Helps in elimnating outsourcing failures that result from companies rushing into transactions with unrealistic or unsubstantiated perceptions of cost savings and performance improvements. There are certain common myths that vendors and clients cling to about offshore outsourcing – false assumptions about how the process should work.

1. IndustryReport
Quick Guide To
Outsourcing

2. © InterGlobe Technologies Ltd. 2011: www.igt.in
Definition
“There are as many definitions of outsourcing as there are ways to screw it up,” says Stephanie
Overby, Senior Editor CIO Magazine. Basically, outsourcing is simply the farming out of services to a
third party.
The term outsourcing is often used interchangeably - and incorrectly - with offshoring but offshoring (or,
more accurately, offshore outsourcing) is a small but important subset of outsourcing wherein a
company outsources services to a third party in a country separated by several time zones and usually
not on the same continent as the client company. Outsourcing is primarily used to take advantage of
lower costs. Nearshoring is a relatively new term, meaning outsourcing services to a third party in a
different country usually close in proximity and having a similar time zone to the client company.
History of Outsourcing
Outsourcing is not a new phenomenon, as many believe. Many thousands of years ago, our recorded
history is filled with outsourcing examples. The great pyramids of Egypt, the temples of Central
America, all shows signs of and efficient outsourcing model. In most outsourcing cases the outsourcer
recognizes their inability to furnish the amount of laborers for a particular project or they may recognize
a lack of skills to complete a project effectively, and within a predetermined cost budget.
However, just before the Industrial Revolution, most companies preferred to handle all production
activities within the complete control of the company. They rarely relied on outsourcing activities
preferring to manage these functions internally. It is worthwhile to note that during the revolution a large
number of companies utilized imported workers from foreign countries as their own labor pools were
lacking the skills or quantity of laborers needed. This is similar to the current outsourcing model, with
technology allowing the worker to remain in their respective countries.
Development of offshore outsourcing:
The 20th century experienced many political and economic changes combined with transportation
developments, making distances somewhat irrelevant. As industrialized nations began seeking the
manufacture of certain products in less developed countries, these developing nations welcomed this
form of outsourcing as it stimulated their developing economies by increasing employment and the
income levels of the countries workers. The impact of these financial gains is seen in the education and
skill level improvements of these developing nations. As educational improvements increased, they
have created additional opportunities for outsourcing. The birth of the global economy brought us the
outsourcing industry.
In the 1980s, many companies began to experiment with outsourcing non-essential activities. As
outsourcing progressed and companies became more comfortable with their outsourcing partnerships,
they began to outsource some core activities like data processing, human resources and accounting.
By reducing the cost of core activities, companies enhanced their profits while freeing their intellectual
resources to focus on product innovation and development, aiding in the further growth and
development of their core business.
Recent trends:
Globalization has created a trend of forming strategic partnerships. This means that large companies
are willing to outsource even their core activities to service providers if their relationship has reached a
level of maturity and if it means greater profits. Outsourcing is now an indispensable part of any large
organization. Despite the controversies surrounding outsourcing almost every activity – customer
service, telemarketing, logistics, computer hardware, software, IT services, finance and accounting,
medical transcription, research and development, legal, and human resource development - can be
and is outsourced.

