Archive for December, 2008

An Overview of Outsourcing

Saturday, December 13th, 2008

When I was with Day, Berry & Howard, I negotiated large, complex outsourcing contracts for a number of Fortune 500 companies.  For example, in one instance, it was more efficient for a pharmaceutical company to outsource its help desk to an expert provider of such services rather than to manage and maintain the resources necessary to operate the help desk function in-house.  In another instance, a bank outsourced its data processing function to an expert provider of data processing services for lenders.

This expertise I gained came in handy at E-Solutions Integrator, Inc. (e-SI). because it helped us to grow much more rapidly on limited resources. In the early days of e-SI, when we landed a project, we needed to quickly add software developers.  However, we didn’t want to hire full-time employees for a variety of reasons.  This was because the Internet – and our business – was growing so rapidly that it was hard to predict our needs and we didn’t want to take on employees we might not need in a couple of months when a project ended.  So we used the leverage of contractors and ultimately, we engaged hundreds of individuals  – in addition to our own core employees.

Outsourcing worked for us.  We hired contract organizations that provided employees in India.  This provided the flexibility we needed and increased our margins, as software developers in India cost significantly less than in North America.  Yet, we did have concerns and were careful to manage them.  These concerns included quality control, security issues and time constraints from having our resources on the other wide of the planet.

Broadly defined, outsourcing is subcontracting a process to a third party.  That process could involve a product or a service or part of either.  It could also involve a specific business function or a non-core competency of the organization.  We outsourced overseas, which technically, is called “offshoring.”

The Outsourcing Center is an Internet portal for information on methods to outsource information technology.  The Outsourcing Institute is a professional organization dedicated to outsourcing.  For individuals in the U.S. the Contract Employees Handbook is focused on helping contract employees manage their careers.

As it was, at e-SI, we grew and survived the Internet downturn because of the flexibility of being able to outsource.  Ultimately, though, we opened our own offices in India as our business prospered and our projects and customer list expanded.