outsourcing by prashant priyadarshi

8/8/2019 outsourcing by prashant priyadarshi

1/14

Assignment

Of

Organizational Development

Assignment 2

SUBMITTED BY- SUBMITTED TO

Miss Gurnoor Brar

NAME PRASHANT PRIYADARSHI

CLASS- BBA (HONS) MBA

ROLL NO- A20

SUB- ORGANIZATIONAL DEVLOPMENT


2/14

ABSTRACT

Outsourcing has helped many industries reduce costs and increase profits. But businesses havenot yet been able to convey the real-time benefits of outsourcing. This has led to increasedsensitivity to the outsourcing of jobs, which have seemingly led to loss of employmentopportunities in the local economic system. Seemingly as this is not the case. For short while it

may seem that people are losing their jobs to outsourcing, but in the long run, as profits rise, theeconomy improves and with that new jobs are created.

OUTSOURCING

Outsourcing is often defined as the delegation of non-core operations or jobs from internalproduction to an external entity that specializes in that operation. Outsourcing is a businessdecision that is often made to focus on core competences. It also implies transferring jobs toanother country, either by hiring local subcontractors or building a facility in an area where laboris cheap. It became a popular buzzword in business and management in the 1990s.

Outsourcing has really made its mark in the business entities. The decision to outsource is likethe decision to expand a business overseas, to incorporate computer technology, or to hire newworkers. Outsourcing can change the way companies do business-through people, process andtechnology. Whether B2B or B2C, whether SMSs or large diversified companies or small home

offices, every company can leverage the power of outsourcing for business transformation.

Lately however, the concept of outsourcing has been criticized. The negative attitude towardsoutsourcing have been mostly discussed by masses in the US and UK, due to unemployment in


3/14

the mentioned countries. People in countries like the US, feel that outsourcing is threat to theireconomy. Economist Thomas Sowell from the University of Chicago said anything thatincreases economic efficiency, whether by outsourcing or a hundred other things, is likely to costsomebody's job. There are other problems too.

Problem of unemployment

It cannot be denied that the immediate effects of outsourcing such as lay-offs as well as theshifting of production and jobs to foreign locations causes problems for both low and high-endemployees.

Quality problem

As "outsourced" workers are not the paid agents of the company, it is argued that there is lessincentive for the agent to show loyalty or work ethic in its representation of said Company. It hasbeen therefore argued that quality levels of customer service and technical support of outsourcedtasks are lower than where they have remained 'in-house'.

Other problems

These include unfavorable contract lengths, loss of competitive edge, problems in contractrenewal, contractual misunderstandings, foreign accents and irritated customers, unions,employees etc.

But this trend is not entirely damaging, there several marked benefits associated with it.

Focus on core business

Back office operations of a company require high maintenance and specialized attention. Yetmost of them are critical for the company's everyday activities. By outsourcing their back office

operations businesses can concentrate on their core competencies while their back officeoperations are being managed smoothly by a specialized third party company.

Cost and Efficiency saving

Lowering the overall cost of the service to the business. This involves defining quality levels, re-pricing, re-negotiation and cost-restructuring.

Staffing Flexibility

Access to larger talent pool and sustainable source of skills. This increase quality as well asquantity of goods.

Increase in Business

By employing skilled manpower in larger numbers at lower costs companies can really increasetheir productivity. This in turn would result in better customer satisfaction and increasedprofitability.


4/14

Competitive Advantage

In todays fast paced global economy a company needs to provide high-quality services at cheapprices to its customers in order to retain them. Outsourcing in this case can help the companymaintain lower rates with better service solutions, thereby giving them a better market position.

Tax Benefits

By selecting the right BPO destination companies can save up on taxes and can improve theirmargins.

The Outsourcing market is estimated to grow tremendously in the coming years with anincreasing number of companies planning to outsource and as the number of companies arerising, there will be large variety and less risks as businesses will have more experience andclearer objectives.

Review of literature

Is outsourcing a good idea for small businesses?

