How to Decide When to Outsource
Posted by Catch Friday at Tue, 11 Sep 2007 05:00:00 GMT 
Categories: PR, Time Management, Outsourcing, news
Categories: PR, Time Management, Outsourcing, news
I have been reading the Black Book of Outsourcing by Brown & Scott (2005) which suggests that Outsourcing is good for America, and dispels the myths that workers in other countries are potentially taking away jobs from American workers. Brown & Scott (2005) explain that outsourcing is a process of hiring outside firms to do jobs that companies used to handle in house. When a firm is looking at a cost-effective use of resources, it makes sense to have specialized experts perform functions and processes that are not critical to their business, and small companies have discovered that they must outsource to maintain their competitive advantage over larger firms. In addition surveys by the Information Technology Association of America (ITAA) have concluded that outsourcing benefits America and American workers (Regan 2004).
Indeed the ITAA recently released a report (2007) that suggested that there is a looming shortage of IT workers in the United States due to baby boomers retiring and fewer IT graduates as a growing concern. According to an ITAA survey, some 77% of IT companies battle with a shortage of qualified talent in the United States, and consider it as the biggest human capital management challenge. Without the workers, the hopes of keeping jobs onshore diminish, the report says.
If your firm is considering outsourcing, have you developed a strategy for it? That is have you analyzed the feasibility of the project and allocated the necessary time and resources? For a successful outcome you may find it beneficial to develop an RFI (request for information) and circulate it to three vendors. The purpose of the RFI is to learn about vendors’ experience, expertise, stability and compatibility.
I would describe my company, Dolma International Ltd (Reg No. 05060920) as a middle man advising, which vendors may be able to deliver the service that you are looking for, and our associate Dolma Interactive Web Services Inc. in the Philippines as an outsourcing vendor that trade under the name, CatchFriday.com and has a real commitment to the small company segment of its business.
The results of the RFI enable you to develop an RFP (request or proposal) to distribute to shortlisted vendors. Select your outsourcing vendor based on their responses.
CatchFriday's solution is to offer you a specific worker that you will choose and interview from a number of resumes, and give you the opportunity of recruiting that person, just as if you were recruiting the person locally. Catchfriday Pay As You Go formula on their web site.
Negotiate with the vendor to clarify your goals and determine your business needs. You will need to focus on quality rather than the bottom price, and it is particulary important that you address such issues as governance, pricing and service level agreements.
In my experience I have found that vendors offering the bottom price cannot maintain the quality of their workers, because of a high turnover of staff.
Catchfriday, the vendor that we most commonly use, gives their staff better conditions suchas 15 days holiday a year, bank holidays and 8 hour shifts. Needless to say there staff are loyal to their brand. Catchfriday offer flexibilty to your requirements.
Brown & Scott (2005) identify the most important issues in outsourcing as partner selection, governance and managing the impact on employees. Outsourcing has become something of a dirty word, but if you manage it correctly it can be a win-win situation for everyone involved.
I'm definitely in support of the practice of outsourcing via RFP/RFI process (I run the http://www.rfpdb.com" title="RFP Database">RFP Database), I think the current situation with China shows some of the problems with outsourcing (lead paint in childrens' toys, poisonous toothpaste, killer dog food, chemical shrimp, etc.). In addition, it DOES harm Americans by getting rid of many middle-class jobs in manufacturing, IT, etc. Entry- to Mid- level jobs are being shipped out of here and putting downward pressure on wages. Our economy has seen neutral and/or negative job growth in the last 5 years when compared to population growth, and a negative wage growth when costs and inflation are factored in. How can you say that outsourcing isn't a negative factor?
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David,
America has a population of some 300 million, and the unemployment rate is 4.6% which is very encouraging.
The current downward turn in jobs is related to the number of jobs which were forcasted to be created - so where they said that there would be a hundred jobs, there are just 90 jobs. This is not a major problem.
Outsourcing and Offshoring forces us all to think about what we are doing - for example if something can be produced to a higher quality, it gives us value for money. If the same thing can be produced for a cheaper amount we get lower inflation. Similarily if you upset a client they will go away.
New jobs have been created in America, and it is necessary for the population to become more mobile. For example there is unemployment in Detroit, and the workforce will have to move and retrain to where the employment is.
I am afraid that I think it's just plain fantasy to suggest that moving jobs overseas is going to dent American growth - it isn't - it is encouraging competitiveness.
Perhaps you can tell me why is the dollar at it's weakest point for over 25 years?
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Two things I think you've got wrong: the unemployment rate as a true measure of unemployment (many have given up seeking fulltime employment) and using a report issued by tech companies who are in favor of increasing visas for cheap imported works over hiring more expensive local workers.
"New data from the Higher Education Research Institute at the University of California at Los Angeles shows the percentage of incoming students interested in majoring in computer science has plummeted over the last four years."
You're seeing a drop for a number of reasons, the least of which is that due to companies increasingly outsourcing, there is less demand and lower wages for american programmers.
Regardless, it also comes back to this statement by you: "Outsourcing and Offshoring forces us all to think about what we are doing - for example if something can be produced to a higher quality, it gives us value for money. If the same thing can be produced for a cheaper amount we get lower inflation. Similarily if you upset a client they will go away."
We're getting the same product, but I can't agree that we're getting it for nearly the same quality, in fact we're getting it for the same price, less quality, and the product is escaping our government's oversight because Bush has cut off finding for many government oversight groups.
The dollar is at it's weakest point because our credit is shot. We have the highest debt/GDP ratio in our history, a trade deficit that is staggering, the highest personal debt ratio ever recorded, and stagnating consumer confidence. Additionally, the Treasury has made a concerted effort to weaken the dollar in the hopes that it would make american products cheaper and more appealing in foreign markets, but instead this has failed to work and the trade deficit continues to grow.
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