COST SAVINGS OF OFFSHORING AND MAXIMIZE PRODUCTIVITY
Clients are demanding more advanced products, services with shorter delivery times and lower prices. To respond to these needs, corporations are focusing on their core competencies and are using technology outsourcing providers to help them improve their productivity, develop new products, carry out research and development activities, reduce business risks and manage operations more effectively. The researchers explain that outsourcing can be performed “inshore”, in other words, within a same country or “offshore”, when the company engages a foreign company to carry out these tasks.
How to lock in the full 70% among profit and cost.
If you’re a small to medium business and you’re looking to grow and compete for a bigger market share, offshoring parts of your business will be one of your considerations. It’s possible to save 70% on costs, increase productivity, and open the gateway to a larger playing field should you choose to take this option. Cost optimization should be an ongoing tactic, not a one-off response to a difficult situation. To reach this goal, you should at least consider some of these points below.
Why do countries and companies ought to outsource the production of lower-value goods and services, even if they can produce them more efficiently themselves? Even if you’re faster and more effective than everyone else at a given task, you still might be better off if you pay someone else to do it for you. Why? Because there is an opportunity cost for every hour consumed by these tedious, nonproductive tasks; there exists some higher-value activity you could be spending your time on instead.
The equation is simple: for a university professor earning hundreds of dollars an hour it is more advisable to concentrate efforts in profitable tasks and leave the other simpler tasks – such as washing dishes, ironing – to others, for which he will pay much less. The same occurs with companies deciding to outsource services.
Know Your Business and Decide the Best Scheme for You
If your business is still very small, you could start from project-based outsourcing. Or if you’ve got the resources and the connections in a particular country, you could incorporate your business offshore and set up an office yourself, entirely from scratch. But for most small to medium-sized businesses looking to take the next step, neither of those is likely to work. The first option won’t actually grow your business, and the second option will cost you quite a big deal. That leaves you with two options: you can outsource everything or go for something in between.
Business Services Outsourcing -BSO- or Business Process Outsourcing -BPO- is a practice where a company engages another to carry out certain specialized tasks, hence reducing general costs. For example, a technological firm may decide to hire another company to receive calls and assist customers with respect to its products or outsource to a legal firm the research required to bring cases before the courts. Outsourcing the lot (the BPO model) is the option if you wish to outsource everything you have in hand. With this model, a local company runs the whole thing. But you might be reluctant to take this step. Then, the best option in your case is called managed operations. You run an offshore office in a location where your overheads are affordable, but you do it in partnership with a managed operations provider. Managed operations is much, much easier than doing it all yourself, and if you’re prepared to do your bit and team up with the right provider, the rewards can be substantial. Managed operations is not hands-off. Your overseas office is still part of the team. The end game here is to position yourself competitively in today’s global marketplace. Managed operations gets you into the big league by giving you access to the advantages enjoyed by large enterprises, without the risks of going it alone.
You have to be willing to put in the time and effort you’d invest in a new team at home. That means being involved in choosing the right people, training them, and bringing them into the culture of your company. You should start by doing something small, like arranging team lunches to build camaraderie, rewarding employees with family day out, arranging friendly competitions, documenting your processes and objectives so you can quickly bring new company members onboard, and knowing your company better in terms of what drives your staff as well as your goals and your company ethos.
Your new office may be thousands of miles away, but the technology advances nowadays enable you to stay in touch all the time.
Cost Savings in Terms of Labor
Your top saving is going to be in terms of labor. You can save up to 70% of your costs by empowering Balinese labor as they are cheaper compared to your home. The level of education, qualification and language skill available in Balinese is on par with Western nations, so compromise on standards would not have been made. Although culturally distinguishable, Balinese characteristics and traits are proved to be excellent, so your new team’s integration, both with existing staff and customers, will run smoothly. You’re getting the same high quality output as you would at home, at a much lower cost.
There are also efficiencies to be had in housing and resourcing your new team. Apart from the currency advantage, you also have the benefit of your provider’s local contacts and contracts. They’re already doing business with local realtors, tech support and so on for their other partners, and their negotiated large-scale rates mean you’re paying even less for your infrastructure. And because your provider already has their processes in place and you’re not starting from scratch, you can be set up in a relatively short time.
Consider Using Local Currency
Many outsourcing contracts do not allow for mitigated currency risk as they use U.S. dollars, allowing providers to take advantage of currency fluctuations and making the service expensive when the dollar is stronger than the delivery country’s currency. Evaluate the pros and cons of deals in local currency versus U.S. dollars, using historical currency fluctuation data. When possible, avoid currencies that have a risk of getting stronger. Consider options like hedging, or eliminate cost-of-living adjustments to prevent any losses from the currency fluctuations.
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