The business process outsourcing industry in India refers to the Services Outsourcing Industry in India catering to mainly Western operations of MNCs (Multinational Corporations).
The sector witnessed considerable activity during 2004-05, including a ramping up of operations by major Indian and MNC players and stepped up hiring. The domestic BPO market, catalyzed by demand from the telecommunications and BFSI segments, matched the growth of BPO exports. The market experienced maturity and consolidation, a result of numerous mergers and acquisitions taking place within the sector. There were over 400 companies operating within the Indian BPO space, including captive units (of both MNCs and Indian companies) and third-party services providers. The key enabler for this has been cheaper bandwidth leading to low telecom costs for leased lines and availability of educated English speaking workforce in India.
The Indian BPO industry remains on a growth path, emerging as one of the key investment markets in the country.
It is also referred to as Information Technology Enabled Services or ITES, and high end work with specialisation is referred to as Knowledge Process Outsourcing or KPO. There are other variants in use such as Legal Process Outsourcing (LPO).
NASSCOM is a chamber of commerce that represents this body and lobbies for it, as well as creates a platform for members to take up common issues. NASSCOM services both the Indian Software and the Indian BPO industry.
Contents
[hide]
* 1 History
o 1.1 Airlines
o 1.2 Amex
o 1.3 General Electric
o 1.4 Third party BPO's
o 1.5 Entry of IT majors
* 2 Size of Industry
* 3 From a PricewaterhouseCoopers survey
* 4 Leading BPO-ITes Cities in India
* 5 Leading BPO Organisations in India
o 5.1 Third Party
o 5.2 Captive
* 6 Companies Outsourcing to India
* 7 References
* 8 See also
* 9 Further reading
* 10 External links
[edit] History
[edit] Airlines
In the early 1980s several European airlines started using Delhi as a base for back office operations, British Airways being one among them. The BA captive was finally spun off as a separate organisation called WNS in the current millennium.
[edit] Amex
In the second half of the 1980s American Express consolidated its JAPAC (Japan and Asia Pacific) back office operations into New Delhi. This center was headed by Raman Roy, and has been a source of several leading names in the Indian BPO Industry.
[edit] General Electric
In the 1990s Jack Welch was influenced by K.P. Singh, (A Delhi based realtor) to look at Gurgaon in the NCR region as a base for back office operations. Pramod Bhasin, the India head of G.E hired Raman Roy and several of his management from American Express to start this enterprise called GECIS (GE Capital International Services). Raman for the first time tried out voice operations out of India, the India operations also was the Beta site for GE Six sigma enterprise. The results made GE ramp up their Indian presence and look at other locations. In 2004 GECIS was spun off as a separate legal entity by GE, called Genpact. GE has retained a 40% stake and sold a 60% stake for $500 million to two equity companies, Oak Hill Capital Partners and General Atlantic Partners.
[edit] Third party BPO's
Till G.E most of the work was being done by "captives"- a term used for in house work being done for the parent organisation. In 2000 Raman Roy and some team members from GECIS quit , and with VC funding from Chrysalis Capital started Spectramind. At the same time an organisation called EXL started in Noida and Efunds started in Mumbai and Gurgaon, and Daksh in Gurgaon. However, recently most of the Indian BPO's even smaller and mid-sized ones are actually setting-up their onshore presence. Most of the serious players are actually improving the outsourced business processes by leveraging on years of experience and now some of them are directly competing with their own older clientbase by marking this transition to KPO 's.
[edit] Entry of IT majors
In 2002 Spectramind was bought by software major Wipro, and BPO by then had become mainstream like the IT Industry in India. By 2002 all major Indian software organizations were into BPO, including Infosys (Progeon), HCL, Satyam( Nipuna)and Patni. By 2003 Daksh was bought out by IBM and later in 2006 Mphasis by EDS. Even international 3rd party BPO players like Convergys and Sitel had set up shop in India, swelling the BPO movement to India. Then service arms of organizations like Accenture, IBM, Hewlett Packard, Dell too set up captives in India.
[edit] Size of Industry
The Industry as been growing at a rapid clip. It grew at a rate of 38% over 2005. For the FY06 financial year the projections is of US$7.2 billion worth of services provided by this industry. The base in terms of headcount being roughly 400,000 people directly employed in this Industry. The global BPO Industry is estimated to be worth 120-150 billion dollars, of this the offshore BPO is estimated to be some US$11.4 billion. India thus has some 5-6% share of the total Industry, but a commanding 63% share of the offshore component. The U.S $7.2 billion also represents some 20% of the IT and BPO Industry which is in total expected to have revenues worth US$36 billion for 2006. The headcount at 400,000 is some 40% of the approximate one million workers estimated to be directly employes in the IT and BPO Sector.
The related Industry dependent on this are Catering, BPO training and recruitment, transport vendors, (home pick up and drops for night shifts being the norm in the industry). Security agencies, Facilities management companies.
[edit] From a PricewaterhouseCoopers survey
An Indian call center
An Indian call center
Table 1: Global BPO Market by Industry[1] Industry Percetage (%)
Information Technology 43
Financial Services 17
Communication (Telecom) 16
Consumer Goods/ Services 15
Manufacturing 9
Table 2: Global BPO Market by Geography[1] Country Percentage (%)
United States 59
Europe 27
Asia-Pacific (incl. Japan) 9
Rest of the World 5
Table 3: Size of Global Outsourcing Market[1] Year Size (USD Bn)
2000 119
2005 234
2008 (est.) 310
Table 4: Size and Growth of BPO in India[1] Year Size (US$ Bn) Growth Rate (%)
2003 2.8 59
2004 3.9 45.3
2005 5.7 44.4
Currently the Indian BPO Industry employs in excess of 245,100 people and another 94,500 jobs are expected to be added during the current financial year (2005-2006)
Table 5: Call Center Employee cost[1] Country Cost (USD/yr)
USA 19,000
Australia 17,000
Philippines 9,050
India 7,500
Nearly 75% of US and European multinational companies now use outsourcing or shared services to support their financial functions. 72% of European multinational companies have outsourced financial functions over the past two years.
Additionally, 71% of European companies and 78% US companies plan to use these services in the next 12-24 months. Overall, 29% of US and European companies expect to increase their use of outsourcing of financial functions, with spending expected to be nearly 16% higher than current levels.
Growth in this sector will get a further impetus as Indian BPO companies have robust security practices and emphasis is laid in developing trust with clients on this score. While earlier there were varying quality standards on this aspect, today there is focus on standardization of security, such as data and IP security.
