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Author Topic: On Outsourcing  (Read 10333 times)

jeyps

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On Outsourcing
« on: April 15, 2006, 04:18:09 pm »
Just wanna share this interesting article with you guys. Hope you'd like it. Thanks!



"Outsourcing in the Philippines"

by Rolando P. Gosiengfiao

 (This article was published in the OPS Guide - The Philippines Executive Guide to Office Products & Services, October 1999).

Outsourcing is a catchword that does not even exist in the dictionary. But it simply means getting outside services and products necessary for your business. In manufacturing this can mean procuring parts or assemblies or entire products for completion or resale. In this article we will limit ourselves to outsourcing services.

Outsourcing became a byword in the past decade and included such things as consulting services but it became better known for data-processing services. To understand the concept of using outside services for your company’s business, it is perhaps better to survey the entire range of what has been outsourced by businesses, both large and small.

What can be outsourced?

Traditional Outside Services

Small businesses are actually quite familiar with the concept as they cope with their growing business by using outside help. This has traditionally included such basic things like messenger services, printing, cleaning services, security services, and equipment maintenance. Small Philippine enterprises are only too familiar with this.

Secondary Specialist Services

As enterprises grow, they start using secondary types of outside services like advertising, product promotions, employee training, product warehousing, truck delivery services, packaging design, legal services and other services which are simply too specialized to do in-house.

Intermediate Outsourced Services

This third stage is the real type of outsourcing – when companies who traditionally have been doing certain functions in-house start to farm out these functions to specialist providers for various reasons: skilled staff shortages, economies of scale and specialization, rapid technological developments, substantial technology investments, and simple convenience.

These intermediate functions include:

bookkeeping,
accounting,
payroll, hiring,
HR administration,
cash management & control,
financial reporting,
tax reporting,
accounts receivable collection,
accounts payable administration,
customer statements processing,
customer call centers,
distribution logistics,
transaction processing centers,
temporary staffing, and
website design.
Philippine businesses are only recently realizing the advantages of outsourcing in this area, and this applies to both SME’s and large businesses. Specialist providers were originally the traditional big-five accounting firms (for accounting), banking groups (for transaction processing) and equipment suppliers (for call center and customer statement services). However, with the increased use of PC technology, the development of specialized independent software, and the availability of internet communications, smaller specialized groups have taken a more prominent role with their ability to use up-to-date technologies and best practices, without being attached to traditional so-called "legacy" software and hardware. Moreover, these new groups have small overheads, younger aggressive staff, and a focus on SME’s to enable them to provide affordable high-technology services.

Advanced Partner Services

This advanced type of outsourcing is more involved since the service providers actually become partners of the customer firm. Services become more tailor-fit and normally involve large-scale multi-site services. These include:

E-commerce systems,
enterprise accounting systems,
enterprise HR systems,
dedicated customer service centers,
electronic payments services,
document custody services.
This trend is developing rapidly in the U.S. and will eventually be ported into the Philippines this year by multinationals and via the internet. The nascent Application Service Provider industry is taking shape and it remains to be seen what business models will eventually succeed.

Outsourcing the Accounting Functions

SMEs in the Philippines have been accustomed to using so-called "retainers" or small CPA practices to do their write-up needs for tax filing purposes. Very often, the accountants were doing this service part-time and did not provide full-service bookkeeping. Books are kept manually. Thus, no monthly financial statements are provided which could be of management use to the client. With the introduction, however, of the EVAT system in 1997, the "retainers" started having difficulty in providing detailed VAT lists, withholdings lists and monthly returns. Payroll accounting also got more complicated with the increasing awareness of employees of their entitlements under the SSS and the HDMF.

For the same reasons, SME's who employed their own bookkeepers and accountants under a manual system also realized that they were having difficulty complying with the new tax laws. Accountants were expended, only to be replaced by new accountants who also could not cope. New accountants were expected to handle detailed bookkeeping which only a computerized system could do. They were also expected to be familiar with the provisions of the new tax laws. SME accountants were also given the tasks of handling cash and cheques as well as do the bookkeeping for them, opening the business to security risks. I am sure many of you business owners have experienced these headaches associated with in-house accountants.

