Disadvantages of outsourcing to India: Licensing and copyright issues. Outsourced projects may be copied and sold again to one of your competitors. This leads to serious issues with regards to licensing and copyright.Time lost managing project. Any financial gain must be weighed against the time spent having to manage the project from half way across the world. Communicating to the client and then having to translate requirements to the Indian programmers and back and forth. Paying for airfares, accommodation, visas, etc need to be factored in.Poorer standard of work resulting from poor communication and cultural differences. Financial losses that result from competitor's having better systems.Political instability - It is a fact that India is not as politically stable as Australia. Assassinations can lead to street unrest that can shut businesses down for days.Lack of quality control. Outsourcing a project requires a great deal of trust because the quality of programming varies considerably. Most problems do not surface till later on, and unless a project is written well, it is expensive to fix. Patch after patch is applied to dodgy programming.Customer service. Pushy sales people are always a sign that something is not quite right. If in presales, Indian developers call and email persistently, refuse to accept 'no' for an answer and continue to speak about how great their company and developers are, then what happens in the middle of a project, when something needs to be fixed, will they listen then? Establishing a relationship, is more than - 'we can get you a better price' - it is about working together to achieve a common goal and this means being able to listen and provide thoughtful answers, not just sales rhetoric.Risks to confidential data and personal data. The world may becoming a global village but laws that protect privacy and personal information are locally based. Once you outsource your data, you have very little control about what happens to that data. http://www.sqlsummit.com/Trends/Terrorism.htm Increasing long term costs. According to Forbes magazine's article &quot;The Coming Death of Indian Outsourcing&quot; India's cost advantage, which is currently 1:3 in 2007 will disappear by 2015, because of Indian wages are rising at a rate of 15% a year.Companies that choose to outsource to India, need to budget for long term increased costs, and provision for time to manage the project as well as budget for the risks of outsourcing.
Teaching Global Outsourcing in College
Virginia Intermont College Assistant Professor -Business : David Hite Teaching College Business Students How to Manage Global Outsourcing
<ul><li>A Japanese company and an American company decided to have a canoe race on the Tennessee River. Both teams practiced long and hard to reach their peak performance before the race. </li></ul><ul><li>On the big day, the Japanese won by a mile. </li></ul><ul><li>The Americans, very discouraged and depressed, decided to investigate the reason for the crushing defeat. A management team made up of senior management was formed to investigate and recommend appropriate action. Their conclusion was the Japanese had 8 people rowing and 1 person steering, while the American team had 8 people steering and 1 person rowing. </li></ul><ul><li>Feeling a deeper study was in order, American management hired a consulting company and paid them a large amount of money for a second opinion. </li></ul><ul><li>They advised, of course, that too many people were steering the boat, while not enough people were rowing. </li></ul><ul><li>Not sure how to utilize that information, but wanting to prevent another loss to the Japanese, the rowing team's management structure was totally reorganized to 4 steering supervisors, 3 area steering superintendents, and 1 assistant superintendent steering manager. They also implemented a new performance system that would give the 1 person rowing the boat greater incentive to work harder. It was called the 'Rowing Team Quality First Program,' with meetings, dinners, and free pens for the rower. There was discussion of getting new paddles, canoes, and other equipment, extra vacation days for practices and bonuses. </li></ul><ul><li>The next year the Japanese won by two miles. </li></ul><ul><li>Humiliated, the American management laid off the rower for poor performance, halted development of a new canoe, sold the paddles, and canceled all capital investments for new equipment. The money saved was distributed to the Senior Executives as bonuses and the next year's racing team was outsourced to India. </li></ul><ul><li>Sadly, The End. </li></ul>
Professor Introduction… <ul><li>- 10 years corporate experience in HR, Training, and Technology (Largest power producer in U.S. / Fortune 500 Chemical company) </li></ul><ul><li>- 6 years in collegiate education as adjunct instructor and educational consultant </li></ul><ul><li>- 1.5 years as full-time professor </li></ul><ul><li>- Studied business in over 15 countries </li></ul><ul><li>Entrepreneur, speaker, and technology Consultant </li></ul><ul><li>Passionate about “Talent Management & Small Business” </li></ul>
<ul><li>The goals of this session is to introduce the integration of outsourcing and web technologies for small business formation and how these strategies are taught at the undergraduate level. Several aspects of this will be covered such as: - Identifying the need, cost savings, and considerations when looking at inexpensive outsourcing. - Identifying outsourcing talent and capabilities. - Selecting Web 2.0 open source (free) technologies used to manage the outsourcing process. </li></ul><ul><li>- Challenges with setting clear expectations for projects. </li></ul><ul><li>- Cultural implications when managing a virtual outsourced workforce. </li></ul><ul><li>- Small business examples of outcomes developed from outsourced projects. </li></ul>
