O U T S O U R C I N G

A P r o j e c t b y -M E G H A K U S H W A H A

P R I Y A C H H A B R A A I S H W A R S H A R M A

“The future shape of business is

being redefined through outsourcing”

© 2005 Accenture All Rights Reserved.

4

WHAT IS OUTSOURCING ?

Outsourcing denotes the continuous procurement of services from a third party, making use of highly integrated processes,

organization models and information systems.

OUTSOURCERCOMPANYServices

OrganizationLevel

Agreement

ServiceLevel

Agreement

WHY DO 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

REASONS FOR OUTSOURCING

WHAT CAN BE OUTSOURCED ?

system integration

data network

mainframe data center

voice network, internet/intranet

maintenance/repair

applications development

e-commerce

end-user support system

TYPES OF OUTSOURCING

Business process outsourcing (BPO)• involves the contracting of the operations and responsibilities of specific business functions to a third-party service provider.

Engineering process outsourcing (EPO)• playing crucial role in efficiently supporting dynamic architecture, engineering and construction industries worldwide.

Information technology outsourcing or ITO • is a company's outsourcing of computer or Internet related work.

Knowledge process outsourcing (KPO)• describes the outsourcing of core business activities, which often are competitively important or form an integral part of a

company's value chain. Therefore KPO requires advanced analytical and technical skills as well as a high degree of proprietary domain expertise.

Legal outsourcing• refers to the practice of a law firm or corporation obtaining legal support services from an outside law firm or legal support

services company

A third-party logistics provider (3PL)• is a firm that provides service to its customers of outsourced (or "third party") logistics services for part, or all of their supply

chain management functions.

ADVANTAGES OF OUTSOURCING

Low Operational Cost

Low Labor and Technology

Superior Technology

Risk Mitigation

Capacity Management

PROBLEMS WITH OUTSOURCING

Loss of Control

Increased cash outflow

Confidentiality and security

Selection of supplier

Too dependent on service provider

Loss of staff or moral problems

Time consuming

Provider may not understand business

environment

Provider slow to react to changes in strategy

INTRODUCTION

OUTSOURCING IN INDIA

Outsourcing of

manufacturing started

in 1700

Outsourcing of

services started in

1980

Earliest players in

Indian outsourcing

market were TEXAS INSTRUME

NT, AMERICAN EXPRESS,

SWISSAIR, BRITISH

AIRWAYS, GE

Global software

giants like MICROSOFT, ORACLE, SAP and

many other have

established captive

development centers in India.

Indian companies too have aligned

their internal

processes and

practices in Internation

al Standards

such as ISO, CMM, SIX SIGMA etc

In 2008, a study listed

6 Indian cities of

Bangalore, Chennai,

Delhi-NCR, Hyderabad,

Mumbai, and Pune, among the world's top

10 outsourcing destination

s

PROBLEMS WITH OUTSOURCING TO INDIA

High attrition a significant drag on productivity

• Smaller firms are currently experiencing attrition of 100%+ per year

Quality of the Work • Projects have reported that more than 75 percent of these global IT initiatives fall short of expectations

Significant IP risk • Indian firms (and their court system) have historically been notorious for their lax approach to protecting their customers’ source code and in turn calling it their own.

Cost • Norm in India today is up to 20% pay increases every 6 months – that translates into 45% wage escalation per year!!

Work style • the Indian work approach requires very detailed specifications with no room for interpretation.

Talent base • India has historically focused on IT (vs. software product).

WHY OUTSOURCE TO INDIA

Availability of qualified resources – industry standard certification

Lateral knowledge skills – technology and business skills

Better tax structures and tax holidays - SEZ Cost and quality arbitrage

OUTSOURCING- A BOON OR A BANE FOR INDIA

Indian companies offer a wide variety of outsourced services. Outsourcing to India has been a satisfactory and

profitable experience for most companies around the world.

Indian outsourcing vendors have continuously adapted to internal and external challenges and the

credit for this goes to Indian outsourcing companies and the

successive enabling governments

Great number of jobs are created

Only left over work comes to Indian software industry, which is labour

intensive and does not require brain or enhances skills of the personnel.

Indian society has received with the advent of outsourcing. Youth is

moving away from our culture and values..The gradual intellectual

incapability and complacency is creeping into the youth of the

nation.

In future India can witness huge number of school dropouts which

would in turn affect Indian economy in many ways.

CONCLUSION

Outsourcing For India Is A Boon Because It Has Strengthen The

Indian Economy, But There Are Some Societal Issues Related With

Outsourcing Which Can Makes It A Bane. Outsourcing being a boon or a bane, the decision lies with how we

look at it and how it is channelized in our society.

OUTSOURCING IN USA

In t roduct ion

Initially, a lot of outsourcing was to other American firms; later it involved moving production to foreign countries. Many companies rushed to spin off all but their most essential “core” activities.

Today, some of the world’s largest companies and biggest employers are the product of this outsourcing trend: Sodexo in food service; IBM in information technology; Wackenhut, now known as G4S, in security services; UPS and FedEx in logistics; Foxconn and Lenovo in computer manufacturing. Instead of the Rouge plant, the new model of industrial organization

has become Nike, which outsources the making of all of its shoes, clothing and sporting equipment so it can concentrate on design and marketing.

Apple, outsources all of its hardware manufacturing.

Has outsourcing production and manufacturing to low-wage countries helped or hurt the United States?

In the United States,

outsourcing is considered a bad word.

American workers, with

their technical

expertise and widely-

available Internet

infrastructure, are highly

desired.

Many critics argue that

outsourcing has been

overhyped and that it is

difficult to quantify its costs and benefits.

The United States does not have a

comparative advantage in manufacturing because of high wages

and a relatively

strong dollar (although the

dollar has been on the

decline in recent

months).

Slogans like “Buy

American” have been

popular rallying cries

for years, and many people bemoan the outsourcing

of jobs to low-wage

regions like Asia and Latin

America.

US PRESIDENT BARACK OBAMA AND REPUBLICAN PRESIDENTIAL NOMINEE MITT ROMNEY MET IN HEMPSTEAD, NEW YORK TUESDAY EVENING FOR SECOND OF THREE PRESENTIAL DEBATES. ONE OF THE QUESTIONS WHICH WAS ASKED FROM BOTH OF THEM WAS, “THE OUTSOURCING OF AMERICAN JOBS OVERSEAS HAS TAKEN TOLL ON OUR ECONOMY.WHAT PLANS DO YOU HAVE TO PUT BACK AND KEEP JOBS IN US?”

ANSWER

R O M N E Y ’ S A N S W E R

Want to cut down tax rates on small business, big employees so

they want to be there in US

China has become a currency manipulator and thus US

manufacturers can’t compete with them

OBAMA’S ANSWER

Lower corporate tax

As far as currency manipulator is concerned, the currency has gone up by 11% & have put trade burden on China that why exports increase in

US and this will help in creating jobs in US

Mentioned that reduced rate of tax paid will create 8,00,000 new jobs

but in China, India, Germany

There are two sides to every issue:

1. Outsourcing hurts America by sending jobs overseas.

2. Outsourcing helps America by allowing goods to be produced more cheaply, with savings being passed on to consumers.

OUTSOURCING – A BOON OR A BANE

For the short term the country whose companies are outsourcing may see it as a shortcoming. But in the long run, the economy will be booming again. Thus to conclude, even if the outsourcing industry may seem to be a disgrace to the market, in the long term it is going to be the significant market share contributor. The seeds have been sown and the flowers are blooming, the fruits are not far to be reaped.

THANK YOU