OUTSOURCING

Overview
A precise definition of outsourcing has yet to be agreed upon. Thus, the term is
used inconsistently. However, outsourcing is often viewed as involving the
contracting out of a business function to an external provider. In this sense, two
organizations may enter a contractual agreement involving an exchange of services
and payments. Of recent concern is the ability of businesses to outsource to
suppliers outside the nation, sometimes referred to as offshoring or offshore
outsourcing (which are odd terms because doing business with another country
does not mean you have to go offshoreIn addition, several related terms have
emerged to grasp various aspects of the complex relationship between economic
organizations or networks, such as nearshoring, multisourcing and strategic
outsourcing. Almost any conceivable business practice can be outsourced for any
number of stated reasons. The implications of outsourcing objectively and
subjectively vary across time and space.

DEFINITIONS
• Outsourcing often refers to the process of subcontracting to a third-party.
• Outsourcing is usually the term used when a company takes a part of its
business and gives that part to another company. In recent times, the terms
has been most commonly used for technology related initiatives such as
handing over the IT help-desk to a third-party.
http://www.mariosalexandrou.com/definition/outsourcing.asp
• Outsourcing -The procuring of services or products, such as the parts used
in manufacturing a motor vehicle, from an outside supplier or manufacturer
in order to cut costs. http://www.answers.com/topic/outsourcing
• Outsourcing is an arrangement in which one company provides services
for another company that could also be or usually have been provided in-
house.
http://searchcio.techtarget.com/sDefinition/0,,sid182_gci212731,00.html
• Outsourcing - Contracting, sub-contracting, or externalizing non-core
activities to free up cash, personnel, time, and facilities for activities where
the firm holds competitive advantage. Firms having strengths in other areas
may contract-out data processing, legal, manufacturing, marketing, payroll
accounting, or other aspects of their businesses to concentrate on what
they do best and thus reduce average unit cost. Outsourcing is often an
integral part of downsizing or reengineering. Also called contracting out.
http://www.businessdictionary.com/definition/outsourcing.html
• Outsourcing -Work done for a company by people other than the
company's full-time employees.
http://www.investorwords.com/3534/outsourcing.html
 • Outsourcing -The practice of having certain job functions done outside a
company instead of having an in-house department or employee handle
them; functions can be outsourced to either a company or an individual.

http://www.entrepreneur.com/encyclopedia/term/82610.html

WHY WE PREFER OUTSOURCING

 Cost savings. The lowering of the overall cost of the service to the business.
This will involve reducing the scope, defining quality levels, re-pricing, re-
negotiation, cost re-structuring. Access to lower cost economies through offshoring
called "labor arbitrage" generated by the wage gap between industrialized and
developing nations.
 Focus on Core Business. Resources (for example investment, people,
infrastructure) are focused on developing the core business. For example often
organizations outsource their IT support to specialised IT services companies.
 Cost restructuring. Operating leverage is a measure that compares fixed costs
to variable costs. Outsourcing changes the balance of this ratio by offering a move
from fixed to variable cost and also by making variable costs more predictable.
 Improve quality. Achieve a step change in quality through contracting out the
service with a new service level agreement.
 Knowledge. Access to intellectual property and wider experience and
knowledge.
 Contract. Services will be provided to a legally binding contract with financial
penalties and legal redress. This is not the case with internal services.
 Operational expertise. Access to operational best practice that would be too
difficult or time consuming to develop in-house.
 Access to talent. Access to a larger talent pool and a sustainable source of
skills, in particular in science and engineering.
 Capacity management. An improved method of capacity management of
services and technology where the risk in providing the excess capacity is borne by
the supplier.
 Catalyst for change. An organization can use an outsourcing agreement as a
catalyst for major step change that can not be achieved alone. The outsourcer
becomes a Change agent in the process.
 Enhance capacity for innovation. Companies increasingly use external
knowledge service providers to supplement limited in-house capacity for product
innovation.
 Reduce time to market. The acceleration of the development or production of
a product through the additional capability brought by the supplier.
 Commodification. The trend of standardizing business processes, IT Services,
and application services which enable to buy at the right price, allows businesses
access to services which were only available to large corporations.
 Risk management. An approach to risk management for some types of risks is to partner
with an outsourcer who is better able to provide the mitigation.

 Venture Capital. Some countries match government funds venture capital with private
venture capital for startups that start businesses in their country.

