Building a Business Development Plan
The idea of outsourcing services has been around since the 1970’s although the concept was primarily used as strategy to reduce costs.
When the Cold War ended and trade barriers were lowered, the global business community recognized more potential in improving profitability by engaging with other regions where comparative cost advantages exist.
The evolution of technology made business more accessible and communication more efficient. The telephone gave way to the fax machine which was soon rendered nearly obsolete by e-mail. It was easier for companies to explore opportunities in other parts of the world.
By the new millennium, the global business community had fully embraced outsourcing as a double edged sword. Not only can outsourcing services lower costs but also contribute directly to income by utilizing a highly skilled labor force and adapting technologies proprietary to that region.
The Philippines and India were the two preferred destinations for outsourcing. From the period of 2004 to 2014, annual revenues from outsourcing in the Philippines grew from US$1.3Billion to US$15Billion. The Philippines is projected to claim the number one spot from India in 2015 with expected revenues of US$18Billion.
By outsourcing services, a business can lower costs significantly with labor and benefits the largest sources of savings. The average wage rate in the Philippines is US$4 per hour compared to the US$20 per hour in the United States. Given the global economic slowdown since 2007, most companies have been re-aligning their business development strategies toward streamlining costs while improving revenues.
Businesses usually outsource services that are non-essential or supportive in function. By transferring these tasks, a company can re-align cost savings to shore up funding for core activities that directly support revenue generating programs.
How to build a business development plan through outsourcing?
According to Benchmark Global Management Solutions, an outsourcing services provider based in the Philippines, since the exponential growth of outsourcing particularly in Asia, businesses have more options and opportunities to explore. The consequence is the dearth in long-term contracts. Compared to the fledgling years of outsourcing, it is highly improbably for service providers to secure contracts longer than six months for the initial engagement. For the client, a protracted contract for six months, limits its exposure to risk should the service provider prove to be incapable of rendering quality work. For the service provider, a short term contract such as six months is not sufficient to justify a large capital investment on a private facility.
In order to meet the interests of both client and service provider, there should be four stages in the business development process.
First Stage: Incubation
Given a six months contract, it would be advisable to house the account within leased premises. The advantage of leased premises is the existence of economies of scale. The cost per seat is lower as direct costs are spread throughout the other tenants leasing in the facility. There will be no need to invest in brand new computers, work stations and hold deposits for internet connection. Thus, there is less exposure of capital. Leased premises have contingency measures in place should there be power outage and back up internet connection. In terms of operations, leasing the account gives the service provider an environment to study the set up, current systems and work flows for reference should there be decisions for future long-term expansion.
Second Stage: Integration
After the first quarter of operations, the service provider should have enough information and data available to improve current systems and work flows. This is especially true if the client will initiate a scale up of operations. A change in the volume of work will necessitate an adjustment in internet bandwidth, allocation of power and possibly software program updates. On the manpower side, the service provider should have identified a core group of people to build operations on.
Third Stage: Implementation
By the third quarter of operations, the client and the service provider should be in the process of fine-tuning all systems and work flows. There should be a consensus that the contract would be extended until the end of the fiscal year with the focus now on future expansion under a longer term arrangement. The initial core group should be in the transition stage for greater responsibility and recruitment of new personnel should be in full swing.
Fourth Stage: Expansion
With the contract extension winding down and more data on business performance available for a comprehensive evaluation, both parties should firm up arrangements for a long-term engagement. The technologies, tools and processes should be finalized by this time that the only sound business decision to justify the investments made the previous three quarters is to build a private facility. By definition, a long-term engagement is a contract that justifies the amount of the required investment.
The best approach in designing a business development plan through outsourcing is to first reconcile the interests of both parties. For success to be achieved, all parties must operate on a win-win platform.