OUTSOURCING AND ITS POTENTIAL FOR INDIA BY-JAYA NARULA

WHAT IS OUTSOURCING?

Outsourcing refers to the process in which companies entrust the processes of their business functions to external vendors.

Generally, companies outsource functions that are non-core to their business.

Call centre services, payroll, maintenance, order and inventory management etc are some of the kinds of work typically outsourced.

FORMS OF OUTSOURCING

Onshore Outsourcing- It refers to procurement of services from someone outside the company but within the same country.

Offshore Outsourcing- It refers to procurement of services from abroad.

ADVANTAGES OF OUTSOURCING

1. Cost advantages The most obvious and visible benefit

relates to the cost savings that outsourcing brings about.

Due to the difference in wages between western countries and Asia, the same kind of work that is done over there can be done in India at a fraction of the cost. There is a cost savings of around 60% by outsourcing your work to India.

2. 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.

3. Focus on core areas Outsourcing your business processes would free your energies and enable you to focus on building your brand, invest in research and development and move on to providing higher value added services.

4. Save on infrastructure and technology-Outsourcing eliminates the need for investment in infrastructure as the outsourcing partner takes the responsibility of the business processes and hence develops infrastructure for the same.

5. Access to skilled resources Providers of services take care of the resourcing needs with their pool of highly skilled resources.

The resources employed are well educated in the respective business areas and are experienced in handling the business needs of companies that want to outsource.

6. Time zone advantage Apart from the cost advantage, the other much touted benefit has to do with the time zone differential between your country and the location you are outsourcing to. Get your job done while you are closed for the day and wake up to your service being delivered the next morning. This unique advantage gives you the benefit of round-the-clock business operations.

7.Risk-sharing one of the most crucial factors determining the outcome of a campaign is risk-analysis. Since the outsourced vendor is a specialist, they plan risk-mitigating factors better.

5. Staffing Flexibility-Outsourcing will allow operations that have seasonal or cyclical demands to bring in additional resources when you need them and release them when you're done.Example: An accounting department that is short-handed during tax season and auditing periods. Outsourcing these functions can provide the additional resources for a fixed period of time at a consistent cost.

DISADVANTAGES OF OUTSOURCING

1. Risk of exposing confidential data: When an organization outsources HR, Payroll and Recruitment services, it involves a risk of exposing confidential company information to a third-party.

2. 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.

3. 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.

4. 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.

WHY OUTSOURCE TO INDIA?

THOLONS TOP 100 OUTSOURCING DESTINATIONS 2015

Using the proprietary and industry-leading Tholons Location Assessment Framework, Tholons(Services Globalization and Investment Advisory firm) has identified the Top 10 Emerged, Top 50 Emerging, and 40 Aspiring outsourcing locations around the world through the implementation of primary and secondary research, as well as quantitative and qualitative analysis.

MORE INDIAN CITIES

Chandigarh (22nd) Kolkata (23rd) Coimbatore (31st) Bhubaneshwar (55th) Ahmedabad (63rd)

India has the largest technical and professional talent pool in the world

India remains unmatched when it comes to its vast pool of skilled and talented human resources. The country has a population of over 1.2 billion people and around 3.1 million graduates are added to the workforce each year. India also holds the distinction of being the largest English speaking nation in the world, larger even than the US and UK combined.

India offers flexible pricing options

The India remains a top outsourcing provider is due to the significant cost savings that companies can achieve.

This is mainly because of the wide gap that exists between personnel costs in India and that of the developed countries. For example, a good developer in the U.S. can cost anywhere from $50 to $80 an hour (for a full-time staffer depending on skills and experience). In comparison, the hourly cost of a developer in India can be negotiated down to as low as $15 per hour.

This pricing flexibility allows companies the freedom and creativity in managing their budget and helps them reap large profits.

India provides consistent high quality services

While the cost factor plays a huge role in outsourcing, the consistently high quality provided by Indian outsourcing firms has also enabled India to remain as the top outsourcing destination.

"Cost reduction was only part of the reason that companies were considering offshore outsourcing, there were benefits to be had in time-to-market and quality, leading to an adage that companies initially chose India to save costs but stayed for the speed and quality!"

AT KEARNEY GLOBAL SERVICES LOCATION INDEX(2014)

GSLI seeks to bring rigor to companies decisions about where to locate offshore operations.

GSLI tracks the contours of offshoring landscape in 51 countries across 3 major activities:

1. Financial Attractiveness 2. People skills and availabilities 3. Business Environment

India boasts of the best in Infrastructure and technological capabilities

In India, Clients are offered the latest and best in software technology, including customized solutions for various applications such as e-commerce, business process re-engineering, system migration, legacy system maintenance, system integration, and much more.