By William KingHiring an outsider firm or an individual, to carry out some of your business work is known asoutsourcing. Outsource happens to be a debatable practice because of the advantages anddisadvantages it holds. Outsourcing industry (especially offshore outsourcing) gained momentumwith the amazing growth in communication technologies and internet. Today, a number ofbusinesses in US, Canada or UK employ offshore outsourcing, much to the dismay of localworkforce (thats the reason why in near future we might see some jurisdictions being imposed

on businesses looking to outsource their work to some offshore company).

There are many reasons for companies who decide to hire outsourcing companies instead ofhiring and training their own staff.

Outsourcing for Small Businesses:

Outsourcing has particularly helped entrepreneurs and small businesses, allowing them tooutsource some of their business work while they can focus on their strengths. For example, acompany which is good at web marketing might outsource the web development work to anothercompany because customers are looking for a complete package instead of dealing with different

vendors themselves. Similarly, a small business can simply outsource the tasks like recruiting,book keeping or PR management because the cost of hiring and training full time professionalscan sometime exceed the cost incurred for outsourcing.

Cost saving is unarguably the biggest advantage associated with outsourcing but it is not the onlyone. Outsourcing can help in speeding up the process of establishing a new business or launchinga new product. At times it helps in improving quality. In our example above, you can see howthe outsourcing of web design or development work to a third party can provide better results to
http://www.212articles.com/authors/17557/William-Kinghttp://www.212articles.com/authors/17557/William-King


5/14

the customers as compared to trying and coming up with a mediocre website (because you arenot an expert at web designing). It also allows you to excel in your respective field instead ofspending time in learning all of the required skills yourself.

Disadvantages:

Outsourcing doesnt always result in superior quality products or services. In fact its quite the

opposite when you are outsourcing to an offshore company in a low cost zone, in that casequality becomes the biggest concern. These companies, in their bid to save cost, compromise onthe quality. Therefore, you must choose the outsourcing company carefully instead of going forthe one with lowest quotes. Once you start outsourcing your work, you must put in place someproper quality check measures to ensure the quality.

The Other Risks in Offshoring

By- Effie Sha

Its not just theft of corporate secrets that you need to worry about.

Data theft has always been the big worry in outsourcing and offshoring. There are armed guardoutside the doors of many outsourcing companies and heavy security even inside.

But the bigger threat may have less to do breaking into the building and stealing intellectualproperty than the plume of smoke emerging from a volcano in Iceland or a terrorist attack inIndia. Outsourcing and offshoring operations can be wreaked havoc by natural disasters,geopolitical unrest and infrastructure breakdowns. Even worse, they almost surprise thecompanies doing business there.

"If there's a city outage for the outsourcing operation, very few companies have ever planned forthat," says Sudin Apte, principal analyst in Forrester Research's ( FORR - news - people ) IT services sourcing and vendor management research group. "When they talk aboutbusiness continuity and disaster recovery, they focus on infrastructure and applications and howthose can be moved from one city to another. Process knowledge and people are seldom includedin the plan."

Apte, who is based in India, is seeing these problems firsthand. He says the risk of annualflooding in Mumbai is much more serious than theft of corporate secrets. But while companiesroutinely plan their data center recovery, they don't have the same kind of follow-through when

it comes to their outsourcing operations.So how can they reduce the risk of problems with outsourcing or offshoring? Here are some ofForrester's suggestions:

Fully understand the people, resources and the process involved in an operation. Mostcompanies care the cost savings or lots of expertise gained through contracting out an operationsuch as application development or management-or by locating it somewhere else under their


6/14

own management-but they don't know what's involved in running that operation. It requirespeople and a deep understanding of the process to make it work smoothly, and you can't easilychange it from one location to the next if you don't plan for it beforehand.

