Outsoucing.doc

OUTSOURCING A BOON OR A BANE

1. INTRODUCTION

Since the Industrial Revolution, companies have grappled with how they can exploit their

competitive advantage to increase their markets and their profits. The model for most of the

20th century was a large integrated company that can “own, manage, and directly control” its

assets.

In the 1950s and 1960s, the rallying cry was diversification to broaden corporate bases and

take advantage of economies of scale. By diversifying, companies expected to protect profits,

even though expansion required multiple layers of management. Subsequently, organizations

attempting to compete globally in the 1970s and 1980s were handicapped by a lack of agility

that resulted from bloated management structures. To increase their flexibility and creativity,

many large companies developed a new strategy of focusing on their core business, which

required identifying critical processes and deciding which could be outsourced.

Today’s managers are looking ahead and recognizing that the responsibility for ensuring the

success of their enterprise’s outsourcing initiatives does not stop when the ink has dried on

the contract, Unfortunately, this has not always been the case. A combination of uncertainty

combined with a lack of attention to critical details has created a present day scenario where,

according to The Gartner Group, 25% of outsourcing contracts will be re-negotiated or

cancelled within three years. Ongoing management of the relationship is important. Senior

management must stay involved during the implementation of the contract. Not only should

there be a clearly defined escalation procedure, but senior management should meet at

appropriate intervals to discuss the outsourcing relationship.

Meetings should also be held at the operational level to address the working of the

outsourcing contract in practice, to identify and resolve any problems that have been

encountered, and to agree on changes to ensure continued satisfaction

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2. INITIAL STAGES OF EVOLUTION

Outsourcing was not formally identified as a business strategy until 1989 (Mullin, 1996).

However, most organizations were not totally self-sufficient; they outsourced those functions

for which they had no competency internally. Publishers, for example, have often purchased

composition, printing, and fulfilment services. The use of external suppliers for these

essential but ancillary services might be termed the baseline stage in the evolution of

outsourcing. Outsourcing support services is the next stage. In the 1990s, as organizations

began to focus more on cost-saving measures, they started to outsource those functions

necessary to run a company but not related specifically to the core business. Managers

contracted with emerging service companies to deliver accounting, human resources, data

processing, internal mail distribution, security, plant maintenance, and the like as a matter of

“good housekeeping”. Outsourcing components to affect cost savings in key functions is yet

another stage as managers seek to improve their finances.

STRATEGIC PARTNERSHIPS

The current stage in the evolution of outsourcing is the development of strategic partnerships.

Until recently it had been axiomatic that no organization would outsource core competencies,

those functions that give the company a strategic advantage or make it unique. Often a core

competency is also defined as any function that gets close to customers. In the 1990s,

outsourcing some core functions may be good strategy, not anathema. For example, some

organizations outsource customer service, precisely because it is so important.

Eastman Kodak’s decision to outsource the information technology systems that undergird its

business was considered revolutionary in 1989, but it was actually the result of rethinking

what their business was about. They were quickly followed by dozens of major corporations

whose managers had determined it was not necessary to own the technology to get access to

information they needed. The focus today is less on ownership and more on developing

strategic partnerships to bring about enhanced results. Consequently, organizations are

likely to select outsourcing more on the basis of who can deliver more effective results for a

specific function than on whether the function is core or commodity.

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3. WHAT IS OUTSOURCING

Outsourcing can be defined as “the strategic use of outside resources to perform

activities traditionally handled by internal staff and resources”. Sometimes known also

as “facilities management”, outsourcing is a strategy by which an organization contracts out

major functions to specialized and efficient service providers, who become valued business

partners.

Companies have always hired contractors for particular types of work, or to level-off peaks

and troughs in their workload, and have formed long-term relationships with firms whose

capabilities complement or supplement their own. However, the difference between simply

supplementing resources by “subcontracting” and actual outsourcing, is that the latter

involves substantial restructuring of particular business activities including, often, the transfer

of staff from a host company to a specialist, usually smaller, company with the required core

competencies.

Outsourcing is when a company contracts with an outside provider for services or other

business processes, rather than employing staff to do these services in-house. These services

may be provided on-site or off-site. Typically outsourcing is done with an eye toward

efficiency and cost-saving for the company. Outsourcing could be as simple as hiring

a freelancer to edit a company newsletter or as large-scale as hiring an outsourcing company

to handle all accounting and payroll functions.