Overview and Objectives: <ul><li>Global business now has become the standard for B2B and outsourcing has become a core business process where value has been greatly realized. It is time to recognize the possibilities and opportunities for individuals and smaller businesses (below 20-30 employees) to fully utilize and manage a globally outsourced workforce. The ability for these skills to be taught will enhance academic business curriculums or community-based training programs. </li></ul>
What is Global Business Process Outsourcing <ul><li>Involves the contracting of the operations and responsibilities of specific business functions (or processes) to a third-party service provider. </li></ul>T. Friedman
<ul><li>The estimated 29.6 million small businesses in the United States: </li></ul><ul><li>Employ just over half of the country’s private sector workforce </li></ul><ul><li>Hire 40 percent of high tech workers, such as scientists, engineers and computer workers </li></ul><ul><li>Include 52 percent home-based businesses and two percent franchises </li></ul><ul><li>Represent 97.3 percent of all the exporters of goods </li></ul><ul><li>Represent 99.7 percent of all employer firms </li></ul><ul><li>Generate a majority of the innovations that come from United States companies </li></ul>Small Business Impact on the Economy
Ready to start your own business?? Wait! <ul><li>Small Business Openings & Closings in 2008: </li></ul><ul><li>There were 627,200 new businesses open and 595,600 business closed and 43,546 bankruptcies </li></ul>Source: U.S. Small Business Administration
<ul><li>New business owners frequently lack relevant business and management expertise in areas such as: finance, purchasing, selling, production, business research, marketing, advertising, technology skills, project management, hiring and managing employees. </li></ul>But why do so many small businesses fail?
So where can small businesses in rural and (non-rural) area find the talent and expertise they need?
Where can I find good, cheap, efficient talent , NOW ….? Without paying over $15,000-30,000 start up costs from U.S. Service Providers Website $5000 Social Media $1000 E-Commerce $8000 E-Payments $2000 CRM $3000 Advertising $6000 Graphic Artist $1200 SEO $1000 Data Entry $15-20/hr Market Research $60/hr Newsletters $300 a piece
Outsourcing ? If a large company can do it, why can’t a small business??
List of services imported (outsourced) by United States of America Source: International Trade Centre (ITC) is the joint agency of the World Trade Organization and the United Nations. Service label Imported Value in 2005 Imported Value in 2006 Imported Value in 2007 Imported Value in 2008 Total services 313835712 349115328 375266624 405402080 Travel 73395616 76987032 81531400 85402768 Transportation 88177264 92865072 95553968 104778224 Other business services 50100496 46177520 50057352 58424908 Insurance services 28739712 37041384 41672376 42954672 Government services, n.i.e. 33454878 34463864 36447792 40340992 Royalties and license fees 24637526 23530700 24660356 26624740 Computer and Information services $2,351,294 $13,440,713 $14,808,688 $16,145,136 Financial services $6,426,704 $14,740,276 $19,753,508 $19,149,020 Communications services 5158027 6952821 7608036 7789556 Personal, cultural and recreational services 959572 1521035 1552230 1879045 Construction services 434890 1395539 1621041 1913328 Personal remittances 40634500 43619600 46995200 48187000
<ul><li>“ India, according to the prophets of globalism, is to become the back-office of the world.” </li></ul>
Started Teaching / Mentoring <ul><li>Met with clients to identify various business needs </li></ul><ul><li>Taught business consulting models and website design and development process basics </li></ul><ul><li>Created a centralized project management portal </li></ul><ul><li>Matched student with outsourced talent </li></ul><ul><li>Defined project specifics </li></ul><ul><li>Let them go! </li></ul>
Identifying outsourcing talent and capabilities.
Finding the right talent for the job... <ul><ul><li>Review the job descriptions other people have used to hire someone to get ideas for your own job template. </li></ul></ul><ul><ul><li>Create a thorough description of the role: the time required, the hours of the day work is to be done, communication methods, skills and experience necessary, technology used,etc. Be as specific and detailed as you can to get rid of the bad outsourcers. </li></ul></ul><ul><ul><li>Submit the job to one or several outsourcing sites. Include a keyword or phrase within each job post that applicants must include in their application. This confirms they actually read the job details and helps filter away people who are not taking your position seriously. </li></ul></ul><ul><ul><li>Try out several people at once on a test job. Make sure it’s something they would do regularly when hiring them and take the best one. </li></ul></ul>
Who? Example Talent Pool Atta - Web Designer, Joomla, Wordpress, Freelance Website / Graphic Designer, Pakistan $4.44 / hr JoJo - Technical Writer, Virtual Assistant Philippines - $1.11 / hr Mark – Graphic and UI Designer, Philippines - $5.56 Merlin - Web 2.0 Developer(PHP/MySQL/CMS (Joomla ,Wordpress, Drupal )/Ecommerce) - Extolution, India $7.00
Starting – Understanding the talent team: The Basics Culture - The young people have been trained in the cultural background of the countries they serve. In order to drown their own culture and remake them in the image of their customers' requirements. Communication – This is challenging at times, but India and Pakistani students learn very good English and keyboarding skills. PM – Starting a project with a project management approach will guarantee better outcomes. Expectations – When starting projects, make sure specific expectations are as clear and understandable as possible.
