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To Outsource or Not To Outsource

Via LinkedIn : Whether you are a start-up or a well established business, cost efficiency is the most important aspect to running your business successfully. While cutting costs is certainly an advantage, the fear of having your work done by someone you don’t know, in a country thousands of miles away is a most daunting challenge.

In a recent issue of the Small Business Journal, David Bernstein of WTI Outsourcing explains what the key variables companies need to know, before deciding if outsourcing is right for them.

Why Outsource?

Substantial Cost Savings

A competent clerical worker in New York City earns between $14.00 and $20.00 per hour. Payroll taxes and benefits increase this cost 10 to-30% or more. After factoring in paid vacations, holidays, and sick time, a typical clerical worker will cost most businesses well in excess of $20 per hour. Moving New York‑ area work offshore will save most businesses at least 60%, often substantially more, on fully‑absorbed labor costs.
Skillset Acquisition

Companies will often find that an outsourcing company has more in-depth capabilities in certain non‑core functions. Working with an outsourcing company enables businesses to learn through watching the processes being performed on their behalf.

The Challenges

Location-based Thinking

Many managers feel the need to walk over and talk face-to-face with employees to obtain the feedback and interaction necessary to “manage”. Managing employees in a distant location requires analytical substitutes to the face-to-face encounters. Managers control outsourced processes through measurements and controls, such as error rates, throughput rates, balancing totals, and other metrics that substitute for the constant hands-on interactions. Outsourced processes are more likely to be managed by the numbers.
Resentment of existing employees

Using offshore workers can be seen as a threat to job security. There can be a certain disdain among US employees for work done by foreigners, even when competence is demonstrated.

Training Lag

It does takes a little longer to train an employee at a distance, than it does face-to-face. Most standard processes, even if easily documented, have many exceptions to the rules. In a face-to-face environment, it is easier to teach processes that are heavy with exceptions.

In Summary

In the current business environment, the use of outsourcing can strengthen your company’s bottom line and competitive position. While there are challenges, you can succeed if you are careful and do it right.

What has been your experience? Would you feel comfortable outsourcing with your company? Please leave your comments below.

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