Outsourcing can be when a company directly hires an independent contractor to a provide

service. Or a company may hire an outsourcing company that either employs or contracts

with workers to provide the services.

An outsourcing company may send workers to its client's workplace or provide the

workspace. Sometimes outsourcing companies practice home shoring by hiring home-based

workers, or they may practice offshoring, by contracting outside the client’s country for the

services.

Also Known As: subcontracting, BPO

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4. WHY DO COMPANIES OUTSOURCE

Common Reasons Why Companies Outsource:

Reduce and control operating costs

Improve host company focus

Gain access to world-class capabilities

Free internal resources for other purposes

A function is time-consuming to manage or is out of control

Insufficient resources are available internally

Share risks with a partner company

Lack of expert-labor in some portions of the business process

Availability of cheaper labor, whilst not comprising on the quality of output

Ability and feasibility to concentrate on the other crucial business process.

These factors have specifically contributed to most of the outsourced partners across different

locations in the world. Expertise in communication capabilities, technical expertise and

favourable financial packages are the most important advantages of outsourcing to India.

In earlier periods, cost or headcount reductions were the most common reasons to outsource.

In today’s world the drivers are often more strategic, and focus on carrying out core value-

adding activities in-house where an organization can best utilize its own core competencies.

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5. MAIN FACTORS INFLUENCING SUCCESSFUL

OUTSOURCING

Critical Areas For A Successful Outsourcing Program As Identified Are:

Understanding company goals and objectives

A strategic vision and plan

Selecting the right vendor

Ongoing management of the relationships

A properly structured contract

Open communication with affected individual/groups

Senior executive support and involvement

Careful attention to personnel issues

Short-term financial justification

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6. OUTSOURCING PROCESS

There are four main aspects to a typical outsourcing program:

Program Initiation

Service Implementation

Final Agreement

Program closure

1. Program Initiation

At the start of any outsourcing program, there are a variety of ideas and opinions about the

purpose and scope of the program, what the final result of the program will be, and how the

program will be carried out. The Program Initiation Stage is concerned with taking these

ideas and intentions and documenting them to form the basis of a draft contract

2. Service Implementation

Service Implementation covers the activities required to take these ideas and intentions and

develop them into a formal, planned outsourcing program and to make the transition to the

outsourced service. Specifically these activities are:

Defining the transition project

Transferring staff

Defining the Service Level Agreement (SLA)

Defining service reporting

Implementing and handing over the service

Implementing service management procedures

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During the hand–over phase it is imperative that continuity of service is maintained at all

times, that there is no reduction in the quality of the delivery and that timescales and

deadlines are not compromised.

3. Final Agreement

The draft contract produced at the Initiation stage is generally amended during negotiations

and the final Contract is produced on completion of the negotiation cycle.

4. Program Closure

In order to gain maximum benefit, the program should go through a formal close down.

There is no point in continuing to argue lost causes once irrevocable decisions have been

taken. Staff and companies alike need to accept the new situation and move forward.

However, there will be a lot of information generated during the life of the program, and this

will have been stored with varying degrees of formality by the team members. This

information needs to be formally filed away for future reference.

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7. HOW TO DECIDE WHETHER TO OUTSOURCE

There are no simple criteria to conduct an outsourcing versus in-house analysis. The benefits

associated with outsourcing are numerous, and one should consider each project on its

individual merits. Ongoing operational costs that may be avoided by outsourcing are also a

consideration. In a nut shell, outsourcing allows organizations to be more efficient, flexible,

and effective, while often reducing costs.

Some of the top advantages brought by outsourcing include the following:

Staffing flexibility

Acceleration of projects and quicker time to market

High caliber professionals that hit the ground running

Ability to tap into best practices

Knowledge transfer to permanent staff

Cost-effective and predictable expenditures

Access to the flexibility and creativity of experienced problem solvers

Resource and core competency focus.

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8. DEFINING GOALS AND OBJECTIVES

Before you can determine what processes to outsource, you need a clear understanding of

your organization's strategic goals and objectives. Is the sole driver for considering

outsourcing cost reduction? Is the objective to increase scalability and flexibility, so that

mergers and acquisitions can be better integrated into the organization? Does management

hope to drive growth through a redirection of capital and human resources? Is the objective to

improve quality, or more efficiently and effectively service customers?

