OUTSOURCING

BUSINESS ENVIRONMENT
By: Lodhia Ronak (45) Parekh Keval (48) Shah Nishit (26) Sailor Bhavesh (23) Polishwala Nikunj (18)

Introduction
Outsourcing is any task, operation, job or process that could be performed by employees within an organization, but is instead contracted to a third party for a significant period of time. Almost every organization outsources in some way. Typically, the function being outsourced is considered non-core to the business.

History
The idea of outsourcing is not new. It started way back in the 1700s when manufacturers started shifting the manufacture of goods to countries with cheaper labor during the Industrial Revolution, following the precepts of Adam Smith in his book 'The Wealth of Nations'. Though the outsourcing of manufacturing is an old story, outsourcing to services is a relatively new phenomenon. Services outsourcing to India started in the 1980s and rapidly accelerated in the '90s.

History
In today's world where information technology has become critical to business, the meaning of outsourcing has undergone a drastic change over the years. Companies have started focusing on their core competencies and outsourcing many non-core functions, for which they had no competence internally.

Objectives
Cost Savings Focus on Core Business Improve quality Operational expertise Capacity management Tax Benefit

Types of Outsourcing
Business Process Outsourcing (BPO) Knowledge Process Outsourcing (KPO) Recruitment Process Outsourcing (RPO) Engineering Process Outsourcing (EPO) Third Party Logistics Service (3PL)

 BPO
KPO RPO EPO 3PL

BPO is a subset of outsourcing that involves the contracting of the operations and responsibilities of specific business functions (or processes) to a third-party service provider. India has revenues of US$10.9 billion from offshore BPO and US$30 billion from IT in 2009-10. The top five Indian BPO exporters for 2009-2010 according to NASSCOM are Genpact, TCS BPO, WNS Global Services, Wipro BPO, and Aegis Ltd.

 BPO

KPO
RPO EPO 3PL

KPO deals largely in services that are highly "knowledge-based", such as: intellectual property research for patent applications; legal and medical services; training, consultancy, and research and development in fields such as pharmaceuticals and biotechnology; and animation and design. NASSCOM predicts that India will emerge as a global hub for knowledge service by 2015.

 BPO KPO

RPO
EPO 3PL

Recruitment Process Outsourcing is a form of business process outsourcing (BPO) where an employer outsources or transfers all or part of its recruitment activities to an external service provider. The biggest difference between RPO and other types of staffing is process.

 BPO KPO RPO

EPO
3PL

EPO industry is playing crucial role in efficiently supporting dynamic architecture, engineering and construction industries worldwide. EPO has made major contribution to the bottom-line of majority of companies specially in developed nations. While at the other end it has opened up huge market for developing nations.

 BPO KPO RPO EPO

3PL

A third-party logistics provider 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. Often, these services go beyond logistics and included value-added services related to the production or procurement of goods, i.e., services that integrate parts of the supply chain.

Statistics
Call Center Employee cost (USD/yr) United States 19,000 Australia 17,000 India <7,500 Outsourcing contributed around 25% in Indian exports in 2008. In 2009, seven Indian firms were listed among the top 15 technology outsourcing companies in the world.

Statistics
There are more than 100 million skilled-English speaking labours in India. India's share in the global outsourcing market rise from 51% in 2009 to 55% in 2010 NASSCOM predicts that India will emerge as a global hub for knowledge services by 2015. The growth in BPO sector in the Asia-Pacific has been a significant 17.9 percent in 2011.

Small Examples
1. McDonalds call center, California, 2006:
Took orders from Hawaii, Mississippi, and Wyoming in just two minutes. The goal is to help other employees focus their attention on in-store matters. 2. New England Journal of Medicine, 2009: Found that the number of countries that are hosting drug trials outside of the United States doubled between 1995 and 2005.

In 1992 IBM encountered a different set of problems. Facing fierce competition, they realized the need to re-engineer their go-to-market strategy to dramatically reduce both sales and service costs. IBM decided a call center would provide the best blend of quality and cost- efficiency as a channel for both sales and customer service. But they recognized that they had no experience designing and managing, a call center. IBM outsourced the design, staffing, and management of a TeleServices Center, an expert in Call Center Services.

 Reduced the cost of customer contact by 97% from $500 for field contact to $15 for telesales contact Before Outsourcing: Customer contact cost $500 After Outsourcing: Customer contact cost $15 A Drastic reduction of 97% Shortened the field sales cycles up to 80% Generated 125% of goal for leads. Exceeded customer expectations by 78%.

 Airtel outsourced their IT processes to IBM for next 10 years. Entire network operations to Ericsson and Siemens along with Alcatel Lucent. The transmission towers to another company.

 Airtel is one of the most prominent telecom companies in the world with its services spanning 19 countries in South Asia and Africa. Worlds third largest single country operator and fifth largest telecom operator in the world. First mobile telephony company to outsource everything except marketing and finance. First Indian telecom operator to achieve the Cisco Gold certification for good competency, service, support and customer satisfaction standards

Advantages

Disadvantages

Focus on core activities. Cost and efficiency savings. Reduced Overhead Operational Control Staffing Flexibility Continuity & Risk Management

Loss Of Managerial Control Hidden Costs Threat to Security and Confidentiality Quality Problems Tied to the Financial Well-Being of another Company Bad Publicity

Opportunities
In services that require advanced English, like KPO, India will continue to excel. NASSCOM predicts that India will emerge as a global hub for knowledge services by 2015. India has a large pool of English-speaking lawyers with expertise in foreign legal systems who can offer legal support and patent services. India is now the leader in the FAO (Finance and Accounting outsourcing) market with many Fortune 500 companies already having their outsourced operations in India with firms like IBM, ACS, TCS etc.

Opportunities
According to a study done by Booze and Company, India will become a dominant player in the Engineering R&D market which is expected to be $1.4 trillion by 2020. India's domestic market is expected to contribute 10-15% of the global ER&D services market. Indian skilled manpower is increasing at a high rate which will make its position more stronger.

Challenges

The industry is growing rapidly but correspondent growth of infrastructure is not equal. Due to the rise in labour costs in Indian metro cities, companies are moving towards smaller cities. India will face tougher challenges in the near future, from South-east Asian countries like Indonesia, Malaysia, the Philippines, Singapore, Vietnam and Thailand, which are improving their positioning as alternative offshore locations.

Summary
India has a large pool of skilled manpower Chartered Accountants, Engineers, MBAs, Doctors, Lawyers, Research Analysts, etc., which makes its position stronger. India is offering a high quality services and continuous improvement in Outsourcing industry. Till now India have sustainably retained the position of cheaper and better destination for the outsourcers. New emerging countries in outsourcing industries can not be ignored.

O U T S O U R C I N G

Successfully executed outsourcing strategies enabled each organization to achieve critical business goals & improve margins

THANK YOU