Outsourcing

OUTSOURCING

TABLE OF CONTENTS

Slno Particulars Page no

1 ) Title page 1

2 ) Table of Contents 2

3 ) Introduction 3

4 ) What is outsourcing 3

5 ) Differences between outsourcing and contracting 3

6 ) History of outsourcing 4

7 ) Outsourcing- current scenario 4

8 ) Reason and advantages of outsourcing 5

9 ) Disadvantages of outsourcing 5

10 ) Impact of outsourcing on American workforce and its

Negative and Positive attributes 6

11 ) My beliefs and opinion on

outsourcing and conclusion 7

12 ) References 8

Introduction

In the current globalization and global economy , outsourcing has become a strategic management option than just a cost cutting operation Economic situation is a natural development to outsource the jobs , where it can be executed with high quality and lesser cost , so that the organization can stay competitive in the market by providing satisfactory goods and services to the customer

In to be competing in global economy , all companies started focusing on their resources on core operations and started outsourcing one or more of their operations which are not their core activity and strength

What is outsourcing

Outsourcing is a contracting transaction for a company where it purchases services from another while keeping the ownership and ultimate responsibility for the underlying processes (2004 . Outsourcing Retrieved May 2 , 2008 , from Cyber Futuristic (Web site http /www .cyfuture .com /Outsourcing .htm

Difference between outsourcing and contracting

There is difference between outsourcing and contracting even though it may seem very similar . Actually contracting and outsourcing are entirely different

In contracting the ownership of the control of the operation or process lies with the parent company . In outsourcing the control of the process is with the service provider instead of the parent company . Hence a parent company delegates a part of its in house operation to a third party . The third party takes control of that operation or process

History of outsourcing

Outsourcing dates back few thousands years back as people outsourced manufacturing of certain operations of their goods and services which they were not familiar with

The general idea of Offshore Outsourcing , as a way to make business competitive was pronounced by Adam Smith in his 'The Wealth of Nations published in HYPERLINK "http /en .wikipedia .org /wiki /The_Wealth_of_Nations " 1776 . Gauriady J (2007 , 7 , 19 . Offshore outsourcing-the service that goes form local to global . Retrieved May 2 , 2008 , from History of outsourcing Web site http /www .offshoretricks .com /customers /o9hos .php

History of outsourcing started with low tech items and continued with high tech items . The main purpose of outsourcing is to get the cost advantage and to be competitive in the global market . In fact globalization has also fuelled the outsourcing . Getting a skilled manpower with cheap labor cost was possible in India , China , Taiwan Indonesia and Philippines . This has helped the companies to stay competitive by serving their customers with high quality and lesser cost (2004 .History of outsourcing . Retrieved May 2 , 2008 , from Cyber Futuristics Web site http /www .cyfuture .com /history-of-outsourcing .htm

Outsourcing gained its momentum when American car companies caught with strong dollar and increasing foreign competition and realized that they are in desperate situation to insure cost parity and profitability During 1980 , to be profitable , GM closed its 10 factories in US and moved them to Mexico

Outsourcing- current scenario

Outsourcing market is estimated to grow tremendously in the coming years and service providers are also in rise . Outsourcing business has developed a clear focus and is serving the clients up to their expectation . Even with growing service providers , the competition is very fierce thus giving an advantage to the client to get high quality service with lesser cost

Reason and advantages of outsourcing

The main reason behind outsourcing is to allow the organizations to invest more time , human resources and money into core activities and building strategies which will take the company to growth path Outsourcing saves on operational cost even to the tune of half . It helps access to cheap , efficient labor , better technologies at cheaper cost and increased productivity . The estimated cost saving from off shoring is 10-15 in the first two years and rise up to 30 -40 after three years when the processes are stabilized . Gauriady , J (2007 , 7 , 19 Offshore outsourcing-the service that goes form local to global Retrieved May 2 , 2008 , from History of outsourcing Web site http /www .offshoretricks .com /customers /o9hos .php

Disadvantages of outsourcing

There are some disadvantages in outsourcing and an organization should analyze the same before deciding to go for outsourcing . Since some of the operations are done by the service provider , some controls are transferred to them . In long run the client will become solely dependent on service provider . Hence trusted service provider to be identified otherwise there will be a threat to confidentiality and security . There is a chance of loss of flexibility by the service provider in reacting to changing business environment . Service provider may enact partiality within its clients , based on the client 's payment pattern . When a company goes for outsourcing , the current employees may feel job threat At most care to be taken on contractual problems . There is a price threat from service provider when there is a decrease in Dollar value with service provider country 's currency and sudden change in laws and economic policy of service provider 's country due to political instability