SECTORS OF ECONOMY WHICH ARE BEING

OUTSOURCED
Global BPO Market by Industry

Percentage Industry Players

Industry
(%)
For online transactions, e-billing and other
financial tasks, a majority of companies
Information
43 are turning to outsourcing market giants
Technology
like IBM and EDS, in addition to smaller
players newly hitting the market. For
Financial Services 17 running their hardware and server
systems, a company may easily pick the
services of major organizations like
Communication Oracle, Sun Microsystems, or any of the
16
(Telecom) numerous less famed providers. Many
other outsourcers and service providers
exist for services like customer
Consumer Goods/
15 management, Web hosting, security and e-
Services
mail support, etc. Stalwarts like Hewitt,
IBM and Accenture dominate the current
Manufacturing 9 HRO industry. I addition, there are now a
significant number of both large and small
new companies in the fray, SAP to
Yurcor.

http://www.ecommercetimes.com/story/17802.html

http://services.silicon.com/itoutsourcing/0,3800004871,39166820,00.htm

TOP COUNTRIES WHICH ARE OUTSOURCING

AND THEIR INFRASTRUCTURE
1. India:
is the leading star of this global outsourcing surge, cornering approximately 80-90% of the
global offshore market. It has to its credit a large pool of talented and English speaking
professionals (200,000 IT graduates per year), robust infrastructure as well as the advantage of
providing outsourced services at a low cost. It leads over its nearest rival by a wide margin
mainly due to its early start in the field.

2. China:
is being touted as being the next big IT outsourcing destination and is expected to rival India by
2007. The Chinese IT services market has grown nearly 42% a year since 1997. This growth is
mainly built on the pricing plank and a study by PriceWaterHouse Coopers that suggests that
using China based outsourcers could save companies approximately 37% as compared to those
from India. The Chinese government has also put in its bit to enhance China’s image as an
outsourcing destination. It has liberalized the economy, laws and policies and laid a major
emphasis on education. China is fast becoming a low cost alternative to its economically
developed neighbors like, Korea, Japan, Taiwan, Hong Kong and Singapore.
3. Malaysia:
has well-developed world-class infrastructure and its outsourcing industry has good government
support. A number of policies are being put in place to widen the labor pool and improve
proficiency in English and technical skills.
4. Philippines:
has many years of experience in the BPO space and have to their credit a vast population that
speaks English with American accents, while also being exposed to Western culture and global
business. It also has high bandwidth as compared to its other neighbors.
5. Hungary:
is slowly emerging as Europe’s leading IT service providers. Once an Eastern Bloc country, it
has the advantage of offering its European counterparts with near shore facilities at a much lower
cost. It also has to its credit a large pool of tech savvy workers with cultural compatibility to
Western Europe. Among the top companies that have set up shop here are the likes of TCS, EDS
and IBM. In a deal worth $35.54 million, IBM was to create approximately 700 service centre
jobs, which include financial services, procurement, human resources and call centre positions.
7. Russia:
is emerging as a preferred destination for outsourcing of complex R&D problems for most global
corporations. The IT companies here are built on the “boutique” approach, which focuses on the
solving of advanced R&D problems. Russia has over 2 million people working in their over 4500
R&D centers, and of these at least 1 million are researchers and scientists. This pool of highly
educated and talented workers known for their unconventional approach and complex problem
solving capabilities has attracted companies to outsource their R&D work to Russia. The
companies with a presence here include Bechtel, IBM, Intel, Boeing, Microsoft, Sun
Microsystems and Motorola.

8. South Africa:
is one country that is slowly emerging as an outsourcing destination that is taking advantage of
increased competition worldwide. South Africa is advantageous to the UK market as it lies in the
same time zone and has a similar culture. It has to its advantage good infrastructure; call center
operation capabilities and mastery over the English language.
9. Mexico:
is increasingly becoming a preferred destination to service Spanish speaking populations. Big
companies like Accenture, IBM and EDS have a significant presence here.
10. Poland:
is another country favored by the German companies as it has a large base of German and
English speakers. Its advantages as an outsourcing destination lie in its cultural and time zone
compatibility for Western Europe.
11.Brazil:
The business of offshoring has been maturing for decades. Driven by strategies to reduce costs,
generate economies of scale, and focus on core competencies, it's clear that IT and business
process outsourcing work. India has stood out as the pre-eminent force in this process; but in
practice most global companies and offshore service providers are looking to spread their
facilities and investments on a global basis, rather than in just one location.
http://www.chillibreeze.com/articles/top-countries-outsourcing.asp
TOP 100 GLOBAL OUTSOURCING COMPANIES

