9/18/12 An Outsourcing Case Study

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An Outsourcing Case Study

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Welcome to Outsourcing Interaction! This is an analytical approach case study. retw eet

Outsourcing is the most talked about topic these days often referred to as the most important
management development of the decade. It is based on a simple rule, if something is not the
core competency of your company then simply just takes the task and contract it out. As Tom
Peters said, "Do what you do best and outsource the rest"

Outsourcing is an important and a simple tool for world-class companies that allow them to
improve their product and services, increase the net profit and grow the businesses. Apart from
this, outsourcing impacts both positive and negative aspects of a business.

In the positive aspect: It takes huge benefit for businesses in terms of cost savings,
better outcomes, increased productivity, improved accuracy and efficiency, allow
employees to do the things that they can do best.
In the negative aspect: Citizens lose their jobs because either their company fires them
or outsourcing a part of their work and they have fewer resources to earn.

Let's get into the details.

What is 'Outsourcing'
Outsourcing entered the English-speaking lexicon in 1980s to designate a business practice in
which a company hires third-party service usually located outside of the country. Initially, this was
used to cut costs. In today's world it is also a strategy management option.

It can more simply be defined by this picture

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Alphonso Jackson defined the common motive of companies as, "When work can be done
outside better than it can be done inside, we should do it."

When Outsourcing First Started?

Believe it or not, outsourcing is not new. It began few thousand years ago and started with selling
of foods, tools and other household goods. It was known as 'barter system' when the people of a
village traded for goods. They trade what they produce on their lands. After that, money was
introduced to simplify this process and every person started sharing some sort of the work with
other workers in exchange of money.

Why do people outsource their work?

Once you get started with outsourcing you would be amazed to find how useful it could be for
your business. Most of the companies claim, they outsource their work for cost-cutting but there
are extra benefits they get:

1) Get experts: Team of experts would be ready to handle the load of your projects. They might
have already experienced with your business niche and can give you good quality, expert
guidance and better exposure.

2) Release burden: If you outsource most of the tasks, you don’t have to worry about many
employees separate desks, computers, life insurance, vacation, personal problems, sickness,
15 plus holidays, retirement etc.

3) Pay on Deliveries: You don’t have to pay monthly wages similar to your onsite employees -
you can pay them after the work! (it is briefly defined below)

4) Analyze day-to-day progress of work: Because of the time zone difference between
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Asian and the Western countries, you can get your work done while your business closes down
in the evening that is your core competency and you get complete report of your outsourced non-
core tasks at a very next day.

5) Improving customer service: Through outsourcing you can service your customer’s faster,
satisfaction, reliability, better quality and decrease turnaround time.

Why Outsourcing is Increasing?

Love it or hate it, outsourcing is a trend that is not going away. Most of the companies are
launched by engineers or operations professionals. They are able to grow at a certain level after
that, a company may go stagnant and need more professionals in order to achieve the next level
of growth but it is not easy to find the professionals quickly and on affordable wages. So, they
look to outsource the work to achieve the upper-level.

The rate of outsourcing is increasing every year and outsourcing job hasn't hurt the economy
(BusinessWeek) [1] . In today's world, it is very important for companies to reduce expenses for
the Global competitive market. For example: An American company charge $70,000 to build a
software while a Chinese company create that software for just $8,000 with the same quality and
quick time. Why shouldn't we source the work?!

In a survey by the Society for Human Resource Management (SHRM), HR professionals were
asked why they outsource their work:

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Image data from About.com [2]

Involvement of Countries
India is leading the race and followed by China and Malaysia. Choosing the best location for
outsourcing can have a significant long-term impact on your business growth. Here are the top
20 countries, each country has been scored across the number of key statistics, where cost
Competitiveness, Resources & Skills, and Business & Economic Environment are the
noticeable areas that will help you to make a decision.