An understanding of the company's objectives provides insight into the type of relationship

your company is seeking and how the outsourcing initiative should be managed.

Typically, organizations can expect to realize the following benefits from an effective

strategic outsourcing initiative:

Improved focus, as the outside "experts" take on necessary but non-core

responsibilities

Increased customer satisfaction

Reallocation of internal resources to core activities

Access to world-class capabilities, systems and services, without the need to build

them from the bottom up

Staffing flexibility, whereby staffing levels are "in sync" with immediate needs.

Reduced operating costs, resulting in increased capital funds availability for things

like research and development, market analysis. etc.

Reduced risk. Markets, competition, government regulations, financial conditions and

technologies all change extremely quickly. Outsourcing is a vehicle that enables the

organization to share these risks with the outsourcing provider.

Improved cost, quality, service and cycle times.

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9. SELECTING THE PROCESSES TO BE OUTSOURCED

Processes that are highly transactional and have low strategic value (non-core) to your

organization are typically good candidates for outsourcing.

The definition of a non-core competency is: "any process that does not generate income or

help your organization increase its market share." To help identify internal business functions

that are non-core, ask:

1. Does this process create or provide a unique competitive advantage for the

organization?

2. Is the process contributing directly to business growth or expansion?

3. If your organization were a start-up, would you build this capability internally?

4. Would other companies hire you to perform this process?

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10. TYPICAL OUTSOURCING STRATEGY RISK

Outsourcing relationships fail when they are viewed as short-term or tactical solutions, rather

than part of long-term strategic plans. To be effective, the process of considering an

outsourcing solution -- large or small, long-term or short-term -- must be systematic and fully

documented.

Some of the risks involved at this stage include:

Outsourcing undesirable functions rather than ones that provide the greatest

competitive advantage

Not clearly defining goals and objectives before starting the outsourcing project

Not establishing an effective internal baseline against which providers are measured

Inadequate business-case development for the outsourcing decision

Making a decision to outsource without complete information on internal costs and

processes

Not considering the impact of outsourcing on other functions

Ignoring areas of risk such as environmental and regulatory factors

Failure to understand human relations and employment law requirements for an

outsourcing initiative

Announcing outsourcing before sufficient details have been finalized, creating morale

issues with internal staff

Lack of risk analysis and risk assessment planning

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11. DURATION OF THE OUTSOURCING PROJECT

When most of us think of outsourcing, we think of jobs lost as they move overseas. However,

outsourcing need not be an "all or nothing" venture. It's possible to utilize outsourcing for a

short-term clean up or to take on only part of the internal department's duties. Following up

on invoices/ receivables is a case in point.

An outsourcing initiative could be used to handle a one-time influx of new credit accounts

from a merger or acquisition. Or, you could outsource handling of a specific subset of your

customers, perhaps the smaller accounts that you never have time to contact.

Understanding the outsourcing initiative in terms of your company objectives will help you

make key decisions. It will help you determine whether your approach should be to hand-off

total responsibility for a non-core function, or to use outsourcing as a strategy to efficiently

manage (perhaps seasonally) short-term increases of new accounts.

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12. ADVANTAGES AND DISADVANTAGES OF

OUTSOURCING

Outsourcing most commonly known as offshoring has pros and cons to it. Most of the time,

the advantages of outsourcing overshadow the disadvantages of outsourcing.

The Advantages of Outsourcing

Swiftness and Expertise

Most of the times tasks are outsourced to vendors who specialize in their field. The

outsourced vendors also have specific equipment and technical expertise, most of the times

better than the ones at the outsourcing organization. Effectively the tasks can be completed

faster and with better quality output

Concentrating on core process rather than the supporting ones

Outsourcing the supporting processes gives the organization more time to strengthen their

core business process.

Risk-sharing

One of the most crucial factors determining the outcome of a campaign is risk-analysis.

Outsourcing certain components of your business process helps the organization to shift

certain responsibilities to the outsourced vendor. Since the outsourced vendor is a specialist,

they plan your risk-mitigating factors better.

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Reduced Operational and Recruitment costs

Outsourcing eludes the need to hire individuals in-house; hence recruitment and operational

costs can be minimized to a great extent. This is one of the prime advantages of offshore

outsourcing.