Hedge your bets the same way you'd hedge the risk in a financial portfolio. Suggest a service

provider to add other locations so that if something happens in one, work can continue withouttoo long disruption in another. Manufacturing companies have learned a lesson during the 2003SARS in China, which almost shut down all commerce for several months, that the best way isadding operations in other countries. Unfortunately, it isn't always possible in IT because theskilled labor pool in India is significantly larger than it is in other countries. If it is not possible inother countries, then try in other parts of the same country.

Understand the costs of downtime and build that into the financial model. Many companieskeep eyes on outsourcer's infrastructure. They need to look deeper into the infrastructure of thecity where the outsourcer is located and any potential problems that might happen there.

This isn't something companies would even raise an eyebrow about on their home turf. It's partof good business management practices. Yet it's surprising how it gets swept under the carpetwhen it moves beyond the direct oversight of a corporation.

"If you pull out all the wires from the walls in any company, they won't survive more than eightor nine minutes, no matter where they are," says Apte. "But only 10% to 15% of all thecompanies doing offshoring understand all the risks. Those are the mature offshore buyers.They've gone through this for the past 10 or 15 years. Others understand the risk only partly."

Reasons Why Businesses Find Outsourcing Extremely Beneficial

By - By Craig

Outsourcing has now become a household name in a lot of businesses as most have come torealize the benefits of delegating tasks to outside providers. Howevernot unlike grade schooljust because everybody has one doesnt mean you should rush out and get yourself one too. Its

imperative that you spend time making sure and evaluating this significant decision first. Qualitypartnerships and success will eventually follow.

Its a logical process of first figuring out what drives you to do something in order to know

where exactly youre driving to. In most outsourcing decisions, there are usually nine key factorsthat affect business owners in deciding to hire outside companies to do some of the work in their

organization. Run through these nine and figure out which one applies to your company:Hasten the re-engineering of the business. Most businesses want to re-engineer in order tohave dramatic improvements in some of the most important performance indicators such asservice, quality, cost, and momentum. Often, though, the necessity to invest in the efficiency of abusiness contradicts the necessity to invest in its core part. The constant holding off of those non-core needs affects the efficiency of the operation and, in the long run, affects the productivity.
http://en.wikipedia.org/wiki/Outsourcinghttp://www.virtualassistant.org/outsourcing/organized-working-relationship-productivity/http://www.virtualassistant.org/outsourcing/organized-working-relationship-productivity/http://en.wikipedia.org/wiki/Performance_indicatorhttp://en.wikipedia.org/wiki/Performance_indicatorhttp://www.virtualassistant.org/outsourcing/organized-working-relationship-productivity/http://www.virtualassistant.org/outsourcing/organized-working-relationship-productivity/http://en.wikipedia.org/wiki/Outsourcing


7/14

Outsourcing a non-core need to a competent outside provider can give you the benefits of re-engineering.

Be able to hire top-notch skills. World-class service providers have professionals trained andexpert in different fields; technology, personnel, etc. They also have knowledge and use of the

newest technology that will give more advantage to a business.Get more use of your other resources. Especially manpower. Outsourcing some non-corefunctions can give you an opportunity to get your other resources to be of help in some otheressential factors in the business, like focusing on the customer. No need to lose some of yourcustomers due to inadequate service and follow through. When you can free up some of youremployees time, there will be more focus given to the customer.

Reassess functions that cause issues. If your business is in trouble or you want to relinquish amanagement role, outsourcing might not be one of your options. This is one of the things peoplemisunderstand. Not all functions can be passed on to an outside provider. If the function is

considered problematic or out of control, instead of outsourcing it, there might be a need toreevaluate first. Look for the main issue. If you pass duties without being clear aboutexpectations or requirements, outsourcing might not be a solution but an additional problem.

Improve the focus of the organization. When non-core tasks are done by an outside serviceprovider, it gives the company the freedom to focus more on its core needs and functions.

Make use of capital funds. Management sometimes have a difficult time deciding if they shouldeven spend precious capital on non-core needs when theres also a need to invest on corefunctions. Outsourcing helps in reducing the need to cut the capital to spend on non-core needs.