Outsourcing companies also maintain uninterrupted communication channels with clients by providing high-speed bandwidth via satellite connectivity, submarine cables and fiber optic networks.

The Indian Government is stable and offers attractive IT policies

The Indian outsourcing industry is supported by a stable pro-IT government whose policies on the economy, GDP growth, taxation, power, telecom, industrial parks and special zones have been helpful in improving infrastructure as well as communications systems.

IT is regarded as one of the top 5 priority industries in India, and the government has framed policies to obtain maximum benefit from IT outsourcing to India.

The government has offered its support to the IT industry by providing various tax-related and other benefits and by enacting the Information Technology Act.

Indian companies provide the quickest time-to-market

Indian outsourcing companies are able to provide the quickest time-to-market due to the advantages gained by time zone differences.

The 12-hour time difference between India and the USA provides companies with numerous opportunities for work to be completed earlier than expected, leading to greater efficiency, increased productivity and more time to focus on other crucial tasks.

The time difference makes India an ideal option for clients who wish to outsource various service-related options, such as 24X7 Customer Support and Helpdesk services.

TOP OUTSOURCING COMPANIES IN THE WORLD

International Association of Outsourcing Professionals (IAOP) has recently come out with “The Global Outsourcing 100” for 2014 which enlists the top outsourcing companies in the world.

What is unique about this list is – It does not rank the companies on its size alone but based on various different Outsourcing parameters which include:

Customer References Balanced performance Management Capabilities Size & Growth Demonstrated Competencies

The various companies have given the following ranks:

1. ISS (Integrated Service Solutions)-Balanced performance, Co. based in Denmark

2. Accenture(Ireland)- Balanced Performance3. CBRE (US based Commercial Real Estate

Company)- Balanced Performance4. Kelly Outsourcing and Consulting Group(US)-

Balanced Performance5. Colliers International(US)- Management

Capabilities

Indian Companies:o HCL Technologies ranked 6th

o L&T Infotech ranked 22nd

o Mindtree ranked 33rd

o Datamatics Global Services ranked 39th

GROWING AREAS OF OUTSOURCING

Knowledge Process Outsourcing(KPO) With  the  evolution and maturity of companies, businesses are moving towards outsourcing high-end processes such as legal processes, market research and analytics, engineering processes, design and product development. Such off shoring of high-end knowledge intensive work is termed as KPO.

The industry has also finally come of age, with the sector now providing a variety of services such as clinical trial management, along with advanced research &analytics. Popular KPO services include services to the financial sector

(such as insurance & actuarial services, corporate credit & project finance services, equity research, and investment banking) intellectual property research, medical &legal research, and research in biotechnology &pharmaceuticals.

According to ASSOCHAM, the Indian KPO sector accounts for about 70% of the global KPO industry and is expected to grow at a CAGR of 30% to reach $30Bn in 2015, with financial services being the largest contributor. 

PHILIPPINES AS A EMERGING DESTINATION

 Philippines attracts vendors because it possessed an outsourcing bond that’s maturing, improved macro-economic environment, and an expanding domestic market.

Apart from a highly literate and fluent population, the country was seen as having an edge over other rising stars like because it invested heavily in training programs for BPO employees and managers. Such continued learning initiatives did not only provide trainees with basic outsourcing knowledge but also equipped them with skills that enabled them to compete with the best from around the world.

 Government is putting an effort to develop an operating platform for the IT-BPO industry through grants and enhanced infrastructure.

CHINA AS AN EMERGING DESTINATION

Chinese vendors offer specific business knowledge in areas such as banking, insurance, and healthcare. Such specialization creates closer links between vendor and client, resulting in higher productivity and profitability for both.

Government have also launched initiatives to develop education, training, and other supporting infrastructure.

One of China’s strengths in outsourcing is its vast talent pool of skilled technicians and engineers.

Most outsourcing service providers in China have adopted strict security measures to prevent customers’ intellectual property from falling into the wrong hands.

INDIA LACKING?

 Human resource experts have also uncovered potential areas for concern in India’s current labor scene:

•Gradual salary increase that has affected cost savings advantage •Higher labor costs resulting in an intense competition to get employees with the right skill sets •Low company loyalty and high attrition rates •Poaching of key employees by competitors

But still its better than other destinations.

CONCLUSION India remains the preeminent destination for

outsourcing services with excellence in IT, BPO and voice services.

According to National Association of Software and services Companies(NASSCOM) the outsourcing sector today employs one million people and represents 25% of India’s total Exports.

The IT service sector dominates the industry with exports of $40 billion followed by BPO exports of $20 billion.

According to survey by AT Kearney, India’s share in world outsourcing is 55%.

THANK YOU