[edit] Leading BPO-ITes Cities in India
* Bangalore - IBM, Dell, AOL, EDS, Wipro, Genpact, Hewlett Packard,Infosys BPO, Fidelity, Convergys
* Chennai - Hewlett Packard,Citibank, Standard Chartered, Sutherland,
* Hyderabad - UBS, Dell, Genpact, Nipuna
* Kolkata - Wipro, Genpact
* NCR (Gurgaon,New Delhi NOIDA, Faridabad, Greater Noida) - American Express, Genpact, IBM, Wipro,HCL, Convergys, Dell, Fidelity, United Health, Hewitt Associates ,
* Pune - Infosys BPO, EDS, Wipro
* Mumbai - Wipro, TCS, Hutch 3G, Deutsche Bank, J.P Morgan, Morgan Stanley, Countrywide, Hewitt Associates, Accenture.
These are Tier I cities that are leading IT cities in India
With rising infrastructure costs in these cities, many BPO's are shifting operations to Tier II cities like Ahmedabad, Bhubaneshwar, Chandigarh, Jaipur, Kochi, Mangalore, Mysore, Nagpur and Vishakapatnam.
Tier II cities offer lower business process overhead compared to Tier I cities, but may have a less reliable infrastructure system which may hamper dedicated operations. The Government of India in partnership with private infrastructure corporations is working on bringing all around development and providing robust infrastructure all over the nation.
Wednesday, April 11, 2007
Business process outsourcing
Business Process Outsourcing (BPO) is the contracting of a specific business task, such as payroll, to a third-party service provider. Usually, BPO is implemented as a cost-saving measure for tasks that a company requires but does not depend upon to maintain its position in the marketplace. BPO is often divided into two categories: back office outsourcing, which includes internal business functions such as billing or purchasing, and front office outsourcing, which includes customer-related services such as marketing or tech support.
BPO that is contracted outside a company's own country is sometimes called offshore outsourcing. BPO that is contracted to a company's neighboring country is sometimes called nearshore outsourcing, and BPO that is contracted within the company's own country is sometimes called onshore outsourcing [1]
The most common examples of BPO are call centers, human resources, accounting and payroll outsourcing.
Use of a BPO as opposed to an application service provider (ASP) usually also means that a certain amount of risk is transferred to the company that is running the process elements on behalf of the outsourcer. BPO includes the software, the process management, and the people to operate the service, while a typical ASP model includes only the provision of access to functionalities and features provided or 'served up' through the use of software, usually via web browser to the customer. BPO is a part of the Outsourcing Industry. It is dependent on Information Technology, hence it is also referred to as Information Technology Enabled Services or ITES. Knowledge Process Outsourcing, or Legal Process Outsourcing are some of the sub sets of Business Process Outsourcing.
[edit] Industry Size
The global BPO Industry is estimated to be worth 120- 150 billion dollars.[citation needed] Of this the offshore BPO is estimated to be some US$11.4 Billion.[citation needed] India has revenues of 6.4 Billion USD [2] from offshore BPO and 36 [[3]] Billion USD from IT and total BPO.
India thus has some 5-6 % share of the total BPO Industry, but a commanding 63% share of the offshore component. This 63% is a drop from the 70% offshore share that India enjoyed last year, despite the industry growing 38% in India last year, other locations like South Africa, Philippines and Eastern Europe have emerged to take a share of the market. China too is trying to grow from a very small base in this industry, though the industry is expected to continue to grow in India. Its market share of the offshore piece is expected to reduce.
[edit] See also
* Outsourcing
* Offshoring
* Nearshoring
* Recruitment
* Business process outsourcing in South Africa
* Business process outsourcing in India
* BPO security
* Business process outsourcing in the Philippines
* Homeshoring
* Bangalored
BPO that is contracted outside a company's own country is sometimes called offshore outsourcing. BPO that is contracted to a company's neighboring country is sometimes called nearshore outsourcing, and BPO that is contracted within the company's own country is sometimes called onshore outsourcing [1]
The most common examples of BPO are call centers, human resources, accounting and payroll outsourcing.
Use of a BPO as opposed to an application service provider (ASP) usually also means that a certain amount of risk is transferred to the company that is running the process elements on behalf of the outsourcer. BPO includes the software, the process management, and the people to operate the service, while a typical ASP model includes only the provision of access to functionalities and features provided or 'served up' through the use of software, usually via web browser to the customer. BPO is a part of the Outsourcing Industry. It is dependent on Information Technology, hence it is also referred to as Information Technology Enabled Services or ITES. Knowledge Process Outsourcing, or Legal Process Outsourcing are some of the sub sets of Business Process Outsourcing.
[edit] Industry Size
The global BPO Industry is estimated to be worth 120- 150 billion dollars.[citation needed] Of this the offshore BPO is estimated to be some US$11.4 Billion.[citation needed] India has revenues of 6.4 Billion USD [2] from offshore BPO and 36 [[3]] Billion USD from IT and total BPO.
India thus has some 5-6 % share of the total BPO Industry, but a commanding 63% share of the offshore component. This 63% is a drop from the 70% offshore share that India enjoyed last year, despite the industry growing 38% in India last year, other locations like South Africa, Philippines and Eastern Europe have emerged to take a share of the market. China too is trying to grow from a very small base in this industry, though the industry is expected to continue to grow in India. Its market share of the offshore piece is expected to reduce.
[edit] See also
* Outsourcing
* Offshoring
* Nearshoring
* Recruitment
* Business process outsourcing in South Africa
* Business process outsourcing in India
* BPO security
* Business process outsourcing in the Philippines
* Homeshoring
* Bangalored
Information technology consulting
Information technology consulting (IT consulting or business and technology services) is a field that focuses on advising businesses on how best to use information technology to meet their business objectives. In addition to providing advice, IT consultancies often implement, deploy, and administer IT systems on businesses' behalf.
The IT consulting industry can be viewed as a three-tier system:
* Professional services firms which maintain large professional workforces and command high bill rates. These firms are increasingly sourcing their employees from low-cost nations.
* Staffing firms, which place technologists in businesses on a temporary basis. These firms are pejoratively known as "body shops". While they are geographically limited by their customers, they can exploit global cost differences by bringing guest workers to their host country. Body Shops are typically distinguished from Consultancies by their commercial practice of pricing service by the day (the input), rather than by the results of their work (the outputs, or deliverables).
* Independent consultants, who function as contractors (on "1099"), employees of staffing firms (employed on "W-2"), or as subcontractors in their own right.
Contents
[hide]
* 1 List of IT consulting firms
o 1.1 Asia
o 1.2 Europe
o 1.3 North America
o 1.4 Defunct but notable
* 2 See also
There is a relatively unclear line between management consulting and IT consulting. There are sometimes overlaps between the two fields, but IT consultants often have degrees in computer science, electronics, technology or management of information systems while management consultants often have degrees in accounting, economics, finance or a generalized MBA (Masters in Business Administration).
