Are you expanding your operation overseas? There are some aspects about outsourcing that you must consider. Do you know all your available outsourcing options?
Despite being the go-to strategy that many companies around the world employ to contract cheap skilled labor; choosing the wrong option for your company could lead to disaster.
Taking a brief glimpse into its history will help you grasp the basic mechanics and implications of the recruitment process and the main types of Outsourcing available to your enterprise.
The Origins of Outsourcing
Seeking foreign help to achieve technological and communication improvements has been part of the history of developing nations.
After World War II, America’s role as a global power was solidified, and many companies attempting to compete globally found the need to identify which processes could be outsourced to increase their markets and profits.
But it was not until the late 1980’s, when low-cost versions of PCs were released, that outsourcing was formally identified as a business development strategy: vendors overseas began to purchase the client’s mainframe software and managed their services remotely.
Why Outsource to Mexico?
In the business world, it’s no secret that Mexico is considered one of the most important outsourcing countries in Latin America—and this is how it all started:
Over 40 years ago, U.S. companies would only cast their eyes on Mexico searching for basic services such as surveillance and cleaning. However, the worldwide upsurge of consulting agencies reached Mexico in the 1970’s, which facilitated a range of new services provided and the optimization of processes at significant cost savings.
The fact that U.S. companies started to gradually invest in the Mexican workforce – and the notorious good quality in which their services were delivered – prompted other developed economies to create trade partnerships and new investments in Mexico.
North American Free Trade Agreement (NAFTA) — This agreement, which was originally signed by Canada and the United States on January 1st, 1989, was carried out with the purpose of encouraging trade between these two nations. Two years later, and with the intention of promoting a business channel free of tariffs on imports and exports – among other restrictions – bilateral talks between the United States and Mexico commenced and Canada decided to join. Due to this agreement, Mexico drove investment into various sectors, including the tech market, competing against low-cost labor countries such as China and India.
Mexican Technology Hubs — Over the years, Mexico has become a tech-savvy country in different areas. Cities like Guadalajara (a.k.a. Mexico’s Sillicon Valley), Queretaro, Mexico City, and Monterrey – to name a few – have opened their doors to many international companies such as IBM, Oracle, Hewlett-Packard, Motorola, and Wizeline – and what’s most important – to promising start-ups.
What Jobs and Tasks to Outsource
As mentioned previously, companies decide to outsource not only to optimize profitability and shareholder returns, but to share risks with a partner company by reducing and controlling operating costs and – most importantly – to position their business at a greater scale.
Although “penny-pinching” in workforce sounds appealing, not all areas of an operation should be outsourced. Here are 4 tips that will help you in your decision-making:
1. Outline the transition process and project scope. Before joining the outsourcing craze, break down your operation needs in depth. Assess which processes and projects could be easily done in-house and whether they could be done at a lower cost by another business. Most companies have numerous valuable people, capable of leading important tasks efficiently and effectively – but lower level work can be a good way to save time and money.
2. Define your SLA. A Service Level Agreement, also known as “SLA”, will provide your vendor with a layout of conditions, metrics, remedies, and/or penalties under which their service will be measured.
3. Price-in data risks. Cyber-risk is a reality. Therefore, it is important that you weigh up the pros and cons of trusting your valuable information to low-cost third parties.
4. Choose wisely. Finding what type of outsourcing is best for your company might be time consuming, but it’s not rocket science. Taking the time to do your research will lead to cost savings and higher efficiency.
The Quest for Right-Shoring
You are about to take a big leap towards successful outsourcing. Understanding your company’s goals and objectives will put you in the best position to choose the right vendor and the most suitable outsourcing options for you.
Take a look at these three types of recruitment services. One of them could turn out to be the best fit for your needs and interest.
At its core, offshoring is about relocating the operating activities of a company to another country with the purpose of reducing personnel costs; opposite to outsourcing, which consists in only moving internal operations to a third-party. This business model aims to save money for both seller and consumer; yet, some challenges may arise due to factors such as time-zone, high turnover, wage inflation, and language barrier.
Nearshoring offers the option of sharing a border with the target country, allowing for little-tono cultural differences, conflicting time-zones, or language barriers. Having the opportunity to go into business with a nearby country, translates into greater reliability and less risks of most types of interference.
Onshoring refers to the relocation of business processes to a nearby, lower-cost, location (inside domestic borders). This option allows for faster services, since the coordination and communication of manufacture are efficient.
Find the Best Outsourcing Options for You
Now that you’ve decided to embark on the thrilling adventure of finding the outsourcing options for your operation, it is important to ensure that your objectives are well established and in line with the execution strategy of your company. Regardless of your choice, the outsourced resources will mirror your operational habits – good and bad.