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Types of Outsourcing:
Domestic In-house
Domestic Outsourcing
Offshore In-house
Offshore Outsourcing
KNOW Offshoring
Offshoring is defined as the transfer of worker’s productivity to abroad as part of outsourcing or as part of an
in-house transfer of work.
WHY OFFSHORING?
Offshoring allows US companies to capture economic values by creating markets, jobs, and production of goods
in other countries.
OFFSHORING ARENA
Major jobs offshored are in the fields of information technology, financial services, human resources,
purchasing and manufacturing.
TYPES OF OFFSHORING
Production Offshoring
IT Enabled Offshoring
Innovation Offshoring
Models of Offshoring
Global Shared Services - Mass insourcing, something like captive centres, this is followed primarily to
combine internal operations to large centers.
Hybrid Model- Known as “Dual Shore” - 30% work onsite( requirement gathering, client interaction) and 70%
offshore ( coding, testing and fixes).
Multi-sourcing model- Having multiple off-shores to get wide range solutions or “best-of-breed” strategy.
Global Delivery model - also termed as blended outsourcing, this model has advantage of backup delivery
locations in case of failures. Eg: TCS, CTS, Accenture etc.
Build-Operate-Transfer Model (BOT) - company can create a shared services or development center in
offshore and manage it for a limited period of time by signing a contract with an offshoring corporation. This
ensures quick time to achieve stability in the project progress.
Evolution and Cause of Offshoring
Evolution
Initially offshoring started with blue collar jobs in early 70’s.
By 80’s white collared jobs also started moving to other countries.
Development of Internet accelerated R&D and manufacturing offshoring.
Reasons
Competitive Pressure
Access to skilled personnel
Long term Benefits
Lack of skilled labor
Decrease in Work Age population
Cost Cutting
IT OFFSHORING
Types of IT Offshoring
Off-site/Offshore Outsourcing Model
Onsite/offshoring Model
Global Delivery Model
Jobs Impacted
Low skilled and repetitive jobs
Call centers
Complex IT jobs and product design
Manufacturing and R&D jobs
Economic Impact
Skilled labor at cheap price will boost the economy in developed country.
Creation of new wealth and jobs in developing country.
With the theory of comparative advantage, both countries can enjoy greater total consumption and well
being in aggregate by trading with each other.
Offshoring firms to lower costs and save scarce resources.
Capture domestic market and generate revenues.
What goes around comes around - Developing countries look back at US for more complex work.
Total exports from US companies to India / China have grown manifold.
Economic benefits are also linked to improved political relations.
Why INDIA and CHINA for Offshoring?
How effective is offshoring?
Value adds from offshoring
TIME ZONE ADVANTAGE
Enables 24*7 operation.
Provides business opportunities to local economy.
Reduced downtime (maintenance during client off work hours).
Timesaving.
SECURITY ISSUES
Intellectual and Proprietary Rights
Offshore Development Centers
Network Security Planning
Regular Audits
Recovery Planning
OTHER MAJOR BENEFITS:
Focus on core activities (Innovation,Research and Development).
Reduced Waiting Time.
Accelerated Process Cycles.
Fragmentation of supply chain enables side by side development.
Elimination of recruitment costs, liabilities of employees.
Flexibility - Eliminating hiring and termination costs.
Increased GDP for both countries.
Better Technology and Infrastructure.
Benefits from Profits.
Offshoring is Proportional to
Growth
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