Cost Savings

Many businesses embrace outsourcing as a way to realize cost savings or better cost control

over the outsourced function. Companies usually outsource to a vendor that specializes in a

given function and performs that function more efficiently than the company could, simply

by virtue of transaction volume.

Staffing Levels

Another common reason for outsourcing is to achieve headcount reductions or minimize the

fluctuations in staffing that may occur due to changes in demand for a product or service.

Companies also outsource in order to reduce the workload on their employees (freeing them

to take on additional moneymaking projects for the business), or to provide more

development opportunities for their employees by freeing them from tedious tasks.

Focus

Some companies outsource in order to eliminate distractions and force themselves to

concentrate on their core competencies. This can be a particularly attractive benefit for start-

up firms. Outsourcing can free the entrepreneur from tedious and time-consuming tasks, such

as payroll, so that he or she can concentrate on the marketing and sales activities that are most

essential to the firm's long-term growth and prosperity. "What an outsourcing partner really

sells is focus," wrote Adam Katz-Stone in Baltimore Business Journal. "In accounting for

instance, that is something that typically is seen as necessary but not essential, not the core of

the business. So you bring in an outsourcing partner and then you don't have to think about

that any more. You can focus your energies on sales, marketing, all the other things that

matter more."

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Flexibility

Still others outsource to achieve greater financial flexibility, since the sale of assets that

formerly supported an outsourced function can improve a company's cash flow. A possible

pitfall in this reasoning is that many vendors demand long-term contracts, which may reduce

flexibility.

Knowledge

Some experts tout outsourcing of computer programming and other information technology

functions as a way to gain access to new technology and outside expertise. This may be of

particular benefit to small businesses, which may not be able to afford to hire computer

experts or develop the in-house expertise to maintain high-level technology. When such tasks

are outsourced, the small business gains access to new technology that can help it compete

with larger companies.

Accountability

Outsourcing is predicated on the understanding—shared by business and vendor alike—that

such arrangements require quality service in exchange for payment.

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DISADVANTAGES OF OUTSOURCING

Risk of exposing confidential data:

When an organization outsources HR, Payroll and Recruitment services, it involves a risk if

exposing confidential company information to a third-party.

Synchronizing the deliverables:

In case you do not choose a right partner for outsourcing, some of the common problem areas

include stretched delivery time frames, sub-standard quality output and inappropriate

categorization of responsibilities. At times it is easier to regulate these factors inside an

organization rather than with an outsourced partner.

Hidden costs:

Although outsourcing most of the times is cost-effective at times the hidden costs involved in

signing a contract while signing a contract across international boundaries may pose a serious

threat.

Lack of customer focus:

An outsourced vendor may be catering to the expertise-needs of multiple organizations at a

time. In such situations vendors may lack complete focus on your organization’s tasks.

With all these pros and cons of outsourcing to be considered before actually approaching a

service provider, it is always advisable to specifically determine the importance of the tasks

which are to be outsourced. It is always beneficial for an organization to consider the

advantages and disadvantages of offshoring before actually outsourcing it.

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13. OUTSOURCING CHALLENGES IN INDIA

You have made the decision to outsource. After careful strategic planning and review of the

pros and cons of each scenario you have chosen either a third party outsource company or set

up your own facility in India. You have invested time, resources (including people) and have

a few key executives to manage the operation, on the ground. These people are now

responsible for managing the operational challenges in India. You discover the work has just

started. The top five in-country challenges that need to be managed are:

1. Effectively recruiting a work force: India has the largest English speaking pool of

professional talent in the world. This is what attracted your organisation along with many

others to India. Once here you discover that the huge growth in the Business Process

Outsourcing (BPO) industry has created its own unique blend of recruitment challenges.

McKinsey Consulting estimates that the BPO and IT Enabled Services (ITES) industry will

create 4 million jobs by 2011. An organisation will need to have considerable outreach

activities to reach a potential talent pool. The selection process is more complex than that of

the home country. It is estimated that for a voice-based process, an organisation will need to

screen at least 20 candidates to be able to recruit 1(20:1). This number is increasing and it is

estimated that soon you will have to use the 50:1 formula for recruitment. The major cities

like Bangalore, Mumbai and Delhi have an extremely competitive recruitment market which

requires that, as an organisation, you will have to spread your recruitment wings nationally

into other cities.

