Understanding How Outsourcing Models Work
If you main objective of your company is to increase its efficiency and preserve its integrity while cutting operational costs, then outsourcing is the perfect solution for you. Philippines, Eastern Europe and India are reliable and competent outsourcing partners that can help you with this operation. Outsourcing gives the company freedom, providing significant cost-savings and important resources to use as a competitive advantage. There are five models of outsourcing that can help a company decide if the solution is suitable for its needs or not. Staff augmentation, project-based outsourcing, build-operate-transfers (BOT), out-tasking and managed services are the main Models for Outsourcing each having it benefits. Knowing each model’s strong point can help you make an informed decision that will benefit your company.
When you make the choice, you should take into account your strategic priority, how much process of your strategies are you willing to control and augment in support of your goals, and the risk tolerance, referring to the type of vendor-client relationship that you are comfortable with. For instance, staff augmentation is the basic model, where you add contractors to increase your output as demanded by the company. You will still be in control of the resources even though you will use add-on services, like support services for market expansion. Being the simplest and most basic of the Outsourcing Models, it involves the least amount of risks and can be used to expand current capacity to serve short-term immediate business needs. Out-tasking can be considered when specific skill gaps that can be disaggregated easily in the institution’s processes are identified. This model provides responsibility to the vendor if you are outsourcing certain activities that you are usually doing in you company, like integration, software deployment, destop management or system testing.
Project based outsourcing is usually used when a certain project can’t be divided, so the company decides to outsource the entire project. In this case, the vendor will become your business partner and will make decisions in completing the process and you will have to focus on the final result rather than the daily processes. Research, quality assurance or desktop upgrade, are just a few examples of project-based outsourcing activities that will be a one-time engagement. Managed services is a long term Offshore Engagement Model that is focused on profits, growth and expansion where you need exact indicator of improvement. In this setup, the vendors will become your consultants and the projects will be treated as being part of a system where a competency of the client’s business is managed. Multilingual systems and technologies for emerging markets or offshore research facilities are included in the situations where managed services model is needed. Here, the trust between the client and the vendor is essential.
In the end, there is the build-operate-transfer model that can help you set up your own subsidiary with the help of an offshore partner, who will face all the obstacles involved, from taxes, laws to hiring and managing the operation. Your offshore partner will handle all the aspects of your business for a certain period of time stipulated in the contract, along side a clause that will allow you to purchase the entire operation after the time is over. The main benefit of this model is that the offshore partner has the possibility to initiate and stabilize the business faster than you.