RANK COMPANY (LEADERS) KEY STRENGTH

1 Accenture Management Capabilities

2 IBM Demonstrated Competencies

3 Sodexo Customer References

4 Tata Consultancy Services Customer References

5 Wipro Technologies Demonstrated Competencies

6 Convergys Customer References

7 ISS Balanced Performance

8 CB Richard Ellis Customer References

9 Infosys Technologies Management Capabilities

10 Capgemini Customer References

11 Genpact Customer References

12 Colliers International Customer References

13 CSC Customer References

14 NCR Balanced Performance

15 Jones Lang LaSalle Management Capabilities

16 CGI Group Balanced Performance

17 Sitel Size & Growth

18 Unisys Customer References

19 EDS, an HP Company Balanced Performance

20 HCL Technologies Management Capabilities

21 ADP Management Capabilities

22 Ceridian Management Capabilities

23 Intelenet Global Services Balanced Performance

24 Williams Lea Demonstrated Competencies

25 ACS Balanced Performance

26 Aegis Customer References

27 ARAMARK Management Capabilities

28 CPM Braxis Balanced Performance

29 Inspur Customer References

30 Tech Mahindra Customer References

31 Hewitt Associates Management Capabilities

32 Lionbridge Management Capabilities

33 NIIT Technologies Balanced Performance

34 Softtek Balanced Performance

35 Diebold Balanced Performance

36 Firstsource Solutions Customer References

37 EMCOR Group Balanced Performance

38 L&T Infotech Demonstrated Competencies

39 TeleTech Holdings Demonstrated Competencies

40 Amdocs Demonstrated Competencies

41 SPi Balanced Performance

42 Mastek Management Capabilities

43 Concentrix Customer References

44 Johnson Controls Balanced Performance

45 MindTree Management Capabilities

46 Océ Business Services Demonstrated Competencies

47 Patni Computer Systems Balanced Performance

48 NCO Group Demonstrated Competencies

49 EXL Service Demonstrated Competencies

50 Neusoft Balanced Performance

51 EPAM Systems Balanced Performance

52 Newmark Knight Frank Balanced Performance

53 Syntel Demonstrated Competencies

54 VanceInfo Customer References

55 HOV Services Customer References

56 Hexaware Technologies Customer References

57 Headstrong Balanced Performance

58 Donlen Management Capabilities

59 iGATE Demonstrated Competencies

60 CPA Global Balanced Performance

61 ChinaSoft International Size & Growth

62 Grubb & Ellis Balanced Performance

63 WNS Global Services Balanced Performance

64 NCS Management Capabilities

65 Luxoft Management Capabilities

66 TIVIT Size & Growth

67 AppLabs Demonstrated Competencies

68 Sutherland Global Services Demonstrated Competencies

69 Pitney Bowes Management Capabilities

70 Outsource Partners International Customer References

71 SEI Management Capabilities

72 Cushman & Wakefield Management Capabilities

73 Aditya Birla Minacs Size & Growth

74 hiSoft Technology International Customer References

 75 Quatrro BPO Solutions Demonstrated Competencies

RANK COMPANY (RISING STARS) KEY STRENGTH

76 Synygy Demonstrated Competencies

77 China Data Group Size & Growth

78 Grupo ASSA Customer References

79 Xceed Demonstrated Competencies

80 Emerio Customer References

81 ePerformax Contact Centers Customer References

82 Beyondsoft (Beijing) Balanced Performance

83 InterGlobe Technologies Demonstrated Competencies

84 Nair & Co. Balanced Performance

85 Bleum Size & Growth

86 Ci&T Management Capabilities

87 Auriga Customer References

88 M&Y Data Solutions Customer References

89 SaM Solutions Balanced Performance

90 Knoah Solutions Management Capabilities

91 Microland Balanced Performance

92 Grupo Prominente Balanced Performance

93 DataArt Balanced Performance

94 Reksoft Demonstrated Competencies

95 The Symbio Group Balanced Performance

96 Corbus Management Capabilities

97 MERA Networks Demonstrated Competencies

98 Itransition Balanced Performance

99 CIeNET International Balanced Performance

100 Mindcrest Size & Growth

http://www.outsourcingprofessional.org/content/23/152
/1197/

CONCLUSION
Irrespective of whether outsourcing is ‘adaptive’ or ‘transformational’ or one of the
many other forms it can take, it generally replaces an existing activity or set of
activities in an enterprise. It typically comes under the OE banner and within that
context can be an effective component of the operational strategy of an enterprise.
It can also contribute to or underpin enterprise strategy in conjunction with other
business activities, but viewed from this level it manifests currently as being more
tactical than strategic.Moving from a tactical status to being really strategic for the
enterprise presents a challenge and a great market opportunity for the outsourcing
supplier community.

Whether the big established providers, many of whom have to contend with
relatively high overheads and the burdens of legacy and size, can effectively exploit
this gap in their market, anytime soon, is doubtful. Some of them are trapped into a
‘me too’ downward spiral based on repeated restructuring and reorganization which
seeks to emulate a perceived ‘ best of breed’ competitor, inevitably resulting in
ever thinner profit margins, diluted focus and a dissipating brand equity.

A way forward to explore and meet this challenge may be represented by a small
number of expert and importantly, independent, specialist outsourcing
consultancies, which stand between the enterprise and the outsourcing providers.
These boutique organizations have the insight, experience and objectivity to
spearhead the process of relating strategic enterprise imperatives to the ability and
willingness of providers to meet them.

The preferred providers resulting from this process may very well be the smaller,
more flexible ‘crouching tiger’ outsourcing organizations which can seize the
opportunity and fill this market gap, enabling outsourcing to figure increasingly at
the core of enterprise strategy.

Becoming really strategic for the enterprise may not be that far off for outsourcing
after all.