Everyone's talking about it. The new revolutionary step in the globalization movement, BPO is big. World famous comedy past master Russell Peters recently released album "Outsourced" comments on it. Mad magazine, the cult comic book all over the world, is getting in on the act. It's all over the media. But it's not all just the jocular idea of the caller-helpline relationship. The subtlety of its global economic impact is becoming very apparent and its benefits are being seen all over.
Let's first take a simple definition oriented look at outsourcing and logically break down which of its benefits are results of the idea itself and which of the benefits are results of economic externalities. Don't worry the idea is pretty simple. Picture a large company looking to cut costs. The company delegates a particular function of the business say distribution to another company that's specialized in this field. Why? Well the reasons that are immediately visible have to do mostly with cutting costs. But on closer investigation, a far greater number of benefits are visible. And the new reality is this: The big guns aren’t the only guys who are in on the action. Small companies are starting to see the solid "worth it to go after" benefits. And as a result huge industries have arisen to serve these growing requirements. India, South Africa and many other nations are becoming centers of this growth. India's growth of the BPO industry has been truly spectacular. Employment levels in this field in India have shot up tremendously. This is "Outsourced India". A nation that is a result of the outsource India biz mentality, an economic state of affairs within which huge caskets of cash await the brave few that are willing to venture the initial risk, this India, Outsourced India has improved standards of living raised the nations GDP and most definitely thrown up a plethora of new stably founded, long term employment opportunities. To outsource Indiaand other countries that are big on this industry is a future imperative for success for firms there.
Why? There are numerous benefits to small business that levels the playing field immensely. Firstly, as I have already mentioned, costs will drop drastically. How? It basically converts overheads into variable costs. By employing an outside resource to do say accounting, the fixed costs involved are transferred to the outsourcing service company. Thus more capital is available to put into other facets of the business. This will therefore attract more investors as the cash that is released through outsourcing can be implemented into cash generating ventures rather than formalities. Another very important Side effect of outsourcing is lower product/service costs i.e. Prices as companies that don't outsource have far greater expenses. The reason is that the outside firm has economies of scale that reduce the price of their service therefore reducing the price of yours to a competitive level. One of the most prominent of the cost reduction benefits is that of labour cost reduction. Recruitment and training costs fall and this also lets you focus on HR issues that are more imperative. What’s truly effective about outsourcing is the amount of time and attention it saves. Managers can focus on more customer oriented aspects of business rather than other issues of lower priority that still require their attention. Through outsourcing companies can emulate the internal support services of larger companies. By doing this they achieve good economies of scale and all the other luxuries of bigger companies. And it is very evident that these companies in India specifically, have taken the initiative to outsource Indiaas it were.
Finally the omnipotent factor of business Risk can definitely be reduced through outsourcing. Every investment, decision, product and policy carries risk. Change is very apparent. The evidence is before the consumer's eye as well. Just 10 years ago you would be crazy to think of a music system that could fit in your pocket. And its not just technology as governmental, legal, political situations are changing rapidly. Since when you outsource you are doing so to professionals in their field and therefore they assume the risk responsibly and manage it efficiently. Therefore the change has little effect on operations.
So, after all this consideration, I think Russell Peters is going to have a tough time as a comedian making all the stuff that's going on with this field funny because it really is a serious factor of business operations that is going to remain essential to a number of firms in the future.
Let's first take a simple definition oriented look at outsourcing and logically break down which of its benefits are results of the idea itself and which of the benefits are results of economic externalities. Don't worry the idea is pretty simple. Picture a large company looking to cut costs. The company delegates a particular function of the business say distribution to another company that's specialized in this field. Why? Well the reasons that are immediately visible have to do mostly with cutting costs. But on closer investigation, a far greater number of benefits are visible. And the new reality is this: The big guns aren’t the only guys who are in on the action. Small companies are starting to see the solid "worth it to go after" benefits. And as a result huge industries have arisen to serve these growing requirements. India, South Africa and many other nations are becoming centers of this growth. India's growth of the BPO industry has been truly spectacular. Employment levels in this field in India have shot up tremendously. This is "Outsourced India". A nation that is a result of the outsource India biz mentality, an economic state of affairs within which huge caskets of cash await the brave few that are willing to venture the initial risk, this India, Outsourced India has improved standards of living raised the nations GDP and most definitely thrown up a plethora of new stably founded, long term employment opportunities. To outsource Indiaand other countries that are big on this industry is a future imperative for success for firms there.
Why? There are numerous benefits to small business that levels the playing field immensely. Firstly, as I have already mentioned, costs will drop drastically. How? It basically converts overheads into variable costs. By employing an outside resource to do say accounting, the fixed costs involved are transferred to the outsourcing service company. Thus more capital is available to put into other facets of the business. This will therefore attract more investors as the cash that is released through outsourcing can be implemented into cash generating ventures rather than formalities. Another very important Side effect of outsourcing is lower product/service costs i.e. Prices as companies that don't outsource have far greater expenses. The reason is that the outside firm has economies of scale that reduce the price of their service therefore reducing the price of yours to a competitive level. One of the most prominent of the cost reduction benefits is that of labour cost reduction. Recruitment and training costs fall and this also lets you focus on HR issues that are more imperative. What’s truly effective about outsourcing is the amount of time and attention it saves. Managers can focus on more customer oriented aspects of business rather than other issues of lower priority that still require their attention. Through outsourcing companies can emulate the internal support services of larger companies. By doing this they achieve good economies of scale and all the other luxuries of bigger companies. And it is very evident that these companies in India specifically, have taken the initiative to outsource Indiaas it were.
Finally the omnipotent factor of business Risk can definitely be reduced through outsourcing. Every investment, decision, product and policy carries risk. Change is very apparent. The evidence is before the consumer's eye as well. Just 10 years ago you would be crazy to think of a music system that could fit in your pocket. And its not just technology as governmental, legal, political situations are changing rapidly. Since when you outsource you are doing so to professionals in their field and therefore they assume the risk responsibly and manage it efficiently. Therefore the change has little effect on operations.
So, after all this consideration, I think Russell Peters is going to have a tough time as a comedian making all the stuff that's going on with this field funny because it really is a serious factor of business operations that is going to remain essential to a number of firms in the future.
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