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@ The performance by outside parties,
on a recurring basis, of tasks that
would otherwise be performed in-
house.
?ther Definitions
@ In-sourcing
@ ?ff-shoring
@ Co-sourcing
@ ?utplacement
@ In sourcing ± This refers to when
companies look at their pool of employees
to find those who may be tapped to do
certain needed jobs. They may offer these
employees extra training or they may
merely find the employees that already
possess the skills to take on specialty
work.
@ ?ff shoring - ?ff shoring simply means having
the outsourced business functions done in
another country. Frequently, work is off shored
in order to reduce labor expenses. ?ther times,
the reasons for off shoring are strategic -- to
enter new markets, to tap talent currently
unavailable domestically or to overcome
regulations that prevent specific activities
domestically.
@ Co sourcing ± Co sourcing is where a
business function is performed by both
internal staff and external resources, such
as consultants or outsourcing vendors,
with specialized knowledge of the
business function.
@ ?ut placement - ?utplacement is a term
used to describe the efforts made by a
downsizing company to help its redundant
employees through the redundancy
transition and help them re-orientate to the
job market . A consultancy firm usually
provides the outplacement services.
Types of ?utsourcing
@ Business Process ?utsourcing
@ Information Technology - 28%
@ Human Resources ± 16%
@ Sales & Marketing ± 15%
@ Finance ± 11%
@ Administrative ± 9%
@ All ?thers ± 22%
How Common is HR?
@ 58% of companies outsource some HR function
@ 91% of companies with $1 billion+ annual
revenues are now considering HR?
@ HR? grew 28% from second half of 2004 to first
half of 2005 ··

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The HR? Market

@ In next 5 years, global spending on HR?

will double ± from $40 billion to $80 billion

@ From 2002 to 2004, 14% increase in large

firms that would consider HR?
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@ Performance Management 3%
@ Strategic Business Planning ± 4%
@ Policy Development/Implementation ± 4%
@ Employee Communication Plans ± 10%

 


 

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 Advantages of HR?
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Why outsource HR
REDUCE C?ST ?F HR AND C?NTINUE T? PR?
IDE
ALUE

@ Tightening labour markets and competitive

product markets ± pressure to reduce head
count
@ Cut costs
@ Add value
@ Do more with less
Upgrade, but not upsize
Downsize, but not downgrade
@ HR itself is becoming the target of belt tightening
@ Shed routine administrative tasks and focus on
talent management
Strategic outsourcing
@ Beyond cost control
@ Specialization and expertise that goes with it for
which there is no need on a regular full time
basis
@ Focus on quality, technology and service
delivery
@ ?utsourcing to best of class, best of industry
@ Problems with technology ± address need for
customization (which presently means largely
adjusting to supply side than demand side)
Deciding Whether to outsource
@ Create a project team
@ Analyse the current position
@ Pay attention to people issues
@ Benchmark
@ Come to a decision
What is core to the business and the future of
business
What can bring competitive advantage
Deciding whether to outsource
@ Decide what to outsource
@ Tender the package
@ Choose a partner
@ Introduce your staff to the agency
@ Draw up the contract
@ Test the contract
Pros and cons
@ Pros
@ Cost and savings
@ Financial and operational
flexibility
@ Need to focus on few
things
@ Access to quality,
expertise and better
management skills
@ Staffing flexibility
@ Cons
@ Need greater
coordination flow with
agencies
@ Reduces organizational
learning by depleting its
skill base
@ Loss of control
@ Adverse affects on
morale and motivation
@ Job insecurity
Factors hampering HR?
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Dominant trends
3 main HR outsourcing industry segments

@ Consultants
@ Administrative ± service providers
@ Technology enablers
Customizing imported software products
remains an issue: supply oriented rather than
demand based customization
Typical Problems
@ Integration with over all strategy
@ Fragmented and piecemeal approach ± cleaning
part of the pool
@ Absence of formal outsourcing process
@ Limited cost analysis
@ Core business definition ± Everything is core
@ Contract management how to ensure that we
achieve desired objectives
@ Work flow, supply chain and logistics
management critical to outsourcing process
Risks of HR outsourcing
@ Trust
@ Confidentiality
@ Dependency
@ Spillover risks
@ Relative proficiency
@ Strategic capability
@ Commitment
@ Flexibility
Managing people issues
@ What happens to people
@ When to communicate
@ Who to communicate with
Those whose jobs are outsourced and those whose
jobs are not outsourced
@ How do you deal in the transition phase
@ What about HR staff
Who will survive who has to leave
@ How will the HR department look like, post
outsourcing
 









@ ?utsourcing in traditional areas like customer care, financial
services, manufacturing, IT, ITES is growing.
@ Large multinational companies are investing in captive BP? units
in supplier countries in multiple locations, to reduce risk and
control quality.
@ ?utsourcing is becoming more sophisticated. Customers are
looking for business process excellence, speed to market,
improvement in quality, benchmarking to world-class standards.
CE?s are involved to ensure the long-term success of strategic
offshoring decisions. ?n their part, suppliers understand that they
must  
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 from emerging lower-cost outsourcing destinations.
 