Impact of outsourcing on American workforce and its negative and positive attributes

Forrester research estimates that 3 .3 million U .S . jobs and 136 billion in wages could be moved to such countries as India , China and Russia by 2015 (2004 . Outsourcing statistics . Retrieved May 2 , 2008 from Cyber Futuristics Web site http /www .cyfuture .com /outsourcing-statistics .htm

Workers in developed countries feel that the companies that outsource work to other countries should be penalized and a lawsuit should be lodged against them . University of California has estimated that a staggering 14 million white collar jobs -nearly one in nine of all US jobs - are vulnerable to being outsourced . These are high paying jobs with more than half of them paying above the average salary of 31 ,720 A 2004 report predicted that approximately 3 .5 million white collar jobs and 151 billion in wages would move overseas by 2015 ' - (Hira , Hira 2005 .Many Americans are asking a practical question of `What field should my son or daughter study in college ' I am an information technology worker and have been laid off in the last three years because of outsourcing . At the same time some other says , only 10 of American workers loose jobs because of outsourcing , which indicates that the problem is somewhere else . Economists claim that the situation is temporary and will change once US economy boosts and newer jobs are created . Yes , it is probably good for America in the long run - Dr Gregory Mankiw (Hira , Hira , 2005 .According to a July 2007 report from the Information Technology Association of America (ITAA , midsize metropolitan areas and rural communities could provide a 30 percent cost savings over top-tier IT hubs in the US . In spite of offshore outsourcing , there might be niche opportunities in low cost domestic outsourcing . Foreign outsourcing firm Wipro announced in August 2007 that it would open a global software development centre in Atlanta which will give employment to 500 local workers . The trend to move jobs back to USA also faces problem like whether or highly skilled individuals are available to fill the positions . For example when AT T agreed to move IT positions back to the states , it faced problem in finding talent local people to fill the posts . At last the company had to set up a training program to groom the candidates . Campbell , S (2008 , April 10 . Will Trends Emerge to Move the Call Centers Back Home ? Retrieved May 2 , 2008 from TMCnet Web site http /callcenterinfo .tmcnet .com /analysis /articles /25032-will-trends-eme rge-move-call-centers-back-home .htm

My belief and opinion on outsourcing and conclusion

In spite of skepticism and criticism , global outsourcing provides huge benefits like cost saving in operational , managerial costs , increase in productivity and profitability . Importantly the benefits are passed on to the end user and helps organizations to deliver goods and service efficiently . Temporary problems towards outsourcing should be dealt within organizations cautiously , keeping long term benefits in mind

References

Hira R , A Hira (2005 . Outsourcing America : what 's behind our national crisis and how we can reclaim American jobs ? AMACOM Div-American Mgmt Assn

(2008 , April 31 . History of outsourcing . Retrieved May 2 , 2008 , from Love to know Web site :http /jobs .lovetoknow .com /History_of_Outsourcing

(2004 . History of outsourcing . Retrieved May 2 , 2008 , from Cyber Futuristics Web site : HYPERLINK "http /www .cyfuture .com /history-of-outsourcing .htm http /www .cyfuture .com /history-of-outsourcing .htm

(2004 .Outsourcing . Retrieved May 2 , 2008 , from Cyber Futuristic Web site : HYPERLINK "http /www .cyfuture .com /Outsourcing .htm http /www .cyfuture .com /Outsourcing .htm

Gauriady , J (2007 , 7 , 19 . Offshore outsourcing-the service that goes form local to global . Retrieved May 2 , 2008 , from History of outsourcing Web site : HYPERLINK "http /www .offshoretricks .com /customers /o9hos .php http /www .offshoretricks .com /customers /o9hos .php

(2004 . Outsourcing statistics . Retrieved May 2 , 2008 , from Cyber Futuristics Web site : HYPERLINK "http /www .cyfuture .com /outsourcing-statistics .htm http /www .cyfuture .com /outsourcing-statistics .htm

Campbell , S (2008 , April 10 . Will Trends Emerge to Move the Call Centers Back Home ? Retrieved May 2 , 2008 , from TMCnet Web site http /callcenterinfo .tmcnet .com /analysis /articles /25032-will-trends-eme rge-move-call-centers-back-home .htm

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