[edit] List of IT consulting firms
The following is a list of the largest IT consulting firms in the world by number of consultants. Many of these serve primarily as third-party consultants. Many enterprise software companies, such as SAP and Oracle, employ their own consultants for services related to their own products. Among the corporations listed below, the number of consultants may not be equal to their number of employees; it indicates the total workforce.
[edit] Asia
* HCL Technologies, Noida, India
* Infosys (Bangalore, India)
* Satyam Computer Services Ltd., India
* Tata Consultancy Services (Mumbai, India)
* Wipro Technologies, Bangalore, India
[edit] Europe
* Atos Origin (Hoofddorp, Netherlands) (45,000)
* Capgemini (Paris, France) (60,000)
* Detecon (Bonn, Germany) ()
* Getronics (Amsterdam, Netherlands) (28,000)
* Indra (Madrid, Spain) (20,000)
* LogicaCMG (London, UK) (30,000)
* TietoEnator (Espoo, Finland) (15,000)
[edit] North America
* Accenture (Hamilton, Bermuda) (140,000)
* Affiliated Computer Services (Dallas, TX) (40,000)
* BearingPoint (McLean, VA) (16,000)
* Booz Allen Hamilton (McLean, VA) (18,000)
* CGI Group (Montreal, Canada) (25,000)
* Cognizant Technology Solutions (Teaneck, NJ) (30,000)
* Computer Sciences Corporation (El Segundo, CA) (79,000)
* Deloitte Consulting LLP (New York, NY) (135,000)
* Electronic Data Systems (Plano, TX) (132,000)
* Fujitsu Consulting (DMR, Rapidigm,Greenbrier & Russel], (Edison, NJ) (11,000)
* HP Technology Solutions (Palo Alto, CA) (65,000)
* IBM Global Services (Somers, NY) (190,000)
* Keane Inc (Boston, MA) (10,000)
* Sapient (company) (Cambridge,United States, 5000+)
* Science Applications International Corporation (San Diego, CA) (43,000)
* Titan Corporation (San Diego, CA) (12,000)
* Unisys (Blue Bell, PA) (37,000)
[edit] Defunct but notable
* Arthur Andersen Business Consulting
* MarchFirst
The IT consulting industry can be viewed as a three-tier system:
* Professional services firms which maintain large professional workforces and command high bill rates. These firms are increasingly sourcing their employees from low-cost nations.
* Staffing firms, which place technologists in businesses on a temporary basis. These firms are pejoratively known as "body shops". While they are geographically limited by their customers, they can exploit global cost differences by bringing guest workers to their host country. Body Shops are typically distinguished from Consultancies by their commercial practice of pricing service by the day (the input), rather than by the results of their work (the outputs, or deliverables).
* Independent consultants, who function as contractors (on "1099"), employees of staffing firms (employed on "W-2"), or as subcontractors in their own right.
Contents
[hide]
* 1 List of IT consulting firms
o 1.1 Asia
o 1.2 Europe
o 1.3 North America
o 1.4 Defunct but notable
* 2 See also
There is a relatively unclear line between management consulting and IT consulting. There are sometimes overlaps between the two fields, but IT consultants often have degrees in computer science, electronics, technology or management of information systems while management consultants often have degrees in accounting, economics, finance or a generalized MBA (Masters in Business Administration).
[edit] List of IT consulting firms
The following is a list of the largest IT consulting firms in the world by number of consultants. Many of these serve primarily as third-party consultants. Many enterprise software companies, such as SAP and Oracle, employ their own consultants for services related to their own products. Among the corporations listed below, the number of consultants may not be equal to their number of employees; it indicates the total workforce.
[edit] Asia
* HCL Technologies, Noida, India
* Infosys (Bangalore, India)
* Satyam Computer Services Ltd., India
* Tata Consultancy Services (Mumbai, India)
* Wipro Technologies, Bangalore, India
[edit] Europe
* Atos Origin (Hoofddorp, Netherlands) (45,000)
* Capgemini (Paris, France) (60,000)
* Detecon (Bonn, Germany) ()
* Getronics (Amsterdam, Netherlands) (28,000)
* Indra (Madrid, Spain) (20,000)
* LogicaCMG (London, UK) (30,000)
* TietoEnator (Espoo, Finland) (15,000)
[edit] North America
* Accenture (Hamilton, Bermuda) (140,000)
* Affiliated Computer Services (Dallas, TX) (40,000)
* BearingPoint (McLean, VA) (16,000)
* Booz Allen Hamilton (McLean, VA) (18,000)
* CGI Group (Montreal, Canada) (25,000)
* Cognizant Technology Solutions (Teaneck, NJ) (30,000)
* Computer Sciences Corporation (El Segundo, CA) (79,000)
* Deloitte Consulting LLP (New York, NY) (135,000)
* Electronic Data Systems (Plano, TX) (132,000)
* Fujitsu Consulting (DMR, Rapidigm,Greenbrier & Russel], (Edison, NJ) (11,000)
* HP Technology Solutions (Palo Alto, CA) (65,000)
* IBM Global Services (Somers, NY) (190,000)
* Keane Inc (Boston, MA) (10,000)
* Sapient (company) (Cambridge,United States, 5000+)
* Science Applications International Corporation (San Diego, CA) (43,000)
* Titan Corporation (San Diego, CA) (12,000)
* Unisys (Blue Bell, PA) (37,000)
[edit] Defunct but notable
* Arthur Andersen Business Consulting
* MarchFirst
Offshore programming
Offshore programming (also offshore software development, offshore software R&D) is provision of software development services by an external supplier positioned in a country that is geographically remote from the client enterprise; a type of offshore outsourcing. The main reason behind the companies to use offshore software development services is the higher development cost of the local service providers. The global software R&D services market as contrasted to ITO and BPO is rather young and currently is at early stages of its development.
Contents
[hide]
* 1 Countries involved
* 2 India
o 2.1 Tier 2
o 2.2 Tier 3
* 3 References
* 4 See also
[edit] Countries involved
India, China, and Russia are the three leading countries that currently control the offshore programming market. According to Gartner Group [1], only these three countries are capable of scaling up enough to meet the demands of large-scale projects. Other offshore software development destinations include Philippines, Israel, Republic of Ireland, Eastern Europe (Ukraine, Belarus[citation needed], Czech Republic, Poland, Hungary), Egypt.
