The other important 'Drivers' for outsourcing business activities and functions are:

• An increasingly complex business environment and globally accepted operating standards are being impacted by a sharp growth of national and international Legislations & Regulations

  Coping with these myriad legislations and regulations tends to eat into expensive and valuable management time, which today is desperately needed to concentrate on the Corporates core activites. In a recent survey conducted by the Institute of Directors, United Kingdom, it was observed that 'each small firm spends perhaps six hours a week, almost a working day, battling through forms of various kinds. Dealing with legislative matters and Government regulations is an irritating distraction for people who are trying to run their businesses, and trying to be entrepreneurial and enterprising. Outsourcing such important, though mundane tasks would go a long way in overcoming the associated problems, release management time for core activities and meet legislative requirements.

• The larger companies are finding that size can be a liability, leading to complacency, inefficiencies, bureaucracy and a host of other ills. These can negate the advantages of dominance. The question that keeps popping up for such organizations is: How can we achieve the twin benefits of being a dominant market participant and have the positive attributes of Flexibility & Speed of a small Organization? The answer lies in

  • having an outsourcing plan in place and
  • building Human Resource Capabilities and Competencies

  Through the outsourcing process the organization gets immediate access to a pool of skilled and knowledgeable personnel across various domains. Their availability and advise is built into the 'Service Deliverables' package 'on call' basis. This translates into better, faster, value-for-money service.

• The 'outsourcing' business sector, made up of companies that in essence take over activities other companies choose to outsource, has been gnawing at a rapid pace internationally and the concept is fast catching up in India. This growth of 'Infraservices' has been facilitated by the rapid growth and proliferation of several relevant technologies and their commercial absorption globally. For example, the congruence of Computing/internet technologies, telecommunications and broadband technologies and Satellite technologies have today made possible instant and seamless flow of all forms of information, be it audio, video or data at a commercially viable cost. Technology has therefore contributed in no small measure, in generating a common, sustainable denominator vis-à-vis outsourced service deliverables and which greatly benefits the Customer-Service Provider relationship.

Before we address the issue of Outsourcing Costs it is important that we first answer the question: "What can the Organization expect from the Outsourcing relationship?"

• A high and sustained level of Service with Accountability - taken together we can set required Quality Standards. In this connection Service needs to be carefully defined and benchmarked if possible. Moreover, we would also need to determine through discussions, a set of mutually agreed and acceptable Service deliverables after taking into account the nature and complexity of task/function and internal corporate requirements.

  In so far as Accountability is concerned, we would need to

  • Clarify and ascertain the reporting structure and its frequency
  • Ascertain the required exception reports, and
  • Agree on holding focused, periodic interactions with company personnel.
• One of the main objectives of the outsourcing arrangement is to enable the Customers personnel to experience "Freedom and Liberation" from the routine monotony and nitty-gritties of the task /function outsourced to a service provider. The arrangement must also facilitate a shift in focus to other, strategic core for the customer personnel.

• The customer organization can expect and the service provider must deliver the promised efficiencies and productivity improvements. This expectations is justified considering the fact that the service provider generally enjoys economies of scale provided by a large client base and economies of skill developed by confronting a number of situations.

  Cost savings along with increased productivity is the ideal medium-long term cost related objective concerning outsourcing decisions. This should be possible concerning Outsourcing Decisions. This should be possible considering the fact that the Infraservice provider is expected to bring to the table

  • Economies of scale through a large client base and relevant IT infrastructure
  • Economies of skill developed, over time by confronting a variety of situations. In this context the corporate client must carefully weigh the tangible value provided against the total outsourcing cost to ascertain the gains from outsourcing.

  One of the important advantages of outsourcing certain tasks/functions to a third-party service provider is that the corporate customers enjoys for better control over cost variability through better visibility and predictability into future costs. This is generally due to the fact that the outsourced jobs are executed under Fixed cost/Fixed term contracts incorporating 'Service Levels/Standards - Responsibility' clauses and undertaken at third-party service provider premises. Effectively, therefore, outsourcing arrangements greatly reduce the Hidden/unpredictable costs. It is possible that outsourcing may not lead to immediate cost savings, Quality of service/productivity improvements - cost ratio and not cost of service per se. It is therefore crucially important for the parties concerned to clearly understand and rethink the operational and cost objective milestones which must be achieved over a predetermined timeframe.

  In the ultimate analysis the test of a good outsourcing decision will depend on the following factors:

  • The competencies and operational delivery mechanisms of the service provider facilitating the corporate customer to create its space and earn its freedom.
  • The integrity and internal processes/systems of the service provider contributing to a high level of confidentiality regarding Client data and information.
  • The outsourcing arrangement undertaken and executed in a spirit of partnership