3. © InterGlobe Technologies Ltd. 2011: www.igt.in
Reasons to Outsource
The business case for outsourcing varies by situation, but reasons for outsourcing often include one or
more of the following:
• Ability to focus on core business activities while someone else handle your non-core
activities
• Access to world-class capabilities
• Lower costs of operations ( due to lower labor rates, economies of scale, vendor
specialization, etc.)
• Mitigate risk
• Tighter control over budget
• Increase efficiency and productivity
• Leverage cost and scalability of outsource service provider
Steps of Outsourcing
Warren S. Reid, in his article, “Outsourcing: The 20 Steps to Success” listed 20 steps of outsourcing
which provides a roadmap for achieving greater benefits from any outsourcing deals.
Step 1: Organize a top management steering committee
This committee’s responsibility would be to oversee the whole outsourcing process - from the planning
phase to the delivery phase.
Step 2: Identify and engage an expert team
The expert team will guide you and your organizations during the outsourcing decisions, selections,
and contracting processes. The team should include a small group of independent experts with
specialization in outsourcing.
Step 3: Identify critical internal resources
Identify critical internal resources, such as a Chief Information Officer (CIO) or an Outsourcing
Manager, who will stay on your company’s staff internally to help manage and administer the
relationship between the outsourcer and your company.
Step 4: Identify what is good and bad about your current installation
With respect to service, quality, capability, performance, uptime, costs, and user satisfaction, assess
each strength and weakness.
Step 5: Update the company’s strategic business plan
The outsourcing engagement can run for anywhere between less than a year to 10 years. You must
make sure that your strategic business plan is inline with your outsourcing project and vice versa. If
not, updating and modification is absolute necessary.
Step 6: Develop a strategic systematic plan
It is absolutely necessary for a successful outsourcing engagement that it should be approached in a
systematic manner. Develop a systematic plan that takes into consideration all the short-term and
long-term needs of the company that fit together into the strategic business plan.

4. © InterGlobe Technologies Ltd. 2011: www.igt.in
Step 7: Identify the software and hardware
Identify the software and hardware needed to develop and support the new systems plan.
Step 8: Understand your cost structure
Understand your cost structure and determine/estimate future costs to create and support the projects
outlines in the strategic systems plan developed in step 6 and 7 above.
Step 9: Identify your current and anticipated usage
i.e. normal operations, expanded operations over time, peak periods, off periods, off-site processing,
storage, archive, integrations requirement, back up and disaster recovery requirements, etc.
Step 10: Review the strengths and weakness of the outsourcing alternative
Determine whether/how the outsourcing alternative will help your company achieve its long-term goals
and why that alternative is better than staying in-house or partial outsourcing or working with
outsourcer(s). Determine which applications and resources should be outsourced and which should
continue with different approach.
Step 11: Using your expert team, identify several outsourcing alternatives
Obtain appropriate literature in a request for information from the team’s prospected short listed
outsourcers. Beyond all of the technical and administrative things you need to know about your
outsourcer, you will also need to know in-depth: corporate history; current, new and lost customers;
financials; methodologies, etc.
Step 12: Determine which areas of your company you would like to outsource
General industry practice is to outsource only non-core activities while you concentrate on your core
activities. But leading outsourcing experts Patrick Morrissey says “The best-understood and most well-
defined process, no matter it’s a core or non-core activity, can only be driven to a certain level of
efficiency before the results flatten out – or even diminish. That's where the promise of BPO comes in.”
Step 13: Develop a rigorous Request For Proposal (RFP)
Develop a rigorous Request For Proposal (RFP) with has a format that forces the responding
outsourcer to answer questions in a way that will allow you to compare responses from multiple
outsourcers. Ask outsourcers to simplify their answers to pricing so that you can really understand
what services will be included and which will be extra.
Step 14: Invite bidders to a bidders’ conference
Invite bidders to a bidders’ conference at your site and take each bidder on its own tour of your site.
Have the top management and the steering committee meet with the outsourcing representatives for at
least 45 to 60 minutes during the tour to set the tone and to demonstrate the importance and visibility
of the study and resulting relationship.
Step 15: Evaluate proposals against your pre-established and fully documented criteria
Identify different approaches recommended by the outsourcer and determine how they differ from your
own research and preliminary conclusion. Be open to suggestions but analyze differences carefully.