Spend less on operating costs. Businesses that rely on themselves to do research, development,and marketing spend a hefty amount, which they then pass to the customer. Outsourcing helpsthem save on their operating costs.

Lessen risk. When a company tries to keep up with all the new technologies and other factorsthat affect its efficiency, there is always a considerable amount of risk involved. Markets,competition, technologyall these change at a very high speed. Investing is required in keepingup, which then adds to the risk. However, outside providers keep up with the technologyregularly not just for one client but for many so the risk is reduced and is not just focused on onecompany.

Get to resources not found internally. A lot of start-up companies dont have all the neededresources to gain more customers. Outsourcing provides them with the needed resources thatthey do not yet have and have it used in the most efficient way possible.

Research has shown that of the nine main drivers why businesses choose to outsource, the mostpopular one is cost reduction. Lets face it, why spend so much on something you can have doneas, if not more, efficiently in a considerably reasonable price?
http://training.virtualassistant.org/http://www.virtualassistant.org/va-services/http://www.virtualassistant.org/va-services/http://www.eetindia.co.in/ART_8800566164_1800007_NT_f3bcef77.HTMhttp://www.pwc.com/gx/en/cost-reduction/index.jhtmlhttp://www.pwc.com/gx/en/cost-reduction/index.jhtmlhttp://www.pwc.com/gx/en/cost-reduction/index.jhtmlhttp://www.eetindia.co.in/ART_8800566164_1800007_NT_f3bcef77.HTMhttp://www.virtualassistant.org/va-services/http://www.virtualassistant.org/va-services/http://training.virtualassistant.org/


8/14

Facts and figures (secondary Data)


9/14

Outsourcing

Benefits1) Reduction of in house staffing requirements2) Smaller investment in capital equipment

3) More flexibility in meeting changing requirements and adopting new technology

4) More predictable cost structure

Risks1) Too much dependence on vendors

2) High costs associated with vendor fees and profit structure

3) Employment of contractors who dont understand the operation and culture of

healthcare organization

Businesses nowadays often choose to hire or outsource employees from outside offshoringcompanies. The term outsourcing refers to the process of renting employees from othercompanies. The workers can be hired temporarily, or they can be outsourced on a regular basisdepending on the project. During the last ten years, it has become even more common to hirewhole firms or the so-called dedicated teams for receiving the services of offshore workers. Thisbusiness practice can be advantageous to the firm; nevertheless it can be a great disadvantage toothers. Employees outsourcing potentially hides many profits which can be gained by means ofhiring professional workers. The business usually hires highly qualified and professionalemployees when needed and who stop working for the outsourcer at the end of the project. Inthis case the business does not have to spend any extra time and money on upgrading thetechnology and training of the current staff. At the same time the present staff are gradually kepton the sidelines, and may be disposed of in the long run. Often, the present employees becomeless competitive in comparison with the workers offshore and even lose their jobs. The expertsare particularly concerned with the problem and predict that many American gifted young menand women will simply become unemployed because of the extreme popularity of their offshorecompetitors.

One more issue, dealing with pros and cons of outsourcing, is the fact that the companies hiringstaff abroad do not have to pay any kind of federal or state taxes for these employees. Theoutsourcing companies take care of it themselves. This is an essential advantage for thebusinesses, seeking to reduce the operational costs. Also, the outsourced employees do not askfor benefits or compensations. Such cost-reduction plans are great for any company, wanting tosucceed. On the other hand, the tax institutes dont get the taxes they should be getting, whichmeans that certain branches of national welfare will suffer from the loss of resources.


10/14

Taking into account the pros and cons ofoutsourcing, certain states in the USA have alreadydecided to impose restrictions or even put bans on the usage of offshore outsourcing. Whateverthe decision, it should be made wisely, considering all the pros and cons of outsourcing practice.

