Firms constantly try to find ways to beat the competition. Naturally, these firms turned to India for its low-wage workforce able to carry out back-office operations that drive up cost - undermining their competitive edge - marking the beginning of an incredible boom in the Business Process Outsourcing (BPO) industry. In these early days companies were outsourcing non-strategic issues – such as payroll, IT maintenance, facilities management and logistics – and their goal was to reduce costs. India is increasingly rich in well-educated, English-speaking bright young professionals and, not surprisingly, this is where most firms outsourced to. Recorded cost cuts of up to 50% are not exceptions to the rule- they are the rule and this fact was one of the main drivers of the ever expanding industry.
The main benefits of outsourcing are:
Reduce and control operating costs
Improve company focus
Freeing internal resources for other purposes
Gaining access to world-class capabilities of specialists
Share risks
The range of work done in India has also been constantly expanding, from transcription of medical records, to desktop publishing, filling tax returns, processing insurance claims, updating annual audits, market research and engineering design work. One of the key benefits identified is the renewed focus on the core competencies of the firm by the freeing up of management resources. The management is able to deal with its crucial resources more effectively simply because it has more time to do so. Nowadays, the industry is still growing rapidly as firms gradually come to realize that outsourcing could be much more than simple cost cutting in non-core activities. They currently even contemplate outsourcing core activities to third party specialists in order to improve operational performance. These specialists are more partners than suppliers and the long-term arrangements involve a complex mix of people, processes and assets. Firms are thus able to tap into the specialist knowledge of the BPO-company and free internal resources for other purposes. There even is a visible trend towards setting up joint ventures to share the risk involved in such partnerships.
If wisely applied, outsourcing is capable of giving a company the competitive edge it desperately needs in today’s competitive marketplace.
