Jobbing out with external experts

Outsourcing has emerged as an unparalleled strategy to meet today's needsin transforming important business processes and ensuring maximum value from resources. Partnering strategically with an outsourcer is also the most effective way to build a culture capable of meeting future needs and making sharp turns at a moment's notice. The urge to outsource is understandable. After all, its a relatively hassle-free way for companies to score some much-needed black ink for the bottom line. To be sure, it makes sense to shed peripheral activities to concentrate on core competencies. More focus equals more value.

In recent years outsourcing has became the solution for many companies,both on buyers and suppliers side. The supplier and the vendors lookedat outsourcing as a formula for financial stability through increasedrevenue, long-term customers and sustained profitability. There is arenewed focus on outsourcing on the buyer's side, too. Employers facingthe tough issue of downsizing realised they needed a scalable solutionthat could easily shrink or grow with their needs.

Although there are other reasons to outsource - like the need to focuson a core competency or the desire to standardise your applicationsplatforms - cost is still the driving force. How does outsourcing savemoney? Outsourcing is the transfer of the ownership of a process to anexpert outside an organisation. How can someone else execute a processbetter than you can? The answer is: they have the leverage. Outsourcingexposes leverage that is not available to an internal department.

Apart from the stated advantages, it has been observed that manyAmerican companies have enjoyed significant advantages outsourcing tocompanies located beyond their borders. ``Offshore outsourcing'' providesa powerful labour arbitrage; U.S. firms can receive Made-in-the-U.S.quality at remarkably lower prices because of the wage scaledifferential in other countries. Labour savings can be as much as 60percent. Moreover, time zone differences mean someone is always on thejob.

Until recently, human resources, or HR, was an in-house function, not an industry. Today, a whole industry has sprung up to provide HR services on a contract basis. Companies have been turning to specialist firms to supplement their own HR departments. While HR issues are as ubiquitous as ever, an in-house HR specialist for every discipline in the company is now a luxury rather than a necessity (though HR generalists are often kept in- house to address basic personnel issues). Turning to outside agencies makes sense for several reasons. The main benefit: it cuts costs. Developing training programmes for employees is expensive and time-consuming; bringing in a consultant means an experienced expert is in on call and in your office whenever you need his or her services.

Moreover, outsourcing services like payroll management is both efficient and inexpensive.

The field of outsourcing has been marked by rapid growth. The ranks ofcorporate in-house personnel specialists have grown, and consultancieshave grown even more. The increasing number of company mergers andacquisitions will have profound effects on job prospects in the field of HR. In some cases, more HR specialists will be needed to facilitate the smooth transition of two or more companies into a single entity. Inother cases, the cost of merging will lead to downsizing in areas-suchas HR-which are not considered direct profit centres.

Top 10 reasons for outsourcing

Improves company focus

(To) Gain access to world-class capabilities

Accelerates reengineering benefits

Shared risks

Frees resources for other purposes

Makes capital funds available

Cash infusion

Reduces operating costs

Resources unavailable internally

Out of control

Who needs to outsource

If you have fewer than 100 employees, the answer is, you do. At this size, you often don't have the resources for an in-house HR staff, so outsourcing is just right for you. You don't have to worry about managing all the details that are so critical to HR in your business, and most small- business owners just don't have the skills and experience to do so. Remember, HR functions must be handled correctly or slip-ups can cause your business major problems.

If you're even smaller, online services are the way to go. Theseservices are tailored to work with all sizes of businesses, even thesmallest. You don't have to give up legal responsibility just yet, andyou'll be able to easily access your information online. In addition,since the charge is usually by user, you won't be overpaying.

Whatever you decide, make sure to keep your employees in the loop. Theywill appreciate knowing that you are seeking the most affordablesolution for the business while doing your best to meet their needs.

What outsourcing promises: Traditionally, cost reduction has been theoverwhelming motivation and perceived payback for outsourcing. Today,cost reduction still tops many priority lists, but the goal of"strategic value" has grown to rival it. Such value can include newapplications, productivity improvement, access to new technology andskill sets, and process or infrastructure redesign. Increasingly,outsourcing is viewed as a bridge solution or reprieve. In an era ofstiff international competition, many corporate information officersview outsourcing as the ideal answer.

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