2. Training investment: Balancing the needs for a trained workforce with that of a

quick on-floor time is a challenge for most businesses. This is especially true when many of

the ITES/BPO companies have created huge expectations in terms of ramp-up of people and

processes. A lot of training tends to be canned off the shelf programmes often outsourced to

many training institutes. The degree of customisation in the standard three week

“voice/accent” program tends to low. This often leads to additional investment in re-training

and on- the-floor training needs. Many of these canned programs do not address the deeper

cultural issues that impact cross cultural communication. Companies need to focus on

building partnerships with training vendors and on customising the culture, voice and accent

training to their specific needs. Looking at the skill sets of faculty used is also critical.

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3. Managing Retention: Attrition levels in the ITES/BPO companies range from 15%-

60% per year. The average attrition level for a voice-based call center is 40%. This presents

huge challenges in workforce management. Attrition factors range from industry drop outs to

job hunting; some of it can be attributed to the hype in India about the glamour of working in

an ITES/BPO environment. Many young agents leave the industry after discovering the

monotonous nature of the work, and the physical toll of working in a night-shift environment.

It is important for companies to set and manage realistic expectations and to provide support

services to the workforce. Many companies have also not been able to create or articulate a

vision and culture that is necessary to keep the workforce motivated and energised.

4. Maintaining customer satisfaction/service levels: Companies bring with them

established processes and standards of measuring customer satisfaction levels. There are

benchmarks that need to be maintained. You will discover that getting to these benchmark

levels may take longer then anticipated. You will need to institute effective call monitoring,

call escalation and call handling processes. An effective process in India will also ensure that

the measurement process is transparent to the India workforce and that agents/reps in India

hear the differences in good calls vs. bad ones on a regular basis. Remember to build

reasonable expectations of time into your India centre in order to achieve the same or exceed

the levels of customer satisfaction of your other centers.

5. Infrastructure and Logistics: India presents some unique challenges for a

BPO/ITES in terms of infrastructure and logistics operations. Power and connectivity are first

and foremost the most critical components. You will need to ensure 100% power backup

using a combination of UPS and Generators. Data/voice connectivity also presents the same

challenge. Many companies have discovered to their peril, the dangers of starting with lower

bandwidth, and then the time and difficulties faced in trying to increase it quickly. Ensure

that you factor in your growth potential into today’s bandwidth requirements. Other logistics

issues are transportation, food, services etc. You will discover that labour laws require

organisations to provide home-office-home escorted transport for all women employees who

will need to work after 11 pm. This is often extended to all employees because of the travel

logistics in India.

Remember that outsourcing can be a “WIN” experience if you are conscious of and able to

manage some of the on-the-ground operational issues.

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14. VARIOUS APPROACHES TO OUTSOURCING

It is important to understand the various approaches to outsourcing, so that the most

appropriate one may be chosen.

The broad categories of outsourcing are as follows:

1. Application software outsourcing,

2. Infrastructure outsourcing,

3. Business Process Outsourcing,

4. Manufacturing outsourcing

1. Application Software outsourcing

Perhaps the most sophisticated and skilled category of outsourcing, this has been gaining

popularity over the last two decades. The reason for this is not difficult to understand.

Software development has helped firms become more efficient and productive by reducing

time and expenditure. Initially, companies in Western Europe and America carried on

development of application software internally. Soon the demand for software resources

became very huge. These countries began to face a dearth of software resources. At the same

time in developing countries like China and India, a vast pool of software engineers and

computer scientists was available. They were the product of heavy investments made in the

education sector in these countries. They were cheaper than their counterparts in Europe and

America were, and continue to be so. Outsourcing to these countries was smartest solution

available.

Within the framework of application software outsourcing, the companies that want to

outsource, have to decide on the various options that have evolved over a period. Companies

can outsource either their complete software application needs or just a part of their needs to

the vendor. They may even resort to outsourcing as means of strengthening the software

resources already at their disposal. Most companies usually rely on their own resources to

develop and create software, while they outsource the maintenance of the traditionally used

software to vendors.

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Another choice the outsourcer has to make is the location of the vendor. The outsourcer and

the vendor may work from the same premise or at not so far a place from the outsourcer, or at

a distant place. Usually it is a combination of both these options.

