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OUTSOURCING

What is outsourcing?

Is an innovative management technique that consists of transferring to others certain processes that do not represent core business operations. Helps companies maximize efforts and resources on essential activities and improve competitiveness.

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Published by ConnectAmericas

When small and medium enterprises (SMEs) decide to expand or internationalize they commonly have certain flaws or inefficiencies in certain management areas. This does not mean that the company does not offer an attractive service or product but rather that it lacks required or skilled staff to efficiently manage certain business areas.

Fortunately, in recent years, the outsourcing strategy has evolved in such a way that there are several companies or individuals engaging in managing different processes to facilitate this task for other companies. 

According to the National Institute of the Entrepreneur in Mexico, this alternative provides outside assistance to SMEs in non-core administrative tasks, making room for spending valuable time on fully focusing on the product or services. This generally leads to an increase in productivity, and consequently, in earnings.

The idea is to offer more added value to customers by improving the quality and management of the outsourced processes by reducing processing times and costs

It is essential to analyze which areas (if any) require being allocated to an outside provider to improve business and gains. For example, if the company starts penetrating international markets for the first time and does not have international trade trained staff, an excellent tool would be to engage an outside service to prepare the documentation and procedures related to this operation to improve productivity.

Outsource magazine describes how this practice was traditionally used in peripheral activities (cleaning, maintenance and transportation), but that the increase in globalization and competition in the past decades has led to its application in processes of greater importance to companies (design, marketing, IT, accounting and distribution).

Advantages

This service offers certain advantages, among others, the possibility of reducing costs in hiring trained staff or installing the necessary equipment. This is also based on a change in management dynamics, leading to structural changes in the company in key aspects such as procedures, systems, controls and technology. The objective is to obtain the best results possible concentrating the majority of the company’s resources and energy on its core activity.

The idea is to offer more added value to customers by improving the quality and management of the outsourced processes, reducing processing times and also, in most cases, with lower costs and staff.

A survey conducted by the firm Freelancer, geared towards SMEs, and posted on the website of the Spanish Association of Consultancy Firms (AEC, for its acronym in Spanish), found that 62% of those surveyed believed that BPO helps them to be more competitive in the market. Also, 65% believe that it is much easier to use outsourcing now than ever before, thanks to the sophisticated technologies available. For example, there are many Internet directories where an SME can access BPO provider information in several management and skill areas, accordingly.

Businessmen can also engage the service without having to physically meet the provider, since many directories, such as www.freelancer.com, offer recommendations and comments from companies that have used the service in the past. Likewise, once the ideal provider has been found, the work and exchange of services can be fully completed through the internet thanks to technologies such as cloud computing, videoconference and chat, among other tools.

Precautions

However, businessmen engaging outsourced services must take the necessary precautions regarding risks, which if not previously taken into account may negatively impact the business. The most important concern for businessmen is the risk of theft of valuable information. To ensure protection, businessmen must take care to include clauses specifying sanctions in the agreement executed with the provider.

For example, the agreement must have a clause that clearly stipulates termination of the agreement and legal action if the information is not handled responsibly and carefully by the provider. Another way for an SME to mitigate the risk is by properly examining the provider’s background. It must ensure that the provider is financially stable, properly trained and has acquired experience with relatively similar companies in size and type.

Another fact worth considering is cultural adaptation or compatibility with the provider. It is essential to contact company employees to ensure a good relationship and adjustment between the two companies. This refers to business culture and to factors related with language, time zones, business hours, holidays, etc. Fortunately, the new information technologies are extremely useful elements in this regard, even for researching and prospecting ideal providers for the company.

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