5. © InterGlobe Technologies Ltd. 2011: www.igt.in
Step 16: Rank proposals so that you can have a backup vendor
This helps in case negotiations go sour with your preferred vendor. Identify absolutely necessary
criteria early. No matter how well the outsourcer looks in other areas, if they don’t meet the minimum
“must-haves” – they should be contacted for clarification or dropped from the list.
Step 17: Checking references is a critical part of the evaluation and comparison of outsourcers
If possible, visit other customers; review their contracts and the status reports on key projects. Don’t
underestimate the experience of others with the outsourcers and/or assume your experience will be
different.
Step 18: Negotiate the contract
Negotiate the contract using expert team and using pre-defined target clauses, criteria, and escalating
alternative dispute resolution options to keep the outsourcing agreement and relationship on track
Step 19: Monitor, manage, modify, and steer the outsourcer and the contract as required over time
Give periodic report cards to management of the outsourcer. Update and change the contract over
time to continue and assure that your needs and the mutual needs of the outsourcer continue to be
met.
Step 20: Be Lucky
Warren S. Reid says the last step for successful outsourcing is just be lucky. After doing everything
that is indicated above, he wishes best of luck in outsourcing.
Outsourcing in today's world is seen as a strategic management option rather than just a way to cut
costs. It can help companies achieve their business objectives and even provide an edge in the market
place. Today most companies have one or more of their services outsourced. This provides and
opportunity for the company to put more emphasis on its core competencies. But with outsourcing,
whether overseas or locally, comes risks. Anil Singh, in his article “Managing the Risks When
Outsourcing Offshore” lists five major risks of outsourcing:
• Misunderstanding of requirements
• Quality assurance
• Concerns about intellectual property security
• Differences in company processes
• Communication/cultural barriers
Please refer to our whitepaper “Top Risks of Outsourcing and How to Avoid Them” for a detail
understanding of risks associated with Outsourcing and the remedies for avoiding them.

6. © InterGlobe Technologies Ltd. 2011: www.igt.in
Benefits
Outsourcing can offer definite benefits – but only if you do it right. Some of these benefits are as
follows:
Access to the latest and greatest in technology
You may have noticed how rapidly software and hardware becomes obsolete. It is difficult for business
to stay up to date with all of the changes. How can one person keep up to date with all the changes?
By outsourcing to these world-class providers, companies can leverage on the strengths of the
provider and get access to world-class resources.
Cost savings
Outsourcing your IT services provides financial benefits such as leaner overhead, bulk purchasing and
leasing options for hardware and software, and software licenses, as well as potential compliance with
government regulations.
Increase in your business
Outsourcing, if done in the right way, can lead to increased profits, productivity, level of quality
improvements, business value, business performance, and much more. Outsourcing can help you see
an increase in almost every aspect of your business.
High quality of staff
Outsource service providers (OSP) look to hire staff with specific qualifications and certifications.
Outsourcing the same services for several companies allows the OSP to build core competency and
specialized expertise in specific areas. The business outsourcing benefits from having faster access to
skilled staff and not having to maintain the knowledge base for seldom used skills.
Flexibility
Vendors have multiple resources available to them, while internal staff may have limited resources and
capabilities. Businesses that outsource reap the benefit of leveraging the outsourcers specialized
skillsets without the cost of full time employees.
Job security and burnout reduction for regular employees
Using an outsourced company removes the "someone has to do it" syndrome that burdens your staff.
You will establish a better relationship with your employees when you let them do what they do best
and what they were hired to do.
Increased efficiency
While the service provider handles your outsourced business process efficiently, you are now free to
carry on doing those job functions necessary to separate your business from that of your competitors.
Increases in efficiency lead to increased profits.
Faster deliveries to customer
Outsourcing can speed up the customer delivery aspects of your business. The ability to apply scale
and economy to your deliverables is best seen when outsourcing. Companies cannot typically add
additional resources to projects for a short period of time, outsourcing provides all of the flexibility
needed to meet strategic deadlines fast and efficiently without breaking your bank account.

7. © InterGlobe Technologies Ltd. 2011: www.igt.in
Improved customer satisfaction
With timely deliveries and high-quality services, you will impress your customers. Outsourcing can
help you benefit from increased customer satisfaction and your customers will remain loyal to your
organization.
Competitive edge
Strategic outsourcing can give your business a competitive edge over your competitors. Lower
operational cost or delivery cost certainly positions your company to compete more effectively in
aggressive markets with shrinking margins.
Whether you outsource or not, your business can learn from the principles of outsourcing.

8. InterGlobe Technologies (IGT) is a leading BPO & IT Services provider committed to
delivering innovation and business excellence across the entire spectrum of the travel,
transportation and hospitality domain.
Ranked amongst the World’s Top 3 Travel Technology Solutions providers, the
company offers integrated Application Development and Maintenance, Call Center
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