The wave of offshore outsourcing has come, sweeping the United States, impacting Europe and affecting Asian countries. In this wave, the affected industries are very extensive, and the telecommunications industry is among them. We must fully realize the inevitability of this trend.
Like many business trends in the past, offshore outsourcing is a "double-edged sword". On the one hand, it will lead to a fundamental change in the cost structure of the telecommunications industry, thus bringing about an improvement in efficiency and service; On the other hand, it may complicate the operating system and even lead to out of control.
How should we face the upsurge of offshore outsourcing today when large telecom companies around the world look to developing countries? First of all, there are opportunities in the upsurge. Only by improving the technical quality and language and cultural quality of the people can we seize the opportunity in outsourcing; Secondly, domestic enterprises should be alert and think about their own management methods when foreign enterprises are racking their brains to find good ways to cut costs.
Offshore outsourcing is not only an inevitable trend that cannot be ignored, but also a major business strategy that must be treated with caution.
Needless to say, the ups and downs of the telecommunications industry in recent years. At present, the most urgent task for telecom operators is to cut costs and increase revenue at the same time. Offshore outsourcing is a brand-new business model, which came into being.
-Benefits
The benefits of offshore outsourcing are very obvious. The first is to significantly reduce costs. More than half of network operators outsource offshore in order to cut costs. Enterprises adopting offshore outsourcing strategy as early as possible are expected to save about 20% to 30% of costs and other extra expenses. These expenses mainly include labor costs, recruitment costs, national insurance costs and real estate. Labor costs alone, the wages of Indian employees may be only about one-tenth of those of American employees.
The second benefit that offshoring can bring is to improve quality. With the development of telecommunications industry to advanced digital services, skilled employees with low salary requirements are very important to enterprises. In developing countries such as India, the quality of well-educated employees is even higher than that of the United States, and the participation of these employees is of great benefit to the improvement of the quality of products and services of enterprises.
Thirdly, offshore outsourcing also helps to strengthen the competitiveness of enterprises, because the work teams are distributed in different time zones around the world and can operate 24 hours a day, shortening the time needed to develop application solutions. In the current competitive global telecommunications industry, the inefficiency that operators used to spend half a year or more testing their products is gone forever.
-Power
Although most enterprises adopt offshore outsourcing strategy to reduce costs, cost pressure is not a new problem. So why is offshore outsourcing so popular at present? This is because the development in many aspects has made offshore outsourcing a reality.
15 years ago, some pioneering enterprises in financial services, high-tech manufacturing and other fields started offshore outsourcing strategies, and most of these enterprises were successful, which brought snowball effect and set an example for other industries.
The development of communication technology is another important factor. In the past, the behavior coordination of offshore outsourcing enterprises was always limited by distance, but the breakthrough of communication technology eliminated this obstacle. Cheaper, more convenient and more advanced communication technology makes communication half a world as easy as face to face.
The improvement of education level in developing countries has also become a reason to attract foreign enterprises. In India, for example, 2 million college students graduate every year, most of whom are fluent in English. Many critics hope that China can also popularize English skills to meet the needs of offshore outsourcing enterprises.
In addition, the high-tech boom in the late 1990s created a large number of employment opportunities, and the demand for skilled workers in developed countries was in short supply, so some enterprises turned to foreign employees. Most of these employees are foreign immigrants, and a few of them work overseas in the form of offshore outsourcing. In either case, enterprises and their customers are getting used to communicating with foreign workers, which forms the basis of today's offshore outsourcing trend.
-Risk
Although offshore outsourcing has various benefits, you should never make a decision easily. You must fully understand the risks brought by this strategy.
For complex and uncontrollable services, network operators must formulate brand-new business operation procedures to ensure proper monitoring of product development and customer support activities, so as to achieve high-quality service levels.
The differences of languages and cultures in different countries and the degree of protection of intellectual property laws and regulations increase the possibility of communication errors. For example, when signing a legal contract, the above differences may affect the communication efficiency or cause misunderstanding and hinder the work progress.
Opposition from domestic groups and organizations, such as trade unions, anti-globalization activists and internal employees, will affect the benefits of offshore outsourcing. In addition, political instability or immature operators in the outsourcing target countries will affect business progress and confidentiality, which may lead to investment in offshore outsourcing services.
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Analysts pointed out that network operators have many choices, and offshore outsourcing should not be regarded as the only solution to all problems. In some cases, as long as a certain procedure (such as billing procedure) is improved, the benefits may be better than offshore outsourcing. No matter what strategy network operators adopt, offshore outsourcing is a complex and important business decision, which must be carefully analyzed and studied in advance to understand the benefits, business opportunities and related business risks brought by offshore outsourcing.
From the perspective of global economic integration, offshore outsourcing has become the trend of the times and the focus of attention. Offshore outsourcing is an outsourcing that extends overseas. The main forms are outsourcing, establishing wholly-owned subsidiaries or establishing joint ventures with local enterprises.
The benefits of offshore outsourcing are very obvious. The first is to significantly reduce costs. Reducing cost is the original intention of most operators' offshore outsourcing, and it is also the most direct and obvious advantage brought by offshore outsourcing strategy. The reduction of cost directly leads to the improvement of profit rate. In the long run, offshore outsourcing will become a necessary means to improve competitiveness, which will fundamentally change the cost structure of the industry and even lead to the elimination of those operators who have not adopted this strategy. The second advantage of offshore outsourcing is to improve the quality of production and service. Operators can hire higher-quality talents at lower cost to support higher-tech services. Third, offshore outsourcing can make full use of the differences in different time zones around the world and work 24 hours a day, thus greatly shortening the listing cycle of products and services.
However, everything has two sides, and offshore outsourcing is no exception. It is a "double-edged sword", which brings benefits and inevitably contains potential risks. The biggest worry of offshore outsourcing is the risk of increasing operational complexity and out of control. Because, in any case, it is much more complicated to transfer work overseas and implement remote management than in China, and outsourcing cooperation with third parties or joint ventures also increases complexity. Operators must formulate new business operation processes to ensure proper monitoring of product development and customer support activities, so as to achieve high-quality service levels. Offshore outsourcing may also encounter difficulties, including language barriers, cultural differences, and different degrees of protection of intellectual property laws and regulations, which increase the possibility of communication errors. For example, when signing a legal contract, the above differences may affect the communication efficiency or lead to misunderstanding, thus hindering the work progress. Opposition from domestic groups and organizations, such as trade unions, anti-globalization activists and internal employees, will affect the benefits of offshore outsourcing. Political instability or immature operators in the outsourcing target country will affect business progress and confidentiality, which may lead to investment in offshore outsourcing services. In addition, the use of overseas employees will cause many security problems, including infringement of intellectual property rights and disclosure of business secrets.
New york-based Conference Board (TCB), a world-renowned business forum and research institution founded in 19 16, released a report entitled "Beware of offshore outsourcing: decision-making system", which revealed that it is estimated that half of the offshore outsourcing results will be lower than expected. Therefore, if a company considers moving its work overseas, it should not only consider the benefits, but also consider the risks. The report points out that if the company leaders do not fully realize the complexity of offshore outsourcing challenges, the company's performance will decline, which will have a great impact on the company's operations.
"The company needs a comprehensive decision-making system to help senior managers evaluate the risks and rewards of offshore outsourcing rationally and systematically." Ton Heijmen, senior consultant of TCB offshore outsourcing, said.
The report pointed out that many offshore outsourcing companies have low project management level, insufficient internal and external communication, and improper planning and design of the transition period. Many companies pay attention to security risks, but ignore other factors, such as the damage to the company's reputation, social responsibility, human capital and the difficulties of laws and regulations.
The report concludes that successful offshore outsourcing depends on a comprehensive analysis of the following elements, including location, process, scope and participating enterprises. Successful companies must consider factors such as cost, convenience, time to market and resources. They must investigate the quality of suppliers and employees (including their skills, language skills and incentives), the business environment in the country where the company is outsourcing, and the effectiveness of the government in encouraging offshore outsourcing in every possible market. The report includes a risk management system available to offshore outsourcing companies.
"Once a company goes offshore, it establishes a virtual enterprise-a network where multiple companies work together," Heijmen said. "In addition to advanced information technology and communication skills, this virtual organization also needs to adopt specific organizational management and behavior management methods to coordinate internal and external relations."
Offshore outsourcing is a complex and important business decision, which must be carefully analyzed and studied in advance to understand the benefits, business opportunities and related business risks brought by offshore outsourcing.
TCB held a conference on strategic outsourcing production in new york from April 27th to 29th. For more information, please visit www.conference-board.org.