Image data from Sourcingline [3]

Active Areas / niche in Outsourcing

In today's global economy, outsourcing has become a very common phenomenon. It is now
getting involved in most of the areas, many large organizations outsource some of their tasks to
reduce the cost and save the internal resources for the other work that are necessary to do
onsite and cannot be outsourced. Here are the major areas of outsourcing:

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Image credit: OutsourcingDefined [4]

IT is considered to be the most prominent area of Outsourcing and still rising as it is proven to
be the most flexible and effective strategy tool to grow companies rapidly. One of the main
reasons of increasing IT outsourcing is Freelance websites that help large organizations to find
the right professionals and companies to take over part of their work.

Role of Social Media to Recruit

Social Media platform also support companies or industry experts to hire individuals to take the
part of their work. Society for Human Resource Management reports that companies are using
Linkedin, Facebook and Twitter to recruit.

56% organizations stated that they currently use Social media, raised from 34% in 2008. In
addition, 45% companies who don’t plan to use social media, dropped to 21%.

Linkedin come at first in Social Networking websites, used most often by organizations with
95% followed by Facebook with 58% and Twitter with 42%

In addition, approximately 18,400,000 Americans said, they got their current job through
Facebook (Both outsourcing and in-house jobs included).

Role of Freelance Websites in the Race of Outsourcing

Outsourcing is a way-out to release some burden from the company's executives and freelance
websites become helpful to get Low-Cost skilled workers… There are a lot of freelance
websites out there on the Internet. They played a vital role in helping IT companies to find a
reliable team and an individual to take-over part of their work.

A Big name in IT outsourcing / freelancing is Freelancer.com – developed in Sweden on

February 2004. It has received memorable awards [5] and marked as the #1 freelance website
all over the world with having more than 3 million registered freelancers, more than 1 million
successful projects have been completed and the average job is under US$200.

Let me answer some of your questions. You may be thinking about using freelance website,
funding and benefits – is it easy? Yeah!

How Freelance website works

A company contracts with an outsourcing provider to do a defined SOW (Scope of Work) and
the outsourcing provider charges the company a fee. This fee can take from different methods:
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by the transaction, by labor hour, cost per project, an annual cost, cost by service levels, or other
possible arrangements.

Benefits of Freelance website

Freelance website's not just helps companies to hire the right professionals for their work. Also,
it gets freelancer's a greater variety of assignments than in regular employment, earning regular
income, freedom to choose their work schedule and to form a working relationship with clients.
Freelancing experience can lead them to a broad portfolio and established clients into their
network and it becomes the process of earning lot of money for a long term.

Apart from the freelancer's benefit – Freelancer.com played a vital role in helping businesses to
find the ideal candidate at a low cost, professional work, quick timing, release burden, easy
funding and long term easy relationship.

How Does a Company Pay For the Services?

Two kinds of Payments often made on Freelancer.com 1) Hourly rate and 2) Fixed price. When
both parties (freelancer and buyer) agreed to work on one of those payment schedules, buyer
accepts the bid then within the estimated time selected candidate has to finish the defined SOW
(Scope of Work).

Once a buyer satisfies with all the work done, he / she released the payment that credits into the
worker account safely! After the payment, workers can easily take out the money from Paypal,
Wire Transfer, Moneybookers or any other suitable method where they can easily utilize that
money.

Conclusion
It's an inspired post written after the detailed study of Outsourcing and how Freelancer.com [6]
helped IT area to boom outsourcing and made easy to release the burden from small and big
organizations.

I am an affiliate writer for Freelancer [7] , I hope you enjoyed the post. If you have any confusion or
need to ask anything, please feel free to ping me in the comments.

© 2003 - 2012 CustomerThink Corporation

Source URL: http://www.customerthink.com/blog/an_outsourcing_case_study

Links:
[1] http://www.businessweek.com/magazine/content/07_25/b4039001.htm
[2] http://humanresources.about.com/cs/strategichr/a/outsourcing.htm
[3] http://www.sourcingline.com/top-outsourcing-countries
[4] http://outsourcingdefined.com/wp-content/uploads/2011/10/outsourcing-statistics-300x217.jpg
[5] http://www.freelancer.com/info/awards.php
[6] http://www.freelancer.com/
[7] http://www.freelancer.com/affiliates/kumailhemani

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