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How to Overcome The Perils of International Outsourcing

International Outsourcing is any kind of outsourcing that crosses international borders. While there is risk associated with any outsourcing, crossing borders can create its own peril. While entrusting your noncore business activities to outside entities has its own rewards ,culture ,currency and other risks come into play in international outsourcing.

There are several categories of jobs that are currently being outsourced while at the same time certain other industries and businesses need more workers.

  • Open to outsourcing Need more US Workers
  • Call center Retailing
  • Programming Entertainment
  • Manufacturing Healthcare
  • Financial Services Sales/Marketing
  • Accounting High end engineer
  • Graphics Design Government
  • Clerical/transcript Homeland Security
  • Legal research Defense
  • Education/Training

In any outsourcing initiative the negatives and positives have to be laid out and thoroughly analyzed. An unbiased evaluation criteria needs to be established. It is not enough to be satisfied that it is going to save x amount of cash. All hidden and sundry costs need to be factored in any cost saving model. The knee jerk reaction is to worry only about labor costs. It is not enough to outsource to a country where labor costs are 25% of US costs without evaluating the overall reduction in cost of product from the overall Outsourcing Plan.

The process has to start with a plan. First a business needs to identify what are their core capabilities . In general these should never be outsourced. The plan should establish written goals and objectives . Overseas partners should understand that if they meet x service level they can expect y business in 1 year, 2 years , 5 years or 10 years.

Next comes manufacturing and marketing. Most business moves to locations that can manufacture the product at the lowest cost. It was common for most US businesses to start by designing, innovating and manufacturing products in the US first. Then if a suitable manufacturer was found overseas the production was shifted overseas. Currently the competitive pressures are enormous. A number of companies are directly considering manufacturing overseas to fully realize cost savings at the beginning of the product cycle.

Once an outsourcing opportunity is identified two kinds of plans need to be constructed . The first is the external plan for the outsourcing provider. Equally important is the internal plan for the parent organization to make sure outsourcing is successful.. Critical phases of the outsourcing process need to be identified and action items created with designated responsibility . The process needs to be structured right and defined in detail. Certain quality metrics need to be established upfront and goals established for a timeline to meet these quality objectives. Only then should work be transferred overseas.

Four cost elements are increasing costs in the U.S.The primary drivers for international outsourcing are the increase in Insurance, legal services, health benefits and compliance costs for US industries. The market for international outsourcing has matured . Now there is rarely a Fortune 100 company that does not resort to some form of international outsourcing. Other driver spurring this forward is the decrease in telecommunications costs. In 1972 a call from US to India cost $4/minute. Currently calls through Skype or Viber can cost almost nothing. Another driver is the increase in English fluency throughout the globe thanks to CNN ,MTV and other cable channels.

“There’s much more to going offshore than sending out an RFP, selecting a vendor and doing it.” says Marty McCaffrey, executive director of Software Outsourcing Research. “You have to go to extraordinary lengths to establish goals and objectives first.“

Outsourcing by an individual project is very expensive and inefficient. It is best to move a whole category of work overseas. In spite of English language proficiency , cultural barriers persist and need to be overcome. It is best to outsource an entire department or function.

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