Have you experienced called any
customer service centre before? Did you know that the customer service centre
nowadays for a certain company has been outsourced to others company?
Today, all the company strives to
achieve the maximum profits and try to minimize of their operation costs in
order to meet the business target. The
effort in minimizing the operation costs included as minimum of employees
hiring to do simple and repetitive tasks which not contributed to the sales
(example to receive complaints, arranging products warranty, troubleshooting)
and reduce spending on computer software and hardware.
Some of the company using the
outsource service for tasks as accounting, company secretary, auditor, human
resource, despatch, customer service and IT department. Why the company tend to
outsource for their certain business activity? Is the outsourcing idea is
workable?
Since we are now engaging in the IT
revolution era, I would like to discuss and focus more on benefit of
outsourcing in information system (IS) and technology service. Why? Because IT
department is more challenging due to fast changes in the software, hardware,
application and to have an excellent in-house programmer is advantage or burden
to the company?
Let we understand first, what is the
concept of outsourcing. According to Baltzan, outsourcing is an arrangement by
which one organization provides a service or services for another organization
that chooses not to perform them in-house. Typically, the outsourced process of
function is a non-core business activity. The outsourced services can range
from high-volume, repetitive processes such as electronic transaction
processing to more customized services such as a help desk.
Some of the company said,
outsourcing as a strategic technique that to help them align with technology
initiatives and business goals with more on cost effective and this is will
allow them to concentrating on company core business activities and keep
abreast with rapid IT technological development. Significantly, reducing the
operating costs may include applications, assets, people and other resources.
The main reasons why outsourcing become
more popular service now is because everybody go globalization, the internet,
growing economy and low unemployment rate, technology and deregulation. While
there is many benefits associated with IT outsourcing include it will increased
quality and efficiency of a process, service or functions, reduced operating
expenses, focusing resources on core profit-generating.
Malaysia government too is
outsourcing most of the important national projects such as Smart School, Human
resources management Information Systems and e-procurement project. IT
outsourcing also practices among the top commercial banks in Malaysia.
Nevertheless, total outsourcing is only successful if there is a tight and
well-monitored contract or agreement between the sourcing firms. To the
outsourcer, they perceived potential of cost savings and shifting the burden or
risk to the service provider or vendor in order to gain access to the cutting
edge technology. The main reason for outsourcing was to access better or
acquire more skills.
According to Husnayati in her
research, examining factors influencing IT outsourcing success in Malaysia
organization, Bumiputera Commerce Bank is the first bank in Malaysia to
outsource its IT function, with a USD250 million 10-year contract with EDS in 1999.
Other major IT outsourcing contracts in
the private sectors is include Maybank with 1.3 billion deal, the RM440 million
Malaysian Airline System Berhad (MAS) deal, and Permodalan Nasional Berhad
(PNB) RM 32 million extension contract.
While the Malaysian public sector
experience a drastic beginning with outsourcing, largely driven by Malaysia’s
strategic framework known as National IT Agenda (NITA) formulated in 1996 and
the Multimedia Super Corridor (MSC). Among early Malaysia government’s
large-scale systems integration projects were for Malaysia Postal Office and
Amanah Saham Nasional Berhad for Permodalan nasional Berhad (PNB).
I also would like to share; there
is a three type of outsourcing. Onshore (process engaging another
company within the same country for services), Nearshore (contracting an
outsourcing arrangement with a company in a nearby country) and Offshore
(using companies from developing countries to write code and develop systems
and the country is geographically far away).
There are currently three categories
of outsourcing countries as the leaders (countries that are leading
the outsourcing industry as Canada, India, Ireland, Israel and Philippines),
the up-and-comers
(country beginning to emerge as outsourcing options as Brazil, China, Malaysia,
Mexico, Russia and South Africa) and the rookies (countries that are just
entering the outsourcing industry as Argentina, Chile, Costa Rica, New Zealand,
Thailand and Ukraine).
The choosing of outsourcing company
is based on the certain critical criteria like the expertise that they had,
costs of labor, English language proficiency, highly skilled labor pool, low
political and financial risk, telecommunication infrastructure, educational
system, number of technology students graduates from universities, favourable
cost structure and supporting by government. If we look at Malaysia, we are
currently in the position of the up-and-comers category. Please refer to table
1 for detail.
Expertise
|
Wireless applications
|
Major Customers
|
IBM, Shell, DHL, Motorola, Electronic Data
Systems Corporation
|
Advantages
|
▪Good business environment with strong government
support for
IT and
communications industries.
▪Workforce has strong global exposure
▪World class telecommunication infrastructure
▪Over half of the 250,000 students in higher
education major in
scientific
or technical disciplines.
|
Disadvantages
|
▪Labor costs higher than India
▪Few suppliers, which limits business choices
▪Shortage of skilled IT talent
|
Overall, Malaysia views outsourcing
as a value added service to generate revenues and also a means of improving IT
performance. Since 1995, Asia Pacific is the leading outsourcing market.
Malaysia and Singapore are the leading countries where interest level is high.
To countries where the knowledge of English language is not good as Korea and
China, they prefer to purchase technology and buy services. Yet outsourcing
carries risks, loss of control, inflexibility and geopolitical uncertainty. Not
all functions and process can or should be outsources, at least not without
careful analysis of the advantages and disadvantages. When we decided to
outsourcing, we need to be ready with the issue of security. It is because in
the world heading towards border-less transactions and information communication
technology, security is very fragile and crucial to the reputation of the
company.