[edit] India
In India, offshore software development can be performed in all major cities and regions of the country. The cities are categorized into Tier 1, Tier 2 and Tier 3 based on numerous factors as mentioned below:
[edit] Tier 2
[edit] Tier 3
Cities in India catering to software development Tier Cities
Tier 1 Bangalore, Mumbai
Tier 1-1 Hyderabad, Chennai, Pune, NOIDA, Gurgaon, Navi Mumbai
Tier 2 Kolkata, Mangalore, Mohali/Chandigarh, Bhopal
Tier 3 Coimbatore, Mysore, Nasik, Kochin, Nagpur, Indore, Jaipur, Kanpur, Patna
Contents
[hide]
* 1 Countries involved
* 2 India
o 2.1 Tier 2
o 2.2 Tier 3
* 3 References
* 4 See also
[edit] Countries involved
India, China, and Russia are the three leading countries that currently control the offshore programming market. According to Gartner Group [1], only these three countries are capable of scaling up enough to meet the demands of large-scale projects. Other offshore software development destinations include Philippines, Israel, Republic of Ireland, Eastern Europe (Ukraine, Belarus[citation needed], Czech Republic, Poland, Hungary), Egypt.
[edit] India
In India, offshore software development can be performed in all major cities and regions of the country. The cities are categorized into Tier 1, Tier 2 and Tier 3 based on numerous factors as mentioned below:
[edit] Tier 2
[edit] Tier 3
Cities in India catering to software development Tier Cities
Tier 1 Bangalore, Mumbai
Tier 1-1 Hyderabad, Chennai, Pune, NOIDA, Gurgaon, Navi Mumbai
Tier 2 Kolkata, Mangalore, Mohali/Chandigarh, Bhopal
Tier 3 Coimbatore, Mysore, Nasik, Kochin, Nagpur, Indore, Jaipur, Kanpur, Patna
Outsourcing
Outsourcing entered the business world in the 1980s and often refers to the delegation of non-core operations from internal production to an external entity specializing in the management of that operation. The decision to outsource is often made in the interest of lowering firm costs, redirecting or conserving energy directed at the competencies of a particular business, or to make more efficient use of worldwide labor, capital, technology and resources. Though often used interchangeably, outsourcing differs from offshoring in that outsourcing is relative to the restructuring of the firm while offshoring is relative to the nation (see below), though the two are not mutually exclusive, especially under conditions of globalization. Fundamentally and historically, outsourcing is a term relative to the organization of labor within and between societies.
Contents
[hide]
* 1 Overview
o 1.1 Outsourcing and Offshoring: Compare and Contrast
* 2 Benefits of outsourcing
* 3 Criticisms of outsourcing
o 3.1 Quality of service
o 3.2 Work, labor, and economy
o 3.3 Security
* 4 Responses to criticism
o 4.1 Insourcing
o 4.2 Work, labor and economy
o 4.3 Quality of service
* 5 See also
* 6 References
* 7 Further reading
* 8 External links
[edit] Overview
"Outsourcing" involves transferring or sharing management control and/or decision-making of a business function to an outside supplier, which involves a degree of two-way information exchange, coordination and trust between the outsourcer and its client. Such a relationship between economic entities is qualitatively different from traditional relationships between buyer and seller of services in that the involved economic entities in an "outsourcing" relationship dynamically integrate and share management control of the labor process rather than enter in contracting relationships where both entities remain separate in the coordination of the production of goods and services. Business segments typically outsourced include information technology, human resources, facilities and real estate management, and accounting. Many companies also outsource customer support and call center functions, manufacturing and engineering. Consequently, a debate has ensued concerning the benefits and costs of the practice as well as how to categorize it as a phenomenon.
[edit] Outsourcing and Offshoring: Compare and Contrast
Note that “outsourcing,” “offshore outsourcing,” and “offshoring” are used interchangeably in public discourse despite important technical differences. To be consistent, “outsourcing,” in a corporate context, represents an organizational practice that involves the transfer of an organizational function to a third party.[1] When this third party is located in another country the term “offshore outsourcing” makes more sense. “Offshoring,” in contrast, represents the transfer of an organizational function to another country, regardless of whether the work stays in the corporation or not.[2] In short, “outsourcing” means sharing organizational control with another organization, or a process of establishing network relations within an organizational field. "Offshoring,” on the other hand, represents a relocation of an organizational function to a foreign country, not necessarily a transformation of internal organizational control.
[edit] Benefits of outsourcing
It is apparent that many organizations today are making the decision to outsource. In today’s global marketplace outsourcing has made itself accessible to many organizations on a national and international level. Offshore outsourcing has provided many businesses with the opportunity to harvest the benefits of lower labor costs in developing countries with few workers rights laws and to exploit the value of artificially manipulated foreign currencies, where the exchange rate is intentionally undervalued. Through outsourcing, companies today have the ability to develop competitive strategies that will leverage their financial positions in the ever competitive global marketplace. Outsourcing is also successful in increasing product quality and/or substantially lowering firm and consumer costs (e.g., increases the quality to cost ratio). Because outsourcing allows for lower costs, even if quality reduces slightly, which is sometimes the case, productivity increases, which benefits the economy in aggregate. Outsourcing can also present advantages to less developed, typically non-Western states. "Developing" countries, such as China, Philippines, and India, but also countries of Eastern Europe, benefit from the patronage of companies that outsource to them - in terms of increased wages, job prestige, education, and quality of life.
Some of the major advantages that today’s organizations can expect to obtain through outsourcing include the ability to purchase intellectual capital, to focus on core competencies, to better anticipate future costs, to lower costs. Overall outsourcing is viewed by many organizations as a strong business tactic that ultimately is a superior economical approach to developing products and services.
[edit] Criticisms of outsourcing
[edit] Quality of service
Criticisms of outsourcing from both management and consumers often focus on a central question: is the performance or quality of the outsourced service, or new organization of labor, on par with the expected standards of management and consumers - i.e. how does outsourcing a service affect its quality as opposed to "in-house" work (see [1], [2] and [3]for example)? Such judgments are reserved to prevailing cultural values that define what is and is not good service.