<ul><li>“ Dharma or virtue ought to be the controlling principle of those who work under this flag. Again, the wheel denotes motion. There is death in stagnation. There is life in movement. India should no more resist change, it must move and go forward. The wheel represents the dynamism of a peaceful change . “ </li></ul>Sarvepalli Radhakrishnan, who later became India's first Vice President,
Barriers and Disadvantages When Outsourcing <ul><li>Licensing and copyright issues. </li></ul><ul><li>Time lost managing project. </li></ul><ul><li>Lack of quality control. </li></ul><ul><li>Risks to confidential data and personal data. </li></ul><ul><li>Misunderstood communications. </li></ul>
<ul><li>An Indian employee might not veer off the set workflow and ultimately miss the deadline because the way work is done is perceived as more important than the time constraints put on the job. </li></ul>Americans typically work against deadlines
<ul><ul><li>Marketing and advertising </li></ul></ul><ul><ul><li>Managing projects and clients </li></ul></ul><ul><ul><li>I/T, tech support, and HR </li></ul></ul><ul><ul><li>Customer service and sales </li></ul></ul><ul><ul><li>Data entry and research </li></ul></ul><ul><ul><li>Website maintenance </li></ul></ul><ul><ul><li>Graphic design and animation </li></ul></ul>Common tasks that we outsourced (What)
Outsourcing Competencies <ul><li> </li></ul>• Differences between managing vendors and employee teams • Using the RFP process to define the work and select vendors • Understanding how to engage and use outsourced services • Negotiating terms and conditions, briefing vendor, kicking off project • Contracts and agreements; copyright and intellectual property
Negotiating is essential We learned that it is best to start with small tasks where you negotiate a small rate. In many cases, outsourced talent wants to become a “long-term” partner. For example, if their hourly rate is: $11 per hour. Offer $5 initially if they want the job. Don’t be afraid to offer small and explain that you have many other bids.
• Global vendor management, remote teams, multi-sourcing • Defining job scope, deliverables, service levels and standards • Capturing and retaining project knowledge and lessons learned • How partnering can dramatically increase effectiveness • What is required to communicate effectively with vendors • Managing problems that arise, collaboration and conflict • Assessing project results and managing vendor performance • Managing changes to work, project direction, or expected deliverables • Closing out projects, terminating a vendor, transitioning to new vendor Additional Outsourcing Competencies
Tools & Aps: Ipad 1 – with 3G Service Favorite Aps for Managing Outsourcing Teams and Projects: Dropbox A-note Evernote Instant Messenger Plus Google Docs Google Talk and Google Voice Zoho Invoice Email Odesk Ap
Rural Outsourcing & Community Involvement Assisting specific small businesses with exporting opportunities Continue research on future business process outsourced activities Partnerships w/ community and other academic partners Next Steps….
Further Research <ul><ul><li>Developing an Outsourcing Strategy. Continue working with companies to determine the most suitable outsourcing/offshoring strategy based on business needs, core strengths, the competitive environment, existing vendors, and business strategy. </li></ul></ul><ul><ul><li>Strategic IT Outsourcing. Help community and small business clients identify opportunities, manage the bidding process, screen proposals and vendors, develop the contract, and manage the transition. </li></ul></ul><ul><ul><li>Strategic Business Process Outsourcing (BPO). Support and educate individuals through all stages of BPO, from strategy and vendor selection through contract development and negotiation, transformation, and evaluation. </li></ul></ul><ul><ul><li>Outsourcing Health Check. Analyze the current status of an outsourcing relationship, assess the value delivered, and recommend ways to improve performance. </li></ul></ul>
Nasbite Presentation Resources: SBA.gov, SBDC, International Trade Center http://www.msnbc.msn.com/id/8346912/ns/business-answer_desk/ http://www.smallbizsurvival.com/2010/07/rural-sourcing-can-replace-outsourcing.html https://offshoring.fuqua.duke.edu/community/index.jsp http://www.smallbusinesscomputing.com/biztools/article.php/3740906/Outsourcing-Save-Money-Save-the-World.htm http://www.businessinsider.com/more-businesses-are-outsourcingto-rural-and-small-town-usa-2011-3 http://www.retrospector.com/2006/06/05/offshore-outsourcing-alternative-college-interns/ http://www.globalservicesmedia.com/BPO/HR-Outsourcing/Consulting-to-Outsourcing-Gives-Small-Businesses-Practical-HR-Options/23/11/9388/GS100302608115