The Advantages and Disadvantages of Outsourcing

Organizations who are interested in outsourcing are often curious to know more aboutadvantages and disadvantages of offshoring. By gaining insight about both the good and bad ofoutsourcing, organizations can decide if outsourcing is right for them. Most organization jumpheadlong into outsourcing, without actually finding out if outsourcing is good for their business.Before outsourcing, ensure that you are aware about the pros and cons of outsourcing.The advantages and disadvantages of outsourcing can help your organization decide ifoutsourcing is right for your business. The following is a list of the advantages and disadvantagesof outsourcing:

The Advantages of Outsourcing

Outsourcing your non-core activities will give you more time to concentrate on your corebusiness processes

Offshoring can give you access to professional, expert and high-quality services With outsourcing your organization can experience increased efficiency and productivity in

non-core business processes Outsourcing can help you streamline your business operations Offshore outsourcing can help you save on time, effort, manpower, operating costs and training

costs amongst others Outsourcing can make your organization more flexible to change You can experience an increased control of your business with outsourcing Your organization can save on investing in the latest technology, software and infrastructure as

your outsourcing partner would be investing in these Outsourcing can give you assurance that your business processes are being carried out

efficiently, proficiently and within a fast turnaround time Offshoring can help your organization save on capital expenditures By outsourcing, your company can save on management problems as your offshore partner will

be managing the team who does your work By outsourcing, you can cater to the new and challenging demands of your customers Outsourcing can help your organization to free up its cash flow Sharing your business risks is possible with outsourcing Outsourcing can give your business a competitive advantage as you will be able to increase

productivity in all the areas of your business Outsourcing can help your organization to cut is operational costs to more than half

If you want your organization to stay ahead of competition, concentrate on core competenciesand make use of the latest technologies, then outsourcing can help your organization achieve all
http://www.moveyourweb.net/http://www.moveyourweb.net/


11/14

this and more. In outsourcing, the advantages of outsourcing are more than the disadvantages ofoutsourcing. The pros of outsourcing have driven more organization to step into offshoring andexperience the benefits that it has to offer.

The Disadvantages of Outsourcing:-

At times, it is more cost-effective to conduct a particular business process, rather thanoutsourcing it

While outsourcing services such as payroll processing services and tax preparation services,your outsourcing provider will be able to see your companys confidential information and hence there is a threat to security and confidentiality in outsourcing

When you begin to outsource your business processes, you might find it difficult to manage theoffshore provider when compared to managing processes within your organization

Offshoring can create potential redundancies for your organization In case, your offshore service provider becomes bankrupt or goes out of business, your

organization will have to immediately move your business processes in-house or find anotheroutsourcing provider The employees in your organization might not like the idea of you outsourcing your processes

and they might express lack of interest or lack of quality at work Your outsourcing provider might not be only providing services for your organization. Since

your provider might be catering to the needs of several companies, there might be not becomplete devotion to you and your company

By outsourcing, you might forget to cater to the needs of your valuable customers as your focuswill be on the business process that is outsourced

In outsourcing, you may lose your control over the process that is outsourced Outsourcing, though cost-effective, might have hidden costs, such as the legal costs incurred

while signing a contract between companies. You might also have to spend a lot of time andeffort in getting the contract signed With outsourcing, your organization might suffer from a lack of customer focus There can be several disadvantages in outsourcing, such as, renewing contracts,

misunderstanding of the contract, lack of communication, poor quality and delayed servicesamongst others.

The disadvantages of offshoring give organizations an opportunity to think about what they arestepping into. However the disadvantages of outsourcing are less than the advantages of offshoreoutsourcing. When outsourcing, you might not experience any of these disadvantages ofoffshoring, if you find a reliable outsourcing partner. Before outsourcing take the interests of

your customers and employees into consideration and then make an informed decision. If yourorganization is genuinely interested in outsourcing, let not the disadvantages of outsourcing stopyou.


12/14

CONCLUSION

I. As competition is increasing day by day, outsourcing is becoming need of the hour. Toremain competitive a company needs to maintain both quality and low prices andoutsourcing are the best way out to handle this situation. Though in short run, outsourcingseems damaging for people in developed countries but in long run the overall economyimproves and new jobs is also created.