[edit] Work, labor, and economy
Outsourcing became a popular political issue during the 2004 U.S. presidential election. The political debate centered on Outsourcing's consequences for the domestic workforce. Democratic U.S. presidential candidate John Kerry criticized firms that outsource jobs abroad or that incorporate overseas in tax havens to avoid paying their fair share of U.S. taxes during his 2004 campaign, calling such firms "Benedict Arnold corporations". Criticism of outsourcing, from the perspective of U.S. citizens, by-and-large, revolves around the costs associated with transferring control of the labor process to an external entity in another country. A Zogby International poll reports that 71% of American voters believe that “outsourcing jobs overseas” hurts the economy and another 62% believe that the U.S. government should impose some legislative action against companies that transfer domestic jobs overseas, possibly in the form of increased taxes on companies that outsource. The poll of over 1,000 Americans was conducted in August 2004.[3]
Outsourcing appears to threaten the livelihood of domestic workforce and, in the United States, the American Dream. This is especially true for high-tech workers who were promised the “jobs of tomorrow”- a phrase Bill Clinton iterated in 1994 to justify his conservative position on the North American Free Trade Agreement (NAFTA). Outsourcing appears to work contrary to the claim that “free trade” will create the “jobs of tomorrow” in America when high-tech or high paying white-collar jobs are transferred to or created in foreign countries. Thus, outsourcing may be representative of a specific historical moment where the United States government fails to mediate business-labor relations in a way conducive to prevailing values that places the American middle class worker as a central priority. At a more general level it represents a new threat to labor, contributing to rampant worker insecurity, and reflective of the general process of Globalization culminating in Western societies as a whole (see Krugman, Paul (2006). "Feeling No Pain." New York Times, March 6, 2006).
Policy solutions to outsourcing are also criticized. One solution is retraining of domestic workers to new jobs in the form of the Trade Adjustment Assistance Act [4]. However, these policy recommendations do not adequately aid all displaced workers and do not provide security to this "flexible" labor market.
[edit] Security
There are also some security issues concerning companies giving outside access to sensitive customer information. In April of 2005, a high-profile case involving the theft of $350,000 from four Citibank customers occurred when Indian call centre workers in Pune, India, acquired the passwords to customer accounts and transferred the money to their own accounts opened under fictitious names. Citibank did not find out about the problem until the American customers noticed discrepancies with their accounts and notified the bank.[4]
An Outsourced project like US Payroll, where the Social Security Number of an US employee can be one of the vital factor which can be used for fraudulent activities. Hence it's very essential for a company to keep all the data intact, and ensure that no leakage of data is done. This will ensure total security and can avoid such cases of fraudulent activities
[edit] Responses to criticism
[edit] Insourcing
Outsourcing, as the term is typically used in economics, is not necessarily a job destroyer but rather a process of job relocation and may not impact the net number of jobs in a nation or in the global economy. Contrary to the critics, rampant unemployment is not occurring, in the United States. Logically, "outsourcing" cannot occur without a recipient that "insources" and, according to economists, "outsourcing" means an export in services which renders "insourcing" an import. Hence, economists insist on viewing the outsorucing/insourcing debate as a debate on trade, adequately analyzed with trade theory and recorded through official national data. For example, Mary Amiti and Shang-Jin Wei claim more jobs are insourced, or imported, than outsourced, or exported, in the United States and the United Kingdom, as well as other industrialized nations. They report that the U.S. and the UK actually have the largest net trade surpluses in business services. However, some other countries, such as Indonesia, Germany and Ireland have a net deficit in business services.[5] Similar reports state that "while [the U.S. is] exporting some jobs to other countries, the greatest beneficiary of outsourcing is the U.S. itself."[6].
[edit] Work, labor and economy
International outsourcing is a form of trade. As such, mainstream economists argue that the basic principles of comparative advantage and the gains from trade apply. The 'threat' to overall employment or the economy is thus no more valid than the so-called 'threats' from imports or migration.
Economist Thomas Sowell from the University of Chicago said “anything that increases economic efficiency--whether by outsourcing or a hundred other things--is likely to cost somebody's job. The automobile cost the jobs of people who took care of horses or made saddles, carriages, and horseshoes.”[7] Walter Williams, another economist, said “we could probably think of hundreds of jobs that either don't exist or exist in far fewer numbers than in the past--jobs such as lift operator, TV repairman, and coal deliveryman. ‘Creative destruction’ is a discovery process where we find ways to produce goods and services more cheaply. That in turn makes us all richer.”[8] Nationally, 70,000 computer programmers lost their jobs between 1999 and 2003, but more than 115,000 computer software engineers found higher-paying jobs during that same period.[9]
Most economists do not view outsourcing as a threat to the economy[5]. Food malls (and even malls in general), for example, may cease to exist were it not for outsourcing. Capitalist trading often involves interactions among different people, which means often tasks and services are delegated to others. Lack of outsourcing may see deficiencies in specialization and division of labor, important elements in the law of comparative advantage, which is seen by many as the basis for why capitalist free-markets are successful in generating economic growth.
[edit] Quality of service
This article or section reads like a personal reflection or essay and may require cleanup.
Please improve this article by rewriting this article or section in an encyclopedic style. (documentation, talk)
One criticism of outsourcing is that product quality suffers. But the organization outsourcing a business process has the freedom to resume management control and/or decision making for that business process if quality is adversely affected. In fact, many American companies return previously outsourced functions "in-house" as a result of poor quality. The decision to outsource is like any other business investment decision in that there is risk. Critics of outsourcing often talk about outsourcing failures without mentioning instances of outsourcing success.[citation needed] The decision to outsource is like the decision to expand a business overseas, to incorporate computer technology, or to hire new workers. If the company does it correctly, it benefits from higher profits. Proponents of outsourcing believe that arguing that outsourcing leads to lower product quality is pointless because if it were true, consumer demand will force firms to shift back to producing the good or service in-firm rather than out-firm.
The ability to influence the quality of outsourced production depends on the relationship of power between consumers and producers. If producers have market power, e.g. if they are a monopoly they can reduce the quality of their good without suffering a major drop in sales. For example, many individuals do not make their own food. Instead, they outsource the task to restaurants and fast-food firms like McDonald's or Hungry Jacks. Suppose McDonald's and Hungry Jacks are the only fast-food firms. McDonald's competes with Hungry Jacks to win consumers in the fast-food market. However, if Hungry Jacks goes out of business, McDonald's is a monopoly and can reduce the quality of its food (e.g. to reduce costs) without suffering as high a drop in revenue because consumers now cannot switch to Hungry Jacks. Institutions are set up to promote competition. E.g. in Australia the ACCC (Australia Competition and Consumer Commission) regulates businesses to prevent abuse of market power and to promote competition. In the United States the FTC (Federal Trade Commission) takes on this role.
Sometimes poor quality goods and services must be accepted by consumers because accountability systems regarding consumer or user feedback are limited. In order to increase quality or maintain a high level of quality, many offshore outsource firms also employ quality management models, such as Taylor, Lean, and Six Sigma. Differing firms have varying levels of implementation success.
