Outsourcing your Back Office

In most cases you are so engrossed in your business and its day to day operations that you are unable to see the potential cost savings that outsourcing can provide.  Large businesses bring in process consultants to advise them on the advantages of outsourcing.  And it isn’t because the businesses themselves aren’t aware of the benefits that such cost cutting measures can provide.  It’s because a third party bird’s eye view provides the feedback that is often unattainable when you are sitting in the company and have set it up a certain way to meet the daily needs of your business. 

Such process consultants are often beyond the scope of most small and medium sized businesses.  But a few simple logical steps will allow you to quickly assess which portions of your business you can actually outsource, and which you need to keep inhouse.  Because a business can only grow in size and profits by making a margin off its processes, and if you are able to make a higher margin off certain business processes by outsourcing them without negatively affecting your business, why not?

Over the next few weeks, I will be writing about the different steps you can follow all the way from assessing your business for its outsourcing potential, all the way to ensuring that your business grows in margins while keeping fixed costs as low as possible by outsourcing efficiently.

For those of you who are unclear on the difference between outsourcing, offshoring, and other such jargon that I will be referring to, please refer to my post on the same. 

Much has been said and written about the existing or impending recession in the U.S. Whether you agree or disagree on whether the U.S. is in a recession, everyone would concede that the economy has seen better days. In times of economic uncertainty, businesses should consider every reasonable cost cutting measure. Outsourcing your company’s transcription, typing, and data entry work is one such measure. The cost savings can be very significant. As well, outsorucing will allow your company to focus on its core compentencies and the challenges ahead in a slowing economy.  

Having been through engineering school not too long ago, I remember wishing that I could pay attention to the professor instead of scrambling to take notes.  That was in the days of tape recorders.

Today, with the proliferation of cheap digital recorders in the $50 range, they are a must have for all students.  We have several students who use our service to make what I wished for their reality.  They walk into class, sit at the front of the class with their digital recorder, or maybe place the recorder on the lecturer’s desk if he’s comfortable with being recorded, and get transcripts for the lecture instead of making sure they write down every spoken word.

An hour long lecture can run anywhere from $32 to $55 depending on how quickly they want it back, and the template used for the transcript.  The students could choose to pool their resources as a class and bring down the cost per lecture to anywhere from $1.00 to $3.00 per lecture depending on the size of the class.  An entrepreneurial student could go a step further and make some extra cash on the side.  All you’d have to do is co-ordinate the transcript program for your class.  Which student wouldn’t want that?

That’s an example of how eDecree’s transcription service makes a student’s life easier while helping the entrepreneurial ones make some cash.

Here’s one about taking outsourcing to the extreme: MBA students outsourcing project works

What was intriguing in this one was the organized fashion in which the company that the reporter referred to had actually set up the operation.  You could either trade project reports or get a project report created for a fee.

There’s been quite a bit in the news for the last few years about how we’re losing jobs because of globalization.  First it was the manufacturing industry, then it was IT, then it was call centers, and lately it’s administrative tasks.  It’s a general climb up the professional totem pole, especially with the latest trend of outsourcing non-client-facing professional services such as Legal Research and other paralegal tasks.

There is a distinct difference between Outsourcing, NearShoring and Offshoring and they could be mutually exclusive depending on the arrangement.

Outsourcing is when you take a certain business process and you let a different company take care of it for you, because you recognize that it detracts away from your core competency.  On the most simplistic level, using the US Postal Service or Canada Post to deliver your mail instead of you hand carrying it directly to the recipient is outsourcing because you have decided that you want to focus on your business of delivering a service or making widgets because you have found a service that can do a better job at delivering your mail at a more effective cost than if you hired someone to do it yourself.

Nearshoring is when that same business can be done more efficiently at a closely attached geographical location due to several factors including cost, turnaround time, quality, availability of labor, etc.  Canada is often considered the near shore operations center for several US companies. 

Offshoring is when that same business can be done more efficiently at a distantly located geographical location often in a time zone difference of 12 or so hours.  The reasons for doing so are often the same as those for Nearshoring, except in most cases with higher cost savings due to a difference in economies of the country that is offshoring when compared to the country that it is being offshored.