ICT Outsourcing Definitions and Types

ICT outsourcing can be said as one of the current trends for companies around the world to do their business processes. It is estimated that ICT outsourcing starts in the early 1990s where Kodak uses external partner to handle its ICT resources. As Kodak does not have the expertise in ICT, they hire another company to help them handle the ICT resources. This phenomenon occurs because companies would like to concentrate their core business functions among other benefits. After merely 20 years, outsourcing is now needed by a lot of companies mostly at customer support and also back-office processes and this affects Malaysia as well. Currently, Malaysia is known as a main outsourcing hub for the world, where it is currently ranked third globally behind China and India in the outsourcing industry. This shows how significant outsourcing is to developing countries in Asia.

Outsourcing Definition

Outsourcing is defined as a concept of contracting out part of the organization’s business process to a third party that has the specific skills and services. The third party must have the skills needed by the organization so that the outcome of the outsourced job is as expected. Outsourcing can also be explained as the movement of one or many business functions of a company including its assets to an outside service provider who gives a defined service for an agreed duration of time and payment on a written agreement.

From these two definitions, we can see that outsourcing can be defined with the following characteristics:

1. A company transferring one or many business process to a third party.

2. A third party has the skills and services required for the business process.

3. Has an agreement or contract between the two parties on the price and expected outcome.

Types of Outsourcing

Outsourcing can be separated into two types, namely total outsourcing and selective outsourcing.

The first one is total outsourcing, where the IT budget being used to pay the external vendors is approximately 80% or more than the total. For outsourcing activities that only took less than 80% from the total IT budget, it will be called as selective outsourcing. It is named as ‘selective’ because the company will select only one or several IT functions to be outsourced to a third party.

Aside from these two main outsourcing types, there are also other types of outsourcing that are usually the sub-division from these two main types like insourcing and transitional outsourcing.

Broker Price Opinion Outsourcing and Management

As the market improves and less foreclosures hit the market, the volume of Broker Price Opinion’s decreases significantly. Many realtors find it easier to acquire business on the listing end, and thus many drop out of the BPO scene altogether for greener pastures. What does that mean for the remaining BPO agents? More volume. It is the equivalency of the middle class getting squeezed and all the money getting sucking up by the 1%. Survival of the fittest is the name of the game and only the agents with the most streamlined systems, leveraged manpower, diversified portfolios, and inside connections with asset managers are still in the game. It also makes sense from a financial point of view to have simplified Broker Price Opinion management. Does it cost more for a valuation company to assign 1 Agent 100 orders or 100 agents 1 order? Logical, yes. Ethical… that’s another debate.

So what are the secrets for having a streamlined system, leveraged manpower, diversified portfolios, and inside connections with asset managers?

1. Streamlined System – As a BPO/REO agent you need to have a complete system for broker price opinion management. A system which tracks every order for general accounting. A system which organizes each tax record, document, and note pertaining to the property. If outsourcing Broker Price Opinions, a system which gets the assignment round trip from you to the assigned and then back to you in completed form, with you receiving status feedback throughout the trip (think auto email responders). And oh, it needs to be timed! Turning over orders in 24 Hours or less will net a significant increase in business over standard 48 hour turnaround time.

2. Leveraged manpower – A valuation company solicits out 100 orders in your coverage area. This company has been dead for 2 months and now is your chance to prove yourself as a viable high volume agent. This is when Broker Price Opinion outsourcing becomes so powerful. If you have the manpower to fulfill these orders then the companies catch on quickly that you have the ability to output high volume work, thus they turn to you the next time they need a Go-To agent, creating a snowball effect.

3. Diversified portfolios – This is such a crucial aspect of the business. Many agents get in a groove with one or two high volume companies and neglect working with any other companies. In a quickly changing world, some of today’s slow BPO companies are tomorrows future so don’t stop signing up to new companies and/or reapply to old companies which rejected your application years ago.

4. Asset Manager Connections – Create ways to be heard. There are thousands of agents in the field so you need to advertise how you’re truly a cut above the rest. Every assignment email solicitation has the name and email, often even the phone number of the person who will be quality checking your orders. Sometimes the asset manager’s information will be listed on the form. Treat these as leads and contact to solicit more orders. Maintain an open phone and email line. Respond to quality controls as quick as possible.

5. There is no point 5 but it’s always supposed to end on an odd number, right?

Outsourcing IT Projects – Pros and Cons

As the director of a small internet and development consulting firm, I have been both the outsourcee and outsourcer in my career. Seeing both ends of the environment certainly helps me to make better decisions when it comes to outsourcing web development and marketing work. This article offers a few key points for companies looking to outsource some or all of their IT requirements.

Low cost does not necessarily mean low quality

Though it can often be the case, hiring a cheap worker from your domestic or international market can sometimes bring you a higher calibre of worker than their higher paid counter parts. The hardest part in finding the cheap but quality worker is to know what is needed upfront.

The blind hiring the blind

When hiring for a web programmer, for example, a company’s HR department will likely not be able to tell the difference between someone capable for the position and someone who will be ill-suited, simply by comparing resumes and / or doing an interview. While some specific skill-sets may be a requirement for the position and eliminate some candidates based on their resumes, the final interview should be given by the relevant IT leader in the company. If a company does not have an IT department but are considering outsourcing some IT work, I recommend they hire an IT consultant to manage their projects for them. This can save them valuable time and potentially a lot of misspent money, had they mistakenly hired the wrong person for the job.

Hiring from abroad

In my career, I have outsourced various projects and tasks from web applications systems development and data entry to graphic design and voice-acting. My outsourcees have been citizens of China, Argentina, Philippines, Vietnam, Russia and even first-world countries like Japan and the United States. Again, there is not one flat-rate per country for certain professions abroad which will guarantee you to find cheap quality labor, but generally, the average wage in developing countries means you have a higher chance of finding a suitable candidate at a lower cost than in a first-world market.

How now brown cow?

When you have tasks which require minimal English ability, workers from any of the non-English speaking countries listed above will generally be able to comprehend enough English to get the job done. ie, when hiring a programmer, you may be more interested in their mathematics and problem-solving ability than whether they can write correct grammar in your email communications.

For content writing or projects which require a fluent command of English, the Philippines can be an excellent source of workers with a very high level of spoken and written English. Be warned though, that for English text content which will be directly used in marketing to the USA or other English markets, you may need to hire a native English speaker from the first-world. Where someone from the Philippines may have an excellent command of English grammar, without the cultural background of living in a first-world country, some nuances can be hard for them to produce in their language.

Keeping outsourcees accountable

When hiring remote workers, especially from abroad and with different timezones, it becomes very hard to monitor their working hours. For this reason, I suggest working on performance-based milestones to better control your project costs and remove the issues of trust facing many IT outsources now. If you must use an hourly accounting practice, I recommend for programming, content or other applicable work to have the project maintained through a version control system. Using a popular version control system such as SVN, allows workers to “commit” their code and files at certain intervals. The project manager can then see exactly how much change has been made at each interval, with the added benefit of archived backups for each edited revision.

Overall pros and cons of outsourcing IT projects

In this article, I have covered a few key points in outsourcing, specifically for outsourcing IT projects. To summarize some of the pros and cons mentioned in point form, the below comparison is provided.

PROS

  • Potential cost savings
  • Reduced staffing overheads
  • Temporarily increase capacity

CONS

  • Harder to monitor workers
  • Language and / or cultural barriers