[edit] See also
* Application Management Outsourcing
* Business process outsourcing
* Business process outsourcing in India
* Business process outsourcing in the Philippines
* Comparative advantage
* Compromise agreements
* Co-sourcing
* Crowdsourcing
* Farmshoring
* Freelancing on the Internet
* Homeshoring
* India Outsourcing
* Information technology consulting
* Insourcing
* Knowledge process outsourcing (KPO)
* Legal Process Outsourcing (LPO)/ Legal outsourcing
* List of management topics
* List of outsourcing companies
* Lou Dobbs (CNN editor) - self-proclaimed crusader against outsourcing
* Nearshoring
* Offshore Product Development
* Offshore software development
* Offshoring
* Offshoring IT Services
* Open Outsourcing
* Portable Employer of Record
* Supply chain
* Supply Chain Management
* Vertical integration
* Wal-Mart
[edit] References
1. ^ NAPA 2006: 38 (pdf)
2. ^ NAPA 2006: 38 (pdf)
3. ^ Zogby International survey results online at zogby.com
4. ^ http://www.infoworld.com/article/05/04/07/HNcitibankfraud_1.html
5. ^ Amiti, Mary & Wei, Shang-Jin (2004). Feat of Service Outsourcing: Is it Justified?, WP/04/186, International Monetary Fund; Amiti, Mary & Wei, Shang-Jin (2004) Demystifying Outsourcing. Finance and Development.
6. ^ Walter Wriston, economist. Wall Street Journal. March 24, 2004
7. ^ “Outsourcing” and “Saving Jobs” by Thomas Sowell
8. ^ Should we “Save Jobs”? by Walter Williams
9. ^ "The Outsourcing Bogeyman" (Foreign Affairs, May/June 2004)
Contents
[hide]
* 1 Overview
o 1.1 Outsourcing and Offshoring: Compare and Contrast
* 2 Benefits of outsourcing
* 3 Criticisms of outsourcing
o 3.1 Quality of service
o 3.2 Work, labor, and economy
o 3.3 Security
* 4 Responses to criticism
o 4.1 Insourcing
o 4.2 Work, labor and economy
o 4.3 Quality of service
* 5 See also
* 6 References
* 7 Further reading
* 8 External links
[edit] Overview
"Outsourcing" involves transferring or sharing management control and/or decision-making of a business function to an outside supplier, which involves a degree of two-way information exchange, coordination and trust between the outsourcer and its client. Such a relationship between economic entities is qualitatively different from traditional relationships between buyer and seller of services in that the involved economic entities in an "outsourcing" relationship dynamically integrate and share management control of the labor process rather than enter in contracting relationships where both entities remain separate in the coordination of the production of goods and services. Business segments typically outsourced include information technology, human resources, facilities and real estate management, and accounting. Many companies also outsource customer support and call center functions, manufacturing and engineering. Consequently, a debate has ensued concerning the benefits and costs of the practice as well as how to categorize it as a phenomenon.
[edit] Outsourcing and Offshoring: Compare and Contrast
Note that “outsourcing,” “offshore outsourcing,” and “offshoring” are used interchangeably in public discourse despite important technical differences. To be consistent, “outsourcing,” in a corporate context, represents an organizational practice that involves the transfer of an organizational function to a third party.[1] When this third party is located in another country the term “offshore outsourcing” makes more sense. “Offshoring,” in contrast, represents the transfer of an organizational function to another country, regardless of whether the work stays in the corporation or not.[2] In short, “outsourcing” means sharing organizational control with another organization, or a process of establishing network relations within an organizational field. "Offshoring,” on the other hand, represents a relocation of an organizational function to a foreign country, not necessarily a transformation of internal organizational control.
[edit] Benefits of outsourcing
It is apparent that many organizations today are making the decision to outsource. In today’s global marketplace outsourcing has made itself accessible to many organizations on a national and international level. Offshore outsourcing has provided many businesses with the opportunity to harvest the benefits of lower labor costs in developing countries with few workers rights laws and to exploit the value of artificially manipulated foreign currencies, where the exchange rate is intentionally undervalued. Through outsourcing, companies today have the ability to develop competitive strategies that will leverage their financial positions in the ever competitive global marketplace. Outsourcing is also successful in increasing product quality and/or substantially lowering firm and consumer costs (e.g., increases the quality to cost ratio). Because outsourcing allows for lower costs, even if quality reduces slightly, which is sometimes the case, productivity increases, which benefits the economy in aggregate. Outsourcing can also present advantages to less developed, typically non-Western states. "Developing" countries, such as China, Philippines, and India, but also countries of Eastern Europe, benefit from the patronage of companies that outsource to them - in terms of increased wages, job prestige, education, and quality of life.
Some of the major advantages that today’s organizations can expect to obtain through outsourcing include the ability to purchase intellectual capital, to focus on core competencies, to better anticipate future costs, to lower costs. Overall outsourcing is viewed by many organizations as a strong business tactic that ultimately is a superior economical approach to developing products and services.
[edit] Criticisms of outsourcing
[edit] Quality of service
Criticisms of outsourcing from both management and consumers often focus on a central question: is the performance or quality of the outsourced service, or new organization of labor, on par with the expected standards of management and consumers - i.e. how does outsourcing a service affect its quality as opposed to "in-house" work (see [1], [2] and [3]for example)? Such judgments are reserved to prevailing cultural values that define what is and is not good service.
[edit] Work, labor, and economy
Outsourcing became a popular political issue during the 2004 U.S. presidential election. The political debate centered on Outsourcing's consequences for the domestic workforce. Democratic U.S. presidential candidate John Kerry criticized firms that outsource jobs abroad or that incorporate overseas in tax havens to avoid paying their fair share of U.S. taxes during his 2004 campaign, calling such firms "Benedict Arnold corporations". Criticism of outsourcing, from the perspective of U.S. citizens, by-and-large, revolves around the costs associated with transferring control of the labor process to an external entity in another country. A Zogby International poll reports that 71% of American voters believe that “outsourcing jobs overseas” hurts the economy and another 62% believe that the U.S. government should impose some legislative action against companies that transfer domestic jobs overseas, possibly in the form of increased taxes on companies that outsource. The poll of over 1,000 Americans was conducted in August 2004.[3]
Outsourcing appears to threaten the livelihood of domestic workforce and, in the United States, the American Dream. This is especially true for high-tech workers who were promised the “jobs of tomorrow”- a phrase Bill Clinton iterated in 1994 to justify his conservative position on the North American Free Trade Agreement (NAFTA). Outsourcing appears to work contrary to the claim that “free trade” will create the “jobs of tomorrow” in America when high-tech or high paying white-collar jobs are transferred to or created in foreign countries. Thus, outsourcing may be representative of a specific historical moment where the United States government fails to mediate business-labor relations in a way conducive to prevailing values that places the American middle class worker as a central priority. At a more general level it represents a new threat to labor, contributing to rampant worker insecurity, and reflective of the general process of Globalization culminating in Western societies as a whole (see Krugman, Paul (2006). "Feeling No Pain." New York Times, March 6, 2006).
