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Outsourcing Plan W/ References

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Outsourcing Plan

Outsourcing has become the norm in today's business world. Many might argue that outsourcing is not done just because of financial savings and gains, if managed correctly the company can cut labor costs and increased profits. This paper will discuss an offshore outsourcing plan for Riordan Manufacturing that will decrease cost and increase productivity.

Riordan has decided to use a new strategy for the company that is offshore outsourcing. This is a strategic decision to spur innovation, develop new products, and explore new markets. The rationale for choosing this direction is that outsourcing from the literature review has been determined to decrease cost, increase productivity, and produces a higher quality of work. The functions that Riordan has decided to outsource are: customer service call / service centers; database management; application programming; data entry; and sales. Riordan chose to outsource the functions to China. The location was chosen due to the company already has a presence in this market. Legal, communication, role expectation, time zones, and job knowledge can be barriers when establishing a presence in a foreign market. These barriers have already been addressed when Riordan initially entered the market. "China's growing influence on standards could define global competition in technology, media, and telecommunications sector for years to come (Deloitte, 2004). An outsourcing plan pertaining to these specific functions is established for the company. The success of the project will be measured by the achievement of outcomes as defined in the performance measures selected.

As globalization of the information technology (IT) industry continues a natural evolution has been for companies to perform business in an overseas market (Anonyms, 2003). Many industries are participating in the offshore outsourcing explosion. Examples of the industries that have been affected include and are not limited to computers, manufacturing, banking, finance, insurance, and the medical equipment industry (Ware, 2003). The decision to outsource is not industry specific, rather company and / or function specific.

One decision that faces an organization early on in developing an outsourcing plan is whether to complete by oneself or utilize a third-party vendor. Riordan Manufacturing, Inc. under the advisement of Chief Information Officer (CIO), Maria Trinh the company has decided to utilize a third-party vendor. The IT functionalities that will be outsourced are: application development, systems integration, the technical support center, software development, database management, technology upgrades, and E-commerce

The benefits Riordan can expect from this strategic decision are lower labor costs, a reduction in new systems time-to-market costs, reduced project timeline, increased IT productivity, and competitive advantages (Ware, 2003). The company already has an exiting plant in China therefore no large initial outlays of capital will be required. Riordan already has an established understanding of the Chinese culture and enjoys a respected business relationship.

Establishing the performance measures will be the next step in this journey. The measures selected are: 100% buy-in of agreements and proposals, 100% of the outsourcers technologically needs met, 100% of intended resolution solve business issues, 100% projects completed within the established time frames, employee satisfaction at 90% or greater from both counties, cultural issues resolved in a timely manner, and the investment has a return within the first eighteen months.

China's performance standards will have to meet those expected of them by Riordan. Chinese technology companies competing for offshore outsourcing will have to meet and / or exceed their counterparts in other countries. Specific technological standards must be agreed upon during the vendor selection process, so that both the host country and Riordan are having the same understanding in all aspects of their business relationship.

The personnel required to accomplish the technological functions to be outsourced, will be project managers, software engineers, business and systems analysts, developers, and database administrators. The qualifications of the key players will consist of computer science, information systems, and business management degrees. The best skilled employees should be the choice to participate in offshore outsourcing.

Riordan manufacturing has decided to outsource the function of the call center overseas. This supports a trend noticed in the industry. "Of 111 large north American businesses surveyed, nearly a fourth plan to outsource their cal center operations this year" (Ramaswami, 2003). Riordan'a call center will be a small business-to-business operation employing seventy people. The call center will be expected to handle inbound and outbound call regarding customer service concerns. Operators will be in charge of product tracking, processing function, web based product support, and telephone support. The benefits expected from this decision are a reduction of labor cost and resources. This reduction in cost will help the organization achieve their goal to maintain profitability for sustained growth.

The cost reduction will be achieved through the decrease in wages paid to offshore workers as compared to workers in the United States. In order for companies to maintain a competitive edge and continue to demonstrate profitability it will be essential for all companies to consider outsourcing.

The time difference will make it convenient for customers to receive orders quickly and increase overall productivity for Riordan. The call center will operate twenty-four hours per day to accommodate customers in all regions of the world. China is thirteen hours ahead of the time in the United States. When a customer needs a rushed order, the turn around time will be fast since China is technically a day ahead. This will aid in improved customer service reputation. China has a global influence on the technology that will create an economic advantage for the telecommunications industry in the country.

Another benefit of offshore outsourcing for Riordan is the use of service bureau's to employ qualified team members to staff the call center. This will decreased the demand on the human resources department and allow them to focus more on core operations and building employee satisfaction. These services assure Riordan that the operators hired will have the education level and skills to perform the job effectively. The turnover rate in offshore counties is extremely. The benefit to Riordan is less cost to hire and train staff (Read, 2002). The increase in employment opportunities



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