In addition to this, the outsourcer has to decide whether it wants to outsource to a company

that is CMM certified or not. CMM or Capability Maturity Model is a set of scales used to

certify an outsourcing company. The outsourcing company may seek the certificate, which is

given to it based on the maturity, consistency and rigors involved in the processing.

The software outsourcing firms have to provide a variety of services like maintenance and

enhancement of the older soft wares, developing new ones, and quality assurance testing.

2. IT Infrastructure Outsourcing:

This involves operating a network connecting the various sites of the company. The

outsourcer will be responsible for relevant software and hardware components, their

installation and maintenance, data communication, data storage and recovery, security,

internet connection, printers, laptops. In most cases, I T infrastructure outsourcing companies

are located on shore (near the client company's location).

3. Business Process Outsourcing:

This is perhaps the broadest form of outsourcing. I t is an IT enabled outsourcing. BPOs

perform a wide variety of activities.

Processing of tax transactions, checking tax claims

Accounting bills (receivables and payable billing)

Customer support

Telemarketing

Medical transcription

Market research and analyses

Language translations

Warehousing

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Keeping track of human resources- their recruitment training, and payment.

4. Manufacturing Outsourcing:

Perhaps the oldest form of outsourcing, manufacturing outsourcing relates to the production

of parts manufacture or finished goods. They are done either on shore or offshore. The big

companies in U.S.A depend on companies located in other countries for components used in

manufacture certain goods. They may outsource the manufacture of such components or even

set up their own factories in other countries for this purpose.

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15. EFFECTS OF OUTSOURCING

As with most things, there are positive and negative effects of outsourcing. My goal today is

to go over a few of both sides and you can decide it outsourcing is a good idea for you.

Positive effects of outsourcing include:

Growth - more companies are interested to outsource their low-end and high-end jobs,

which mean tremendous growth is expected in this service market as demands grow.

Offshore Expansion - the number of companies located offshore have increased

expansion by outsourcing to locations that provide services.

Variety - variety of services to choose from; companies like to outsource so they can

choose what they feel is the most suitable outsourcing partner.

Reduced Risks - more companies have started outsourcing which has become a

preferred trend. The risks are minimized when they outsource by partnering with

richly experienced offshore companies.

Competitive Spirit - companies can maximize the competitive spirit to fortify their

core competencies and focus more on strategic management.

Fulfill Business Objectives - outsourcing has enabled companies to stay ahead of their

competitors and strengthen position in the global market.

Better Results - companies can focus more on their core areas which helps to usher in

better results and help the company fortify their areas of expertise.

Resource Utilization - skilled man power, advanced technology, and excellent

infrastructure can be utilized productively.

Flexibility - companies are more receptive to change.

Share Business Risks - organizations can share its risks rather than carry the

responsibility alone to ensure that management problems are minimized.

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Fast Turnaround Time - deadlines won't have to be worried about or fretted over

because the outsourcing team can handle certain things on their own.

Negative Effects of Outsourcing

Language Barriers - with outsourcing to other countries, you will likely have call

centers produced in these areas so you have to deal with differences in language.

Intellectual Property Violations - the strategic value has a high likelihood of being

misused by firms that are outside of the company's country.

Contracts - companies are concerned with being locked into multi-year contracts with

a single vendor.

Fraud - there have been reports of incidents of data theft from companies overseas.

Economy - there are claims that outsourcing is leading to a detrimental effect on the

local economy.

Lack of Oversight - unable to know how warehouses and firms hire and pay

employees in other countries, particularly third-world countries.

Geographic Complications - it is nearly impossible to know exactly what the product

looks like if it is made in another country, even if they send photos, that doesn't do

justice for what it looks in in person.

Additional Costs - sometimes, it is not cost-effective for matters of importing and

exporting materials in and out of the country.

Unemployment Issues - the high unemployment rate in the U.S. today is partially

caused by so many companies outsourcing to other countries, rather than from hiring

people close by.

Rising Government Spending - with people in the U.S. losing their jobs due to

outsourcing, there are fewer payroll tax receipts and fewer contributions to Social

Security and Medicare.

Dissatisfaction of In-residence Employees - workers are not satisfied because rather

than the company investing their resources on them, the invest in offshore workers for

reduced salaries.