II. Outsourcing is growing into a major opportunity for both global and Indian players.India, with its intrinsic advantages such as low cost, ready pool of English speakingmanpower and geographic positioning is emerging as a viable destination for outsourcingcompanies to set up their businesses. The outsourcing business opportunity is large andIndia is likely to garner a larger and larger piece of this pie in the future.

III. Indian outsourcing services providers meanwhile are gaining from the onslaught ofprojects coming their way, both from international and domestically located customers.In terms of processes too, these providers are "moving up the value chain," so to say.From the tactical and straightforward handling of payroll and benefits, these HR servicesproviders are moving into the more strategic world of BPO. It enablers are helpingmanagers free themselves from the drudgery of routine jobs and work towards takingemployee services to a superior level.

IV. In conclusion, outsourcing jobs has many beneficial implications for the US economy.The more successful US companies are globally the more successful the US economy is.The success of US companies globally is directly linked to whether they implement thepractice of outsourcing jobs. Accordingly it is paramount the US does not prohibit ordiscourage the practice of outsourcing jobs.


13/14

Ex -Outsourcing jobs benefits HP and IBM:-

Hewlett Packard and IBM obtain 50% of their revenues from markets outside of the USA. ThatHP and IBM are outsourcing jobs is undoubtedly justified when this enables them to increasetheir revenues from markets outside of the USA. If HP and IBM stopped outsourcing jobs theywould be out-competed in foreign markets whilst also potentially risk losing the US market

Not Outsourcing jobs could also threat the US domestic market:Indian companies or other foreign companies outsourcing jobs could also be a threat to UScompanies in the US domestic market. If by not outsourcing jobs, American companies can beout-competed in foreign markets then the same can hold true in the American market.By not outsourcing jobs, American companies not only potentially lose foreign markets but alsorisk losing the US domestic market

Outsourcing jobs reduces cost:

By outsourcing jobs US companies are able to reduce costs for the US consumer. $50 or $200 forthe same software you decide?

So its quite normal to say outsourcing is necessary.

Outsourcing


14/14

Since its evolution, India's outsourcing industry has been facing many challenges andrestrictions, which affects the growth of BPO companies and their employees. In order to meetinternational quality standards, it is exhibiting new business models from time to time as well asspending more efforts and funds in training of its employees. The Indian BPO industry is well-aware that consistency is also important along with customer satisfaction, as it cannot take fullbenefits of the potentials only with advantages like lower costs and multi-lingual capabilities.Further, it can add value to its customers by proactively acquiring domain knowledge of itsclient's business. Thus, the need of the hour is to take some useful steps for sound and healthy

development of BPOs/ KPOs in India.Several steps have been taken by the Government, both at the Central and State level, towardsbetter management of outsourcing activities in economy and to keep India's position stable ashub of outsourcing on the global platform. Given this, some of the suggestions can be listed asfollows:

Develop the talent base by generating/ encouraging enough opportunities for technicalknowledge.

Design appropriate training programmes for BPO employees. Provide broad and essential hands-on experience. Improve choices and processes used by companies and make outsourcing easier by

getting more and more organizations moving to the outsourced model. Follow proper code of ethics and procedures in recruitment of employees. Ensure proper control and quality management systems. Enactment of appropriate social security laws. Incorporate best practices on health and safety hazards. Develop sound work environment with proper safety of women at workplace.

Follow better healthcare policy which involves regular health-checkup of employees and thisfeature should be made compulsory.

Develop time management and other strategies so as to encourage healthy lifestyle habits of BPO

employees, like, having proper sleep, preventing fatigue and stress, etc.

Moreover, along with customer care and support services, other service lines should also beconsidered in broad manner, such as, of finance, human resource, legal procedure, contentdevelopment, etc. Most importantly, there should be joint efforts by both public and privatesectors to keep sustainable India's advantages in outsourcing industry and explore all untappedareas. Increased innovation and technology adoption should be the guiding force.

outsourcing by prashant priyadarshi

Documents