@ 
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for outsourcing like terrorism and
war, disaster and disease make contingency
plans a necessity.
@ The IT industry will see roughly 10 to 15% of
its jobs move overseas during the next ten
years, inviting more   a

a 
@ For the past two decades, h
a has been
growing at an astounding 9.5% a year and
I

a by 6%. They are impacting the global
economy and leading the outsourcing
revolution.
 








@ ?utsourcing 

 will continue to rise.
@ More 
  will find outsourcing attractive,
creating a  a

 Following the
lead of the US and UK, the European Union
markets will expand their offshoring programs,
while Japan will increasingly look to China for
its needs
@ Customers will take greater 

in driving
and designing deals.
@ The interlinking of the supply chains brought
about because of outsourcing will create
stability as companies will put pressure on
governments to avoid wars.
 








@ Risk factors and unexpected occurrences like war,
terrorism, disease, natural disasters and economic
upheavals can throw a wrench in the works.
@ The rising price of oil will put increasing pressure on
companies to both utilize technology and outsource to
remain profitable.
@ The rising price of oil will cause oil consuming
countries like the USA to be less competitive resulting
in more outsourcing to India and China.
@ India will show excellence in Services that require
advanced English like Research and Analysis
?utsourcing, Content and Medicine.
 








@ Political backlash over outsourcing is likely to
lessen over time as economies strengthen and
companies continue to reap the benefits of offshoring.
@ Technological power will shift from the West to the
East as India and China emerge as big players in the
global outsourcing market. The two countries have the
size and weight to a

h

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@ By 2015 China will be No. 1, India No: 2 in the global
top five outsourcing destinations.
@
endor focus will shift from basic skills, costs and
processes to domain knowledge, transition challenges,
change management, HR issues and governance.
 








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to minimize risk and
leveragecultural and linguistic compatibility.
The supplier countries are in the same time
zone as their customers.
@ The large diverse Indian companies will face
stiff competition from new focused smaller
companies. Because these companies are
able to focus and become excellent in one are
they will be able to provide a higher level of
service.
 
 
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- Companies are going beyond basic
research to invest in

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. Companies that have invested in R&D in India
are Cisco Systems, Motorola, Hewlett-Packard, Google
General Motors Corp. and Boeing Co among others.

 
- In haa  a India has the
opportunity of co
 

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India ¶s large pool of qualified English-speaking lawyers with

experience in the British legal system can offer paralegal support,
legal support and patent services. A few Indian companies
affiliated with American law firms are now able capture a tiny
piece of the American market. They are now doing legal research
at very high rates by Indian standards but yet 50% below typical
American rates.

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India can provide high-quality engineering services in the fields of:
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@ ?utsourcing opportunities for India exist
in h 
 
 like Financial Research,
content development, medical writing:
animation, film, publishing, web services;
Human Resource outsourcing:
recruitment, training, Education,
Nanotechnology and many others.
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@ In the next ten years, China will replace India in its
number 1 position in the global ITES-BP? industry.
@ Rising costs and low efficiency in many cities like
Bangalore will make software outsourcing less attractive
in future. The giants may show a drop in earnings.
@ India ¶s terrible Infrastructure will continue to be a drag
on the potential of India giving other countries the
competitive advantage.
@ ?ther competing countries providing low-cost
outsourcing options will exert a downward push on costs
± East Europe, Latin America, South Africa
 ha
 

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@ I
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@ India ¶s ability to develop infrastructure is far outpaced by
neighboring China
@ Metro cities are getting saturated and costs are rising --
Tier II towns need to develop infrastructure but India¶s
track record does not bode well for fast development.
@ |a

  
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@ The demand-supply gap in India for knowledge workers
is being felt now in Bangalore but may peak India wide in
2008-2009
@ The education system needs transformation to produce
people with skill sets that match industry needs.