On April 10, 2014, Lloyd’s Register Group, the global engineering, technical and business services organization and maritime classification society, signed a 36 million pound contract with Capgemini to deliver new and enhanced IT infrastructure and application services. The new contract is designed to deliver immediate savings, provide investment for future technologies, and bring improved services at lower costs and a stronger dedicated account team to better address Lloyd’s business needs.

Before the advent of outsourcing, all the company’s operations were carried out under the same roof. It was in the 1980s that outsourcing became a popular idea when major players like IBM and ADS started transferring their tasks of running the mainframe data centers to external vendors. This was followed by a brief stint by the application service providers (ASPs) in the 1990s who allowed businesses to rent functional applications over the internet or private network, as opposed to building their own. These days, IT outsourcing has been more of a strategic partnership than subcontracts.

Why do businesses outsource?

The basic tenet behind outsourcing is that enterprises should focus on what it does best i.e. its core competency, the basis of competitive advantage, and hire an external agency to do the non-core activities. For instance, recently, Bharti Airtel Ltd, India’s largest telecom services provider, renewed its outsourcing contract with International Business Machines Corp. (IBM) for five years. While Bharti Airtel focuses on telecommunications, IBM would help them in building a world-class IT services platform as they both enter a new era of data and voice.

Outsourcing has a direct impact on a company’s performance and defines how successful enterprises are run. Here are top reasons for businesses to outsource:

Top 10 factors involved in outsourcing

Focus on core business processes

The company develops its core competency and delegate non-core, time consuming processes to external agencies

Reduction and control in operational and labor costs

Labor in countries like India, China, Philippines perform the same work and achieve same quality levels as in US and European countries but at much cheaper rates. For low-level tasks, outsourced labor might cost 90% lesser in these eastern countries

Gain access to the IT resources unavailable internally

It is hard to globalize a company’s business if the internal resources lack the required IT experience. By outsourcing, you will get immediate access to the best of IT professionals overseas

Tap in to and leverage a global knowledgebase

Outsourcing will bring in outside perspectives and new dimensions to manage a business worldwide. Companies get access to world-class capabilities and infrastructure in the outsourced function

Free up the internal resources that can be put in to effective use for other purposes

The internal resources are now freed up for more mission-critical activities. For instance, initially, healthcare practices had to deal with functions like billing, claims processing and transcriptions which consumed a lot of their time and resources. On outsourcing these processes to external locations, the internal resources are now able to focus on their primary objective – ‘patient care’

Help in expanding and gaining access to new market areas

Once the company outsources its work to external locations, they can gradually understand the culture and lifestyle of those places and start offering their core products or services there and expand their business

Take point of production or service delivery closer to end users

If customers are spread out across the globe, outsourcing to the customers’ locations helps in reducing the time and costs involved in delivery of their products or services

Accelerate the projects and reduce time to market

When people are working on the applications around the clock, the software development takes lesser time and the product can be delivered to market more quickly than the competitors

Tax incentives

At 35%, United States has one of the highest nominal corporate tax rates in the world. Shifting work to tax haven countries like India, China or Mexico is one of the reasons for outsourcing

Time zone advantage

The time zone differences between the western and the eastern countries helps businesses to provide 24*7 service to customers thereby improving their customer satisfaction

Simply put, outsourcing work is the new business trend. While the big guns go for global brands such as Infosys and TCS, one name that is grabbing attention lately amidst the Small and Medium scale Enterprises (SMEs) is Snyxius Technologies. With cost effective and hassle free services, and timely delivery of creative solutions, Snyxius Technologies is one of the best options for outsourcing your work