How To Reduce Your Costs With Offshore Outsourcing
Outsourcing no longer needs an introduction these days, nor do you need to be reminded of the benefits of doing it. Almost every company outsources their work to business vendors, and these include functions like inventory management, payroll management, transaction processing and so on. The primary purpose of outsourcing is to reduce costs, so what happens when your expenses escalate in spite of outsourcing work?
You really need to take an inventory on what went wrong. Here are some tips on managing cost risks while outsourcing work.
1. You can considerably reduce the number of people you keep in-house
With team members spread across the globe, you can utilise different skills and talents. As they might come from various parts of the country, or from another country, you don’t have to allocate space in your office. Running a virtual team is always better if you have the resources to run the ship. Hiring an employee calls for a lot of resources, and maintaining them by providing work stations and other benefits can really drain them (the resources) out.
2. Low cost services doesn’t always ensure high quality work
Quality comes with a price. So if you want commendable work, then you must outsource it to a vendor who’s proved his mettle. Outsourcing the work to a mediocre vendor will be a waste of time and money because you will have to find another person to do the same job.
3. No hidden costs
If you want to make sure the project stays within your budget, make sure the vendor doesn’t spring any surprises along the way – no hidden costs, no hidden maintenance or training costs, no hidden infrastructure, etc. Analyze overall costs before starting the project because financial transparency is a real factor that could make your outsourcing project go uphill or downhill.
4. A vendor who has trained staff for your project
Ultimately, it is your choice. Whether to hire a vendor who already provides trained people for your project, or a hire a team of in-house employees, spend thousands of dollars on training and then wait till they learn what you need. When you partner with a vendor who supplies talents, you don’t have to train anyone; it is a headache you can do without.
5. Take time and find the right person
Don’t create partnership with the first person you had discussions with. You need to do background research on the vendor, watch the reviews they have accumulated over the years and check whether their dealings with you are based on transparency and stability.
If you are unable to reach mutual understanding with the partner-company, then there is no point in continuing a business relationship. It could be a waste of time as you may have to look elsewhere to complete your project.
6. Consider your own needs before outsourcing
Make sure your company and it’s needs have a thorough run-through before you even consider outsourcing. Start by evaluating your in-house resources, and decide which all tasks have to be outsourced. If the communication facilities at your workplace aren’t thorough, then get them organized, because managing a virtual team successfully is not possible without solid communication channels.
7. An effective management strategy
Every company should have an effective management strategy in place, to reap the benefits of outsourcing. The strategy should be effective, right from when you select a provider, to negotiating the deal, managing the partnership, conducting the actual business, and dealing with the processes.
Both the vendor and your company must agree with the terms of the management strategy to ensure enhanced performance by controlling the risks and following a procedure where there will be increased coordination, with marked reduction in overall expenses. Fostering a good relationship management with the provider can be successful with transparency and regular communication.
8. Control the communication risks
Once you hire an outsourcing team, it is important to open channels of communication. You cannot always come down to meet them or use the regular phone lines as that could escalate the costs. You need a reliable service provider who can provide uninterrupted internet so you can communicate with them through the email, chat, video conferencing etc.
9. The vendor should know how to manage other kinds of risks
Projects might meet with problems along the way due to unforeseen circumstances. An experienced vendor will know how to deal with potential problems along the way so your project doesn’t suffer any serious setbacks. If the vendor doesn’t know how to handle the situation, then it could affect the deadline, which means more expenses along the way.
10. Understanding the three categories of outsourcing
Outsourcing is a very vast field, and hence you can categorise them in three ways:
- BPO or Business Process Outsourcing – This is where non-primary business activities and functions are outsourced to a third-party provider. BPO include payroll, accounting and customer relations, call centre, human resources and similar jobs.
- Infrastructure and Technology Outsourcing – This is where networking and technology jobs are outsourced. It could be large scale projects of where big migrations of the customer’s environment is done, to simple programming jobs, internet related work and so on.
- Software Outsourcing – Tasks that are usually done in-house can be transferred to a vendor who specializes in these tasks. This is typically done to reduce costs and to ensure experts handle the work.
When you hire a reliable vendor, you will see a sharp increase in productivity and a drastic cut in the costs incurred. You can always ask for past references and see whether the vendor is worth his salt. Make sure you can open honest lines of communication with him and if you like daily updates and weekly meetings regarding the progress of the project, make sure you drive the point home.
Don’t let the risk factors stop you from exploring what could be the best move in your business. All you need to do is follow the above mentioned tips, and there is very little chance that you could go wrong with offshore outsourcing.
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The author: Reema Oamkumar is engaged as a thought leader at www.Software-Developer-India.com which is a part of the YUHIRO Group. YUHIRO is a German-Indian enterprise which provides programmers to IT companies, agencies and IT departments.