Policy solutions to outsourcing are also criticized. One solution is retraining of domestic workers to new jobs in the form of the Trade Adjustment Assistance Act [4]. However, these policy recommendations do not adequately aid all displaced workers and do not provide security to this "flexible" labor market.
[edit] Security
There are also some security issues concerning companies giving outside access to sensitive customer information. In April of 2005, a high-profile case involving the theft of $350,000 from four Citibank customers occurred when Indian call centre workers in Pune, India, acquired the passwords to customer accounts and transferred the money to their own accounts opened under fictitious names. Citibank did not find out about the problem until the American customers noticed discrepancies with their accounts and notified the bank.[4]
An Outsourced project like US Payroll, where the Social Security Number of an US employee can be one of the vital factor which can be used for fraudulent activities. Hence it's very essential for a company to keep all the data intact, and ensure that no leakage of data is done. This will ensure total security and can avoid such cases of fraudulent activities
[edit] Responses to criticism
[edit] Insourcing
Outsourcing, as the term is typically used in economics, is not necessarily a job destroyer but rather a process of job relocation and may not impact the net number of jobs in a nation or in the global economy. Contrary to the critics, rampant unemployment is not occurring, in the United States. Logically, "outsourcing" cannot occur without a recipient that "insources" and, according to economists, "outsourcing" means an export in services which renders "insourcing" an import. Hence, economists insist on viewing the outsorucing/insourcing debate as a debate on trade, adequately analyzed with trade theory and recorded through official national data. For example, Mary Amiti and Shang-Jin Wei claim more jobs are insourced, or imported, than outsourced, or exported, in the United States and the United Kingdom, as well as other industrialized nations. They report that the U.S. and the UK actually have the largest net trade surpluses in business services. However, some other countries, such as Indonesia, Germany and Ireland have a net deficit in business services.[5] Similar reports state that "while [the U.S. is] exporting some jobs to other countries, the greatest beneficiary of outsourcing is the U.S. itself."[6].
[edit] Work, labor and economy
International outsourcing is a form of trade. As such, mainstream economists argue that the basic principles of comparative advantage and the gains from trade apply. The 'threat' to overall employment or the economy is thus no more valid than the so-called 'threats' from imports or migration.
Economist Thomas Sowell from the University of Chicago said “anything that increases economic efficiency--whether by outsourcing or a hundred other things--is likely to cost somebody's job. The automobile cost the jobs of people who took care of horses or made saddles, carriages, and horseshoes.”[7] Walter Williams, another economist, said “we could probably think of hundreds of jobs that either don't exist or exist in far fewer numbers than in the past--jobs such as lift operator, TV repairman, and coal deliveryman. ‘Creative destruction’ is a discovery process where we find ways to produce goods and services more cheaply. That in turn makes us all richer.”[8] Nationally, 70,000 computer programmers lost their jobs between 1999 and 2003, but more than 115,000 computer software engineers found higher-paying jobs during that same period.[9]
Most economists do not view outsourcing as a threat to the economy[5]. Food malls (and even malls in general), for example, may cease to exist were it not for outsourcing. Capitalist trading often involves interactions among different people, which means often tasks and services are delegated to others. Lack of outsourcing may see deficiencies in specialization and division of labor, important elements in the law of comparative advantage, which is seen by many as the basis for why capitalist free-markets are successful in generating economic growth.
[edit] Quality of service
This article or section reads like a personal reflection or essay and may require cleanup.
Please improve this article by rewriting this article or section in an encyclopedic style. (documentation, talk)
One criticism of outsourcing is that product quality suffers. But the organization outsourcing a business process has the freedom to resume management control and/or decision making for that business process if quality is adversely affected. In fact, many American companies return previously outsourced functions "in-house" as a result of poor quality. The decision to outsource is like any other business investment decision in that there is risk. Critics of outsourcing often talk about outsourcing failures without mentioning instances of outsourcing success.[citation needed] The decision to outsource is like the decision to expand a business overseas, to incorporate computer technology, or to hire new workers. If the company does it correctly, it benefits from higher profits. Proponents of outsourcing believe that arguing that outsourcing leads to lower product quality is pointless because if it were true, consumer demand will force firms to shift back to producing the good or service in-firm rather than out-firm.
The ability to influence the quality of outsourced production depends on the relationship of power between consumers and producers. If producers have market power, e.g. if they are a monopoly they can reduce the quality of their good without suffering a major drop in sales. For example, many individuals do not make their own food. Instead, they outsource the task to restaurants and fast-food firms like McDonald's or Hungry Jacks. Suppose McDonald's and Hungry Jacks are the only fast-food firms. McDonald's competes with Hungry Jacks to win consumers in the fast-food market. However, if Hungry Jacks goes out of business, McDonald's is a monopoly and can reduce the quality of its food (e.g. to reduce costs) without suffering as high a drop in revenue because consumers now cannot switch to Hungry Jacks. Institutions are set up to promote competition. E.g. in Australia the ACCC (Australia Competition and Consumer Commission) regulates businesses to prevent abuse of market power and to promote competition. In the United States the FTC (Federal Trade Commission) takes on this role.
Sometimes poor quality goods and services must be accepted by consumers because accountability systems regarding consumer or user feedback are limited. In order to increase quality or maintain a high level of quality, many offshore outsource firms also employ quality management models, such as Taylor, Lean, and Six Sigma. Differing firms have varying levels of implementation success.
[edit] See also
* Application Management Outsourcing
* Business process outsourcing
* Business process outsourcing in India
* Business process outsourcing in the Philippines
* Comparative advantage
* Compromise agreements
* Co-sourcing
* Crowdsourcing
* Farmshoring
* Freelancing on the Internet
* Homeshoring
* India Outsourcing
* Information technology consulting
* Insourcing
* Knowledge process outsourcing (KPO)
* Legal Process Outsourcing (LPO)/ Legal outsourcing
* List of management topics
* List of outsourcing companies
* Lou Dobbs (CNN editor) - self-proclaimed crusader against outsourcing
* Nearshoring
* Offshore Product Development
* Offshore software development
* Offshoring
* Offshoring IT Services
* Open Outsourcing
* Portable Employer of Record
* Supply chain
* Supply Chain Management
* Vertical integration
* Wal-Mart
[edit] References
1. ^ NAPA 2006: 38 (pdf)
2. ^ NAPA 2006: 38 (pdf)
3. ^ Zogby International survey results online at zogby.com
4. ^ http://www.infoworld.com/article/05/04/07/HNcitibankfraud_1.html
5. ^ Amiti, Mary & Wei, Shang-Jin (2004). Feat of Service Outsourcing: Is it Justified?, WP/04/186, International Monetary Fund; Amiti, Mary & Wei, Shang-Jin (2004) Demystifying Outsourcing. Finance and Development.