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16. AIRTEL AS AN EXAMPLE OF OUTSOURCING

Airtel is one of the most prominent telecom companies in the world with its services

spanning 19 countries in South Asia and Africa. It has a number of firsts to its credit which

has positioned it much ahead of its competitors. It’s bouquet of fixed – line services, mobile

services and also broadband have positioned it in a league of its own.

These statistics are a pointer of its growing dominance over others –

140+ million subscribers as of July 2010 (Vodafone comes way behind at 111 million

subscribers)

World’s third largest single country operator and fifth largest telecom operator in the

world

First Indian telecom operator to achieve the Cisco Gold certification for good

competency, service, support and customer satisfaction standards

First mobile telephony company to outsource everything except marketing, sales and

finance

It is the last point which made me thinking. This has turned out to be the reason for the wide

gulf between the best and the rest.

This made me understand and analyse as to what Airtel really did.

Airtel outsourced their IT processes to IBM, entire network operations to Ericsson and

Siemens along with Alcatel Lucent recently and the transmission towers to another company

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Initiative from Airtel

It reduced has their costs considerably and they were able to acquire more customers and

were able to pass on these savings to the customers instead of the shareholders and this

increased their customer base even more and they again followed this pattern

Airtel was also able to differentiate themselves easily from the rest in the market who were

and have been in the RED for a long period of time. Being in a position where they reduced

their costs considerably, they had the opportunity to control the market and introduce various

initiatives without being majorly affected in terms of revenues / profits.

Airtel has done this successfully in India and is now on a mission to implement the same in

Africa. It has embarked on a number of initiatives –

Airtel paid US $10.7 billion to acquire Zain, the Kuwait based mobile

telephone company’s operations in 15 African countries. This has given it a

strong chance of increasing its operational base

It is betting on opportunities in Africa where the mobile penetration level is

less than 32% which is much lesser than India and there are fewer competitors

It has outsourced its IT to IBM for 10 years and is looking for prospective

vendors to outsource its network operations

It has hired Ogilvy for its marketing, branding and PR activities across the

continent

But the biggest challenge facing it currently is the different cultures, demographics and habits

of people in the 15 different African nations. Could constant change of names from Kencell,

Celtel, Zain and finally Airtel really change people’s perceptions of a telecom provider?

Only time will tell. But till then we can be contented to see an Indian telecom provider

making it big at the world stage.

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http://trak.in/tags/business/2010/03/31/bharti-zain-acquisition-deal/


17. CONCLUSION

Outsourcing is a boon because of following reason

Industries such as retail, automotive, and others have used the specialized services of

contract organizations to drive down costs and increase efficiencies.

For E.g:- Croma- A Tata venture is using a firm, helps for warehousing of its electronic

product which are sold to customer, its backend process is held by Woolsworth India Pvt

Limited which is an Australian Based organization which are specilaized in Logistics and

Inventory Management

Outsourcing is Helping our Country to develop product at a competitive Rate and it is

indirectly generating Employment for the People.

The pharmaceutical industry, however, has always closely guarded proprietary

projects, compounds, and processes and has only recently, in the face of escalating costs and

decreasing R&D productivity, warmed up to the idea of routine outsourcing.

Outsourcing in the pharmaceutical market is certainly on the rise, as evident by the rising

numbers of contract research organizations (CROs) and contract manufacturing organizations

(CMOs), both in the United States and in countries such as India and China. The types of

services offered have also intensified and diversified. Many equipment manufacturers and

reagent providers are also now including contract services as a part of their portfolio of

offerings.

In every sector outsourcing is taking place which is helping to generate employment

and make product at a competitive rate not only products but also in an service industry also

experts are outsourced to different firms for completion of specified projects. (Human

Resource Outsourcing)

Hence we can conclude that Outsourcing is boon for country like India.

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18. BIBLIOGRAPHY

From Website

www.pimaweb.org/

www. articles.economictimes.indiatimes.com

www.sourcingmag.com

www.accenture.com

www.outsourcing.org

www.theoutsourcingsummit.com

www.outsourcing-toolkit.com

From Reference Books

Global Outsourcing Strategies: An International Reference on Effective Outsourcing Relationships - by Peter Bareer

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http://www.theoutsourcingsummit.com/

http://www.outsourcing.org/

http://www.accenture.com/

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