1. Outsourcing - Business strategy
of the century
Presentation by
Vinod V Menon, ACA, DCFA

2. 50 %
Savings*
Both direct and hidden cost, based on the survey conducted by Morison Menon covering 100 Companies across Asia and US to find out their experience of availing back office accounting, payroll
and vendor management services. 50 - 60% savings in cost was reported by Companies with more than 1000 employees and 20 - 30% reduction in cost by companies with less than 500
employees

3. Did Outsource help Companies?
The survey was conducted by Morison Menon covering 100 Companies across Asia and US to find out their experience of availing
back office accounting, payroll and vendor management services.

4. Risk Long term Space
Management Cost Saving management
Scalability Why? Focus on
core business
Cost Access to Improve
restructuring talent quality

5. Advantages
• Long Term cost savings
• Skilled work force
• Reliable information
• Effective utilization of resources
• Focus on core business
• Cost restructuring
• Increase in quality
• Capacity Management
• Scalability
• Risk Management

6. What can be
outsourced?
• Accounting and Book keeping services
• HR - Recruitment, Payroll, Performance management and appraisal
services
• MIS and Reporting functions
• Medical Transcription
• IT Development and support functions
• Distribution outsourcing (Logistics)
• Insurance settlement
• Other functions that meet the criteria for outsource

7. Criteria for outsourcing
• Require high volume of processing
• involve large head counts
• are rules-based processes
• have consistent requirements
• demand measurable performance
• are efficiency focused
• require improvement

8. Insource vs Outsource
Like asking which one is good....
Apple or Orange?
Each has its own advantages and disadvantages

9. Outsource Models
• Staff Augmentation
• Out-tasking
• Project Based Outsourcing
• Managed Services
• Build Operate and Transfer

10. Staff Augmentation
• is the process of hiring a dedicated team of additional staff at the third party
location to bring better efficiency and effectiveness in the work process.
• Used when corporates face shortage in work space and difficulty in personnel
recruitment.
• Advantages:
• plug’n’play employees
• No recruitment headaches
• Easy exit plans
• No medical leave, no leave salary, 12 months working

11. Out-tasking
• is the process where specific tasks/ departments are handed over to a third
party
• This is an option when Company wants to concentrate on core activities
and disintegrate itself from doing and spending resources on non core
activities.
• Advantages:
• Specific departments are fully outsourced which relieves management
from micromanaging.
• Volume increase during peak time is managed
• Fixed monthly expense

12. Project based Outsourcing
• Specific projects are outsourced.

13. Managed Services
• is the process where day to day
management responsibility is outsourced to
a third party - this is primarily based on the
mutual trust between client and vendor.
• For example, a law firm will outsource its
administrative functions to a third party
and focus only on legal and core issues.

14. Build, Operate,
Transfer!
• under this option, a third party builds the facility as per our
requirement and specification.
• this will be based on careful analysis and study of our
requirement.
• third party will continue to operate it as a profit centre for
sometime (as specified in the contract)
• at the right time we take ownership of the centre based on a
predetermined amount.
• the buy out can be optional. If we feel the need to extend
the buy out (or decides not to buy), that option can also
exercised.

15. Hiring an external organization
Disadvantages!
1. Loss of Managerial control
2. Hidden Costs
3. Threat to Security and Confidentiality
4. Quality problems
5. Tied to Financial well being of another company
6. Expansion Issues

16. Cost effectiveness of outsourcing depends on how big
is your current team that does the work, their cost and
do they meet your objectives.
If current cost is not a concern and in-house team can
meet your present and future business needs then
outsourcing is not suggested for your business.

17. Cost benefits of outsourcing are realized after couple
of years and one has to be patient to see the benefits
like any other initiative
For any Company to benefit from outsourcing, it needs
to believe in outsourcing, work closely with the service
provider for couple of years to make it a success and
then decide if it is suitable or not. Outsourcing is worth
trying and it is least risky to try it out.

18. Easiest areas to outsource are accounting,
internal audit, payroll processing, recruitment
besides the usual suspects of IT and Admin
support.
Company planing to outsource should
not adopt a big bang approach, but
should go for a well thought out
conservative approach.

19. Risk free path?
• Sit with each Department Head
• Understand what they are doing
• plot the work profile and the current cost
of doing it.
• mark those areas that can be outsourced
• plot the work that can be outsourced and
the cost of outsourcing separately.
• Compare both and find out the savings.

20. Thank you