6. ^ Walter Wriston, economist. Wall Street Journal. March 24, 2004
7. ^ “Outsourcing” and “Saving Jobs” by Thomas Sowell
8. ^ Should we “Save Jobs”? by Walter Williams
9. ^ "The Outsourcing Bogeyman" (Foreign Affairs, May/June 2004)
Offshore outsourcing | Business Consulting
Offshore outsourcing is the practice of hiring an external organization to perform some business functions in a country other than the one where the product or service will be sold or consumed. It can be contrasted with offshoring, in which the functions are performed in a foreign country by a foreign subsidiary. Opponents point out that the practice of sending work overseas by countries with higher wages reduces their own domestic employment and domestic investment. Many customer service jobs as well as jobs in the infotech sectors (data entry, computer programming, and customer support) in countries such as the United States and the United Kingdom - have been or are potentially affected.
Criteria
The general criteria for a job to be offshore-able are:
* There is a significant wage difference between the original and offshore countries;
* The job can be telework;
* The work has a high information content;
* The work can be transmitted over the internet;
* The work is easy to set up;
* The work is repeatable.
The driving factor behind the development of offshore outsourcing has been the need to cut costs while the enabling factor has been the global electronic internet network that allows digital data to be accessed and delivered instantly, from and to almost anywhere in the world.
[edit] Countries involved
Some of the major countries/districts that provide such services are India (Programming, Customer Support), China (Programming), Russia (Programming and R&D), Pakistan (Programming, Customer Support), Bangladesh (Programming and IT), Bulgaria (Programming and R&D), Ukraine (Programming and R&D), Belarus (Programming, R&D), Romania (Programming and IT), the Philippines (Programming, R&D, Data Entry and Customer Support), Egypt (Customer Support and Programming), Malaysia (Customer Support and R&D), and many others.
The widespread use and availability of the internet has enabled individuals and small businesses to contract freelancers from all over the world to get projects done at a lower cost due to lower wages and property prices. This trend runs in parallel with the tendency towards big corporations' outsourcing, and may serve to strengthen small business' capacity to compete with their bigger competitors capable of setting up offshore locations or of arriving at major contracts with offshore companies. See Freelancing on the Internet.
[edit] Source of conflict
There are different views on the impact on the various societies affected, which reflects the attitude of Protectionism versus Free Trade. Some see it as a potential threat to the domestic job market in the developed world and ask for government protective measures (or at least closer scrutiny of existing trade practices), while others, including the countries who receive the work, see it as an opportunity. Free-trade advocates suggest economies as a whole will obtain a net benefit from labor offshoring, but it is unclear if the displaced receive a net benefit.
One issue offshoring of technical services has brought more attention to is the value of education as an alleged solution to trade-related displacements. Education may no longer be a comparative advantage of high-wage nations because the cost of education may be lower in the nations involved in the controversy. [1] While it is true that education is usually considered helpful to competitiveness in general, an "education arms race" with low-wage nations may not pay off.
[edit] Sources
Economist.Com Recommendations from November 11, 2004 Special Survey Edition
For a new topic, outsourcing has produced a huge volume of research, not all of it worthwhile. Here is a sprinkling of some of the better stuff:
From the McKinsey Global Institute
“Offshoring: Is It a Win-Win Game?”, August 2003
“New Horizons: Multinational Company Investment in Developing Economies”, October 2003
“Can Germany Win from Offshoring?”, Diana Farrell, July 2004
“Exploding the Myths of Offshoring”, Martin Baily and Diana Farrell, July 2004
From the Boston Consulting Group
“China: The Pursuit of Competitive Advantage and Profitable Growth”, July 2003
“Capturing Global Advantage”, April 2004
Academia
“The New Wave of Outsourcing”, Ashok Deo Bardham and Cynthia Kroll, University of California at Berkeley, Fisher Centre for Real Estate and Urban Economics Research Report, Fall 2003
“Globalisation of IT Services and White Collar Jobs: The Next Wave of Productivity Growth”, Catherine Mann, Institute for International Economics, December 2003
From The Brookings Institute
“Offshoring Service Jobs: Bane or Boon - and What to Do?”, Lael Brainard and Robert Litan, April 2004
“Offshoring, Import Competition, and the Jobless Recovery”, Charles Schultze, August 2004
“The Outsourcing Bogeyman”, Daniel Drezner, Foreign Affairs, May/June 2004
“Hardheaded Optimism About Globalisation”, Amar Bhide, Columbia University, forthcoming
From the Bureau of Labour Statistics
“Occupational Employment Projections to 2012”, Daniel Hecker, Monthly Labour Review, February 2004
“The 1988-2000 Employment Projections: How Accurate Were They?”, by Andrew Alpert and Jill Auyer, Occupational Outlook Quarterly, Spring 2003
From Forrester
“3.3m US Services Jobs To Go Offshore”, John McCarthy, November 2002
“Low-Cost Global Delivery Model Showdown”, John McCarthy, August 2004
“Two Speed Europe: Why 1 Million Jobs Will Move Offshore”, Andrew Parker, August 2004
Criteria
The general criteria for a job to be offshore-able are:
* There is a significant wage difference between the original and offshore countries;
* The job can be telework;
* The work has a high information content;
* The work can be transmitted over the internet;
* The work is easy to set up;
* The work is repeatable.
The driving factor behind the development of offshore outsourcing has been the need to cut costs while the enabling factor has been the global electronic internet network that allows digital data to be accessed and delivered instantly, from and to almost anywhere in the world.
[edit] Countries involved
Some of the major countries/districts that provide such services are India (Programming, Customer Support), China (Programming), Russia (Programming and R&D), Pakistan (Programming, Customer Support), Bangladesh (Programming and IT), Bulgaria (Programming and R&D), Ukraine (Programming and R&D), Belarus (Programming, R&D), Romania (Programming and IT), the Philippines (Programming, R&D, Data Entry and Customer Support), Egypt (Customer Support and Programming), Malaysia (Customer Support and R&D), and many others.
The widespread use and availability of the internet has enabled individuals and small businesses to contract freelancers from all over the world to get projects done at a lower cost due to lower wages and property prices. This trend runs in parallel with the tendency towards big corporations' outsourcing, and may serve to strengthen small business' capacity