Project Log

SMEs can outsource too

Small companies can leverage the power of outsourcing more effectively than large companies, says Atul Aggarwal, Director, Sterling Tools

Is outsourcing only meant for large companies? Can small companies leverage the power of outsourcing as effectively as large companies? Well, we certainly believe small and medium companies can gain more since most of the companies do not have the required manpower required to meet the changing needs of an organisation.

For example, consider our own organisation. We have grown from a fledging fastener manufacturing company to become one of the leading OEM suppliers in India. Our business has grown almost eight times in the last 7-8 years. From one business unit, we have around six today. Our clients are among the best names in the industry including leading automobile companies such as Bajaj Auto, Delphi, Honda, Kirloskar, Leyland, Maruti Suzuki, Mazda, Mahindra, Simpson, Swaraj, TAFE, TELCO, Tecumseh and Yahama.

Keeping up with the customer

While we have made continuous investments in technology including investments in ERP, the ability to upgrade to technology standards in line with our client’s needs is a challenging task. Customers too have become more demanding. For example, Maruti changed its policy to just in time inventory which in turn increased the workload on the number of invoices that were being generated by the system. This means that the technology has to be available on a 24/7 basis. Being a small company with minimal IT staff, we found ourselves hard pressed to make our systems react to the changing needs of the market. The current IT team was finding it difficult to handle the day-to-day problems arising out of the usage of e-mail, common office software tools, design software, hardware and networking.

These problems coupled with our own hectic growth put a lot of demands on our IT team. The frequency of day to day problems was increasingly rapidly and the involvement of top management in solving these problems was also rising. As our organisation was going global, we needed a robust IT infrastructure in place and the ability to predict, maintain and scale our IT infrastructure according to market needs.

Taking on a partner

Looking at our business growth, we decided that it was imperative that we partner with a leading organisation that could take care of our outsourcing needs. Accordingly we signed a contract with ESS that was based on multiple factors. We considered factors such as the role technology could play in our long-term business planning process and how ESS could help us map our business needs.

In any outsourcing contract, change management is crucial and we educated our employees on the benefits of outsourcing. What’s also unique in this contract is that ESS took over our employees. This worked to our advantage as the handover was smooth. Since the ESS team was part of STL, the transition was completely seamless. We also planned the IT activities to be undertaken over the next twelve months and the kind of technology investments that would have to be made in detail. We have formally signed a contract of five years with ESS wherein the agreement is in place for various components such as hardware, network infrastructure and software support. We prepare a quarterly budget which is mutually agreed to by ESS and our company. Based on the budget, ESS makes the procurements.

Avoiding the nitty-gritty

The most obvious benefit is that the management time is not wasted looking at day to day IT operations. Most unused or degraded systems are being phased out in a planned and predictable manner. Software upgrades, patches and management of software licenses is no longer a tedious and time consuming task. The number of complaints has gone down. We have introduced process based tracking of activities and this has resulted in higher productivity. The future roadmap is to move to a model wherein the structure of the deal could be linked to the productivity gains made by our organisation. In conclusion, IT is crucial for any organisation and more so for a mid-sized organisation. The concept of outsourcing can prove to be extremely beneficial as it does not involve huge upfront IT investments and gives the benefit of the latest technologies.

As told to Srikanth RP