OUTSOURCING

Submitted By : Group 2

IBE - End Term Presentation
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Agenda
What is Outsourcing
Types of Outsourcing
What to outsource
Costs of Outsourcing
Advantages of Outsourcing
Disadvantages of Outsourcing
Impact on the Economy
Conclusion
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What is Outsourcing
Outsourcing is a strategic
process through which
Company A hands over specific
functions of its business to
Company B by making it in
charge of the whole process,
while providing the strict
guidelines regarding the
requirements and specifications
for the project.

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Outsourcing Models
Offshore outsourcing Outsourced work is performed in
countries with different time zones (i.e. India, China,
Singapore)
Onshore outsourcing Outsourced work is performed locally
(i.e. in the same country)
Near-shore outsourcing Outsourced work is performed in
other countries that are in approximately same time zone (i.e.
Mexico or Canada)
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Process Of Outsourcing
Strategic thinking, to develop the organization's philosophy about the role
of outsourcing in its activities

Evaluation and selection, to decide on the appropriate outsourcing
projects and potential locations for the work to be done and service
providers to do it

Contract development, to work out the legal, pricing and service level
agreement (SLA) terms

Outsourcing management or governance, to refine the ongoing working
relationship between the client and outsourcing service providers.
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What to Outsource
Companies should outsource only their non-core activities
that are not central to the business repeatable and
automated tasks

Examples include IT support, HR (payroll, recruiting, benefits
administration, training and development), logistics,
administration, customer services, finance services, supply
chain management
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Costs of Outsourcing
Cost of selecting a vendor

Cost of transition (it takes 3-12 months to completely hand
the work over to the offshore partner)

Cost of layoffs to the home company

Cost of managing the offshore contract
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Reasons for Outsourcing
Lower labor and operational costs
Focus on core business competencies
Increased speed to market
Risk sharing
Adaptations to volatility in demand
Competitive advantage
Access to skills & Technology not present in the organization
Joint & proactive problem solving & innovation
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Reasons for Outsourcing
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Risk in Outsourcing
A possible loss of managerial control

Threat of security and confidentiality

A possible loss of flexibility in changing business conditions

Quality problems/on-time result delivery

Hidden costs (governmental issues, terrorism, currency
fluctuations, contract issues, cultural differences)

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Impacts on the Economy
Increase in Unemployment in local market thereby leading to
temporary decrease in consumer spending

Gradual shift in employee expertise in local market leading to
increase in innovations

Increase in employment in outsourced country leading to
increase in consumer spending

Increase in GDP & GNP in outsourced country


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Impacts on the Economy contd..
Better efficiency enhanced final output with lower costs
contributions

High quality at lower price - Better customer satisfaction

Lower cost of products - Increased demand for the country
that is outsourcing.
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Job Category Yr. 2000 Yr. 2005 Yr. 2010 Yr. 2015
Management 0 37,477 117,835 288,281
Business 10,787 61,252 161,722 348,028
Computer 27,171 108,991 276,954 472,632
Architecture 3,498 32,302 83,237 184,347
Life Sciences 0 3,677 14,478 36,770
Legal 1,793 14,220 34,673 74,642
Art, Design 818 5,576 13,846 29,639
Sales 4,619 29,064 97,321 226,564
Office 53,987 295,034 791,034 1,659,310
Total 102,674 587,592 1,591,101 3,320,213
No. of US Jobs Moving Offshore
According to the U.S. Department of Labor and Forrester Research,
Inc, outsourcing is expected to expand in numbers and scope
Outsourcing Fact & Figures
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Critical Success Factors
Executive-level support in the
client organization for the
outsourcing mission

Ample communication to
affected employees and the
client's ability to manage its
service providers

Cultural sensitization between
the client and the service
provider

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Emerging KPO destinations have created a niche for
themselves.

India leads in KPO services. Countries such as the Philippines,
Russia, Ukraine, Poland, Hungary, China and South Africa are
fast catching up.

For comparing the competitive positions of the given
countries with regard to KPO services, we have used the
following four parameters .

i. Talent pool availability
ii. Cost Arbitrage
iii. Infrastructure
iv. Government Support
India Advantage
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India Advantage
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Factors that give India an Edge over others
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Indian KPO Market Size
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By 2006-07, the number of billable professionals were
approximately 75,000, who were responsible for generating
revenues of US$ 3.05 billion.

By 2012-13, the contribution of the Indian KPO sector to the
global KPO industry will be in the range of 68-70 per cent.

By 2013 the expected market size of KPO in India is expected to
be around 12 billion and the number of FTEs involved would
grow to 265,000.


Indian KPO Market Growth
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References
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www.ibef.org (India Brand Equity Foundation)

www.cii.in (Confederation of Indian Industry (CII))

www.infosys.com (Leading Indian IT Services Firm)

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