Friday, June 4, 2010

Outsourcing - Pros and Cons! The true dimensions

Outsourcing is not the product of IT revolution in the world.  It is an ancient way of handling the exchange of goods and services.  From the times, the barter system existed, replaced with currency transaction, to today's knowledge era that heads with shared services, shared resources, shared domains, shared cultures, and shared boundaries,...the picture only has just enlarged beyond human comprehension.

With this saga continuing only to grow, it is time to realize the realities beyond this most discussed term.

Outsourcing has its own set of positive things, negative impacts, myths and realities.  If you by any chance, a part of this process, somewhere in your personal or professional life, read further. 

For it makes sense only for people who are bitten by this  bug at some point in their lives,...both for good and bad.

Every parameter will have two it a pro or a con.  Someones pro may be other's con in this cult.  So I don't want to call out any specific parameter as a pro or con.  As a reader, you can decide which is a pro to you or a con... view this from a general perspective.

1.  Economies of scale :  Every organization aims at cost savings to the maximum extent possible.  When recessions hit, and revenues are limited, the only way to show growing profits or maintaining standards is cutting costs.  We all do it in our personal lives too right... same way Corporates look at cheap labour,  more long working employees,  easy infrastructure, shared facilities and anything and everything that would save them another penny.

Example:  A box of chocolates cost me Rs.100 in shop A, the same chocolates cost me just Rs 40 but a mile away, as a consumer, I would prefer driving down a mile for saving Rs 60.  This will be a permanent option if my need is frequent.

2.  Uncompromising Quality:  In this world of competition and growing service providers, quality is no more a concern.  All you need to do is identify where is it available and grab it.   You don't need to live with a substandard goods or services any longer for a better product or a better service is available with many a time lesser price, customized to your needs and on time.

Example:  Chocolate box costing me Rs 100 is now available with free shipping and gift packing for Rs 60, that too delivered ahead of time to the address I prefer.   Any freebie or a discount is always a customer's delight.   Now the distance of one mile doesn't seem to be far at all!

3.  Matching Skills and Technical ability:   Again, in this knowledge era, every day is a learning experience.  There is dying need for keeping the skill sets up to date and technical ability to handle unexpected challenges. 

Example : A corporate used Oracle Forms and Reports for close to 10 years.  One day, management decided to move on to a SAP database.  Instead of the client retraining all of its IT folks to SAP at a huge cost and challenges in terms of adoption to change,  learning and certification, the ideal decision was to outsource it to SAP experts in the field, all packaged for a far better price.  Catering to immediate need, with expertize and low cost. 

4.  No longer commitment:  The outsourcing contracts range anywhere between 3 months to 7 years or even shorter or longer depending upon the type of business and services needed.   But there is no permanent liability like an employment for lifetime in government institutions towards most of the outsourcing deals and hence the question of retaining the employees for longer duration doesn't arise.  Need based management has become a norm today

Example:  My chocolate shop needs to supply chocolate cakes during Christmas season.  If I hire cake making experts, am sure they are of great utility during the season, but what am I do with them after the season is over.   Better is to hire a contractor or outsource to a cake shop to supply for my business on the customer orders.  This way, both of us have our profits shared.

5. Risk and Resource handling:  The risk of non-availability of any given infrastructure needed for a project at a given time, or the biggest challenge of modern day organizations in hiring, retaining and managing resources can be handled effectively in the outsourcing world. 

Example:  My chocolate shop decided to come up with the new moulds for the design of my chocolates.  Instead of me concentrating on making my own moulds, I can prefer buying the common moulds from the market or hire a company designing the moulds to do my customized shapes and designs.  I am not only saving my time and effort on it, probably it is cost-effective many a time, and also to the fact that I am not an expert in that field saves me from screwing up the whole thing.

6.  Accent Neutralization:  World with over 160 countries, thousands of dialects, hundreds of  languages, different ways of business communication throws up a bigger challenge in terms of language and understanding.  Demographic diversity and cultural differences play a major role when all the world's a stage.   There is a need for accent neutralization and common business communication standards, but it is many a time only a nice to have feature and cannot be truly made mandatory.

Example:  For 30 long years, I have spoken English in an accent that my British ancestors left back after ruling India for 200 years.  For a 3 month project in west,  with one week notice, you cannot expect me to change my accent overnight.  That's a reality.   Today, most of the population in the world come across such situations and this instead of a challenge should be a way to respect and regard the fact that I can still speak and write English which is neither my mother tongue nor my country's main language, tolerance to different cultures and ways of living in the world for a common benefit is a need today.   

Facebook has almost 9% of the world's population using the social media, but not sure, if there is any one language that is predominant across the globe.  English treads the world and binds the business communication, but no surprising that it is not the only language that is capturing the world's communication.

7.  Responsibility towards all:  There is an immense social responsibility when it comes to outsourcing world.   Any country that only tries to take cost advantage will lead its Nation towards a negative self-reliance.   The goal of any outsourcing can be cost effectiveness, at the same time, it has a social responsibility to ensure that they do not trigger massive unemployment to local people,  closure of opportunities to grow, and neglect its own corporate responsibility and participation in the economic well being of the Nation.

Example:  I am a farmer, and to help me in cultivation, my labor charged me Rs 1000.   My neighbour's labor promised me to do the same work for Rs 200 and slowly, I started giving all my work to him   He slowly raised his cost, and started to share his services to others as well.  Now I cannot get back my own labor for I already lost his trust and loyalty and the other neighbour's labor is also become costly and shared service.   Finally I end up doing my work, resulting is less productivity,  and borrowing money to run my farming business.   The neighbour comes to my rescue in terms of loan.  I end up in huge debt slowly.  There is no win-win situation..  Does it remind you something????

8. Expertise, knowledge and commitment-   It takes many years to build an expertise in any field, any domain.  Especially in the sectors of manufacturing, chemical engineering, bio-medical, paramedics, civil science and scientific studies, it takes years of experience and continuous learning to build a knowledge level.  The outsourcing will trigger a transition process and with a limited timeline. Can the entire knowledge be shared and digested?

Example:  I built a system for over 5 years, investigating in to many aspects of the business, doing loads of research and collecting valuable data.  After 5 years, my company is sold of to an outsourced corporate. And I am axed.  In the transition period of 3-6 months, how much will I be able to truly transit to the new people handling it in future.   Is there a good enough?   Am I satisfied that my baby will be taken care properly, or is the other person comfortable doing it with the knowledge he had to digest all at a time. I don't know.

9. Relocation and Collaboration:  People travelling to the other side of the world has become common in outsourcing parlance.   The myths of cultural shocks is no more predominant with the world become smaller and smaller day by day.   Yet, it is not totally non-existence as well.  Right from the way your dress, food you eat, places where you live, time zone difference, catering to multiple teams spread across the globe on a single team, virtual world has become a reality.   A stronger collaboration and organizational support on relocation would provide relief to people involved in this process.   Professional challenges would become manageable when personal needs are taken care of.

10.  Where do I belong?   The feeling of employee restlessness coupled with new environment challenges grows when there are communication bottlenecks in a team spread across the globe.   Assurances from the home office that you still belong there, makes employees work with more dedication and focus at client locations.   Regular business updates, weekly status calls,  personal motivations, recognition beyond borders,  participation in technical forums, contributing to organizational updates, continuous learning, equal opportunities in terms of recognition, promotion and growth in the corporate ladder  motivate the employees who take that extra mile to work under stressful circumstances.   Corporate responsibility includes accountability to all people in the organization irrespective of their place of work.  This will erase the day to day challenges in the lives of managers who are managing outsourcing project world over!

Good Luck!   Outsourcing should be a strength to the world economy and not a threat!

Disclaimer:  Please note that this do not have any indication to the way my organization works, or the experience from my clients.  The examples and view points are all my own out of years of experience in multiple business environments with multiple traditional and cross cultural teams.

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