Fortunately, a handful of specialized firms have now entered the market providing you with expertise and service in the areas of computerized bookkeeping, accounting, and taxation. They are familiar with the different types of software that are best suited for your business particularly when your business involves multiple departments, inventory management, manufacturing, job contracting, and the like. These firms can provide the computerized bookkeeping service without you having to understand software or the hardware. The cost will often be cheaper than hiring one bookkeeper if the number of transactions that you handle is less than 100 per month. If your requirements are bigger, these firms will divide the work between your people and themselves and install part of the software in your premises. These firms will even do your payroll and tax forms preparation including detailed VAT lists.

But couldn't a company just purchase the software and do the computerization themselves? More than half of our clients have in the past purchased accounting software but the package remains in the shelf. Installing a system requires having warm bodies who do not do anything else in the company. These persons take care of setting up a computerized chart of accounts, entering the opening balances, entering the AR and AP details, entering inventory details, and also entering the historical data from the beginning of the year. They also would be responsible for designing the financial reports and preparing the data entry procedures. Most in-house accountants are just too busy catching up with yesterday's deadlines that they would not have the time for studying software, much less designing a new system and inputting historical data.

Outsourcing service providers have developed experience in determining what software is appropriate for your business. They have also installed the software in several other companies and are aware of the limitations and adjustments that need to be made. They also know the physical preparation required for data input. Moreover, they have the extra staffing needed for backwork. These providers are after the regular monthly business and are willing to quote incredibly inexpensive setup costs.

Don't think that outsourcing of accounting is limited to SME's. Even larger companies outsource certain functions if not entire accounting departments. Most American multinationals in the Philippines outsource their Payroll functions as well as their Accounts Payable functions. Telecommunications and utilities companies outsource their Accounts Receivable functions. Lately, more companies like Caltex and Procter & Gamble are forming service units in Manila to service their Asian regional offices in accounting, purchasing, payroll and HR.

With the increasing sophistication of the internet, the availability of Client/Server technologies and the introduction of the XFRML language protocol, we are going to see more Application Service Providers in the year 2000 offering via internet full payments handling services that will incorporate automatic accounting functions. Outsourced accounting service providers are your intermediate step in eventually participating in these new ways of doing business. Meanwhile, you can address your more immediate bookkeeping and accounting problems through these providers.

And when you talk to a provider - whether a CPA, a big-five firm, or a specialist provider, ask these questions: Is your main business providing service (or consultancy or audit)? Is the service fully computerized (using integrated accounting software and not just a spreadsheet)? Do you employ full time staff? Do you provide monthly financial and tax reports? Do you have a list of established clients?

(Rolando P. Gosiengfiao was President of Rent-a-Team Outsourcing Services, Inc., a firm that provides computerized bookkeeping and payroll services to SMEs and offices of multinational firms in Manila).

 

jeyps

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Re: On Outsourcing
« Reply #1 on: April 15, 2006, 05:57:59 pm »
BPO Competitors of India
By virtue of certain advantages India has been able to maintain its supremacy over its rivals in the BPO industry but there are a number of other countries, which can give India run for its money in Business Process Outsourcing. Some of the prominent competitors of BPO India are China, Philippines, Mexico, Canada, and Malaysia. The Philippines advantage, besides skilled and English educated work force and good telecom infrastructure, is familiarity with American work culture and Spanish language.

China enjoys a great advantage in terms of large pool of people but the Chinese have a great limitation, as they do not have enough English speaking graduates like India. Mexico too is emerging as a tough competitor for India but is good for low-end jobs only. Other countries like Ireland have a smaller talent pool. Canada and South Africa are other prominent competitors of India but are costlier than India, while Russia has poor infrastructure and poor linguistic capabilities.

Hence India still has the leading edge in the BPO industry, but it should keep on improvising to maintain its stability. Therefore India should be on its guard to maintain its position intact. If India has to maintain its supremacy in BPO and its software workforce, then BPO India has to learn Spanish, which is spoken in more than 24 countries. With India already stamping its superiority in the BPO sector with its knowledge of the English language, it now needs just one other language that will make the world its market, which is Spanish.

butangera

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Re: On Outsourcing
« Reply #2 on: April 17, 2006, 10:53:14 pm »
outsourcing is booming... ako, naniniwala ako na matatalo ng pinas ang India kasi mas ok sa customer service ang mga pilipino plus may language factor pa rin kahit papaano... gibberish pa rin mga indian pagdating sa English (palagay ko lang po huh!)

malaki ang future sa BPO. i dont think magplateau ito for the next 10 years. pero kung nahuli ka, tiyak ure dead. this is the right time to go into BPO pero kelangan lam mo pinapasok mo...

jeyps, we'll be meeting na raw this sunday to talk about putting up a call center biz. so far, tuloy tau sa meeting natin next wednesday ha?  :)

jeyps

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Re: On Outsourcing
« Reply #3 on: April 18, 2006, 11:47:19 am »
O'rytie! Wednesday it is! thanks!

smithamla

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Re: On Outsourcing
« Reply #4 on: February 28, 2011, 07:50:15 pm »
A precise definition of outsourcing has yet to be agreed upon. Thus, the term is used inconsistently. However, outsourcing is often viewed as involving the contracting out of a business function - commonly one previously performed in-house - to an external provider

barrinomegan

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Re: On Outsourcing
« Reply #5 on: March 06, 2011, 11:03:02 pm »
Cost savings — The lowering of the overall cost of the service to the business. This will involve reducing the scope, defining quality levels, re-pricing, re-negotiation, and cost re-structuring. Access to lower cost economies through offshoring called "labor arbitrage" generated by the wage gap between industrialized and developing nations.

fmuniz92

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Re: On Outsourcing
« Reply #6 on: March 12, 2011, 07:03:00 pm »
Of recent concern is the ability of businesses to outsource to suppliers outside the nation, sometimes referred to as offshoring or offshore outsourcing (which are odd terms because doing business with another country does not mean you have to go offshore

tomeim59

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Re: On Outsourcing
« Reply #7 on: March 22, 2011, 10:17:36 pm »
An organization can use an outsourcing agreement as a catalyst for major step change that can not be achieved alone. The outsourcer becomes a Change agent  in the process.

jnapolitano

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Re: On Outsourcing
« Reply #8 on: March 29, 2011, 09:53:15 pm »
Operating leverage is a measure that compares fixed costs to variable costs. Outsourcing changes the balance of this ratio by offering a move from fixed to variable cost and also by making variable costs more predictable.

kgosselin

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Re: On Outsourcing
« Reply #9 on: April 10, 2011, 04:40:48 pm »


Outsourcing refers to a company that contracts with another company to provide services that might otherwise be performed by in-house employees. Many large companies now outsource jobs such as call center services, e-mail services, and payroll. These jobs are handled by separate companies that specialize in each service, and are often located overseas.

axiemcorp

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Re: On Outsourcing
« Reply #10 on: March 31, 2016, 11:55:35 am »
There are many definitions of Outsourcing or BPO outsourcing services, all of them are correct though. There types of outsourcing, onshore and offshore outsourcing. Onshore outsourcing is a process of hiring or obtaining a service outside the company but its only within the same country. Offshore outsourcing is also a process of obtaining a service or hiring outside the company outside the country.

LuciaTanner

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Re: On Outsourcing
« Reply #11 on: May 24, 2016, 06:58:01 am »
Since we don't have tech support in our office the management decided to outsource and so far the set up has been great. Job gets done and it's cost savings efficient too.

https://www.flatworldsolutions.com/articles/benefits-of-outsourcing.php

baloydi

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Re: On Outsourcing
« Reply #12 on: September 11, 2016, 12:19:34 pm »
Thanks for the nice article. God bless you!

MaineTenor

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Re: On Outsourcing
« Reply #13 on: March 06, 2017, 11:45:57 am »
Good read! Outsourcing is the thing nowadays!

MaineTenor

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Re: On Outsourcing
« Reply #14 on: March 06, 2017, 11:46:39 am »
Good read! Outsourcing is the thing nowadays!

 

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