Reasons for Outsourcing during Recession!

What could be the reasons as to one why should business estabishments be thinking in terms of outsourcing?
Various reasons!
As it is with all other forms of businesses, recession also has a huge impact on outsourcing and this impact on outsourcing can be as varied as the two poles!
During recessionary times, one sees that there is severe credit & fund crunch, businesses are likely to optimize whatever available resources they have and they would look at outsourcing option as one which could lead to sustained profitability because of the lower costs involved and 24X7 availability of the outsourcing vendor. Outsourcing is used as a strategic tool for a business to grow and not look at it as a mere tool for cost control.
Here is a small example of what it means:
For example John --businessman has an in-house accountant to record his daily transactions and prepare the monthly Income & Expense Statement for helping the John to take a strategic decision about his business. On an average, the hourly rate for an accountant (with less than 1 year of experience) is $14.14. The monthly fixed cost assuming a 40 hours week would be $2,262. And this is only for accounting. John in this case has to again shell out about $300 upwards for preparing his business's tax returns.
But if John decides to outsource his entire accounting function to an outsourcing vendor in India, at the lowest quote available for outsourcing accounting, he would be charged $1,280 per month for all services including the tax return preparation. Add to this, the benefit of getting highly professional reports on the current state of the business which would be far better than reports generated by an accountant with less than a year's experience.

So, cost wise, it makes sense to outsource accounting to outsourcing vendor in India. But doesn't that mean making one person jobless?

Not necessarily. The person's time can be split into: time to interact with the outsourcing vendor for reports etc. and time for the core area of the business. This would have two pronged effect on the person and the business:
a) The person would be able to generate additional direct revenue for the business and also learn a lot from associating with professionals at outsourcing vendor's office.
b) b) The business gets additional revenue while cutting down the overhead.
Thus by associating with an outsourcing vendor in India, you can do business without hurting your conscience!

Outsourcing and Recession!

It’s great to back on the pages again.
Though I know –it’s a bit too late wishing you all a prosperous and a fruitful year ahead but this is what I am exactly doing at the moment.

We all know what outsourcing is all about and we have been talking about it for sometime now—it simply is a subcontracting a process\ services to a third party.

Outsourcing has these main criterions:
a. Making better use of time and energy;
b. Redirecting or conserving energy directed at the competencies of the business;
c. Make more efficient use of resources.

Is recession and outsourcing connected to each other? Yes, they are connected. Inoder to know this better one would have to delve a bit deeper into recession and its impacts.

Normally, economists declare recession for any economy if there has been a negative growth in the GDP for more than 2 quarters. Because of the negative growth in the GDP, people normally take defensive actions to protect the outflow of money which in turn goes to aggravate the sluggish growth further.
The solution to beat recession is to create opportunity for having higher margin from lower costs.
A recent survey conducted by Offshoring Research Network (ORN) in alliance with Duke University and PricewaterhouseCoopers, 40 out of the 100 companies interviewed said they plan to put pressure on service providers for more favorable contract terms in order to trim costs. The conclusion of the survey is summarized as "Enhancing efficiencies has become more urgent in recent months as pressure on margins forces companies to increase productivity while spending less."
This bears direct testimony to the fact that during recessionary times, it is more feasible for business to opt for outsourcing and create higher margins in order to pump liquidity inside the economy.

Most businesses will now be deciding whether outsourcing is good during these recessionary times before actually outsourcing and will outsource only if:
a. There are visible gains in outsourcing the services.
b. The outsourcing vendor shall not charge any avoidable costs like initial set up charges.
c. The outsourcing vendor shall be able to provide value added services which can directly be converted into profitability.

Many of the outsourcing vendors have therefore taken extra care to ensure that businesses in US are able to tide over the tight fund situation in these recessionary times.
At many such outsourcing vendors,
a. There are no initial set up fees.
b. The pricing is lowest among all the outsourcing vendors.
c. There is a lot of flexibility in pricing that suits any need of a business in US.

Thus, it makes sense for a business to outsource and beat the recession blues.