The 5 Ws of Outsourcing

5ws-of-outsourcing

Outsourcing services is a proven way to develop your business because it streamlines costs and improves your productivity level. But for those who have not outsourced before, it may seem like a daunting task filled with risk and uncertainty.

Here are the 5 “W”s usually asked about outsourcing:

1. Why Outsource?

The primary reason why companies outsource services is to reduce their cost of business. Outsourcing lowers business cost because it capitalizes on cost advantages available in other regions or options. The most significant cost advantage is labor.

By delegating services to third party service providers, businesses can realize an improvement of at least 40% on their monthly operating budgets. Outsourcing is also a great way to improve productivity. It allows the business to focus on its core competencies and the cost savings can be used to fund other projects or departments.

2. What to Outsource?

If you are outsourcing for the first time, start out with the non- essential tasks. These are administrative or support services that will not place your business at much risk should problems in performance arise. Once the outsourcing services provider has become more proficient with these tasks and you have gained more confidence, you can consider outsourcing more technical responsibilities.

3. When to Outsource?

Many companies outsource services before official launch of their business so they can gain traction without compromising their limited budgets. Others will outsource when they are in expansion stage.

You can reduce the risks associated with expansion because the costs of outsourcing are low and the agreement can be terminated without much complication. You can outsource different departments of your business  so your company can re-align its focus on potential new ventures.

4. Where to Outsource?

Outsourcing has become a huge global industry. The estimated value of the global outsourcing industry is US$250 Billion. Its market size alone grew by 132% over the last 15 years.

The predominant countries now for global outsourcing are the Philippines and India. The Philippines leads the outsourcing industry in telemarketing, back office support and customer service. India has always been the leader for IT outsourcing.

By outsourcing to these remote countries, you can further improve your margins because wage rates are lower. In the Philippines, you can secure the services of a reputable outsourcer for US$9 to US$12 per hour. The rate includes power, rent and Internet.

By comparison, the average wage rate in the United States, United Kingdom, Canada and Australia is US$16.50 to US$20 per hour.

5. Who to Outsource?

Before you initiate discussions with any third party outsourcing services provider you must make sure the companies are reputable and in good standing.

  • Contact local regulating agencies; ask for a list of members in good standing.
  • Conduct due diligence; a simple Google search may sometimes suffice.
  • Get referrals from friends and associates that have outsourced.
  • Use social media and other networking sites such as LinkedIn.

It pays to spend time and resources on these activities. There are many spurious companies that work to scam clients of their hard earned money.

Finally you have the “H” as in “How” to outsource. That will be the subject of another article but once you have identified “Who” you should already plan to reach out and establish contact, interview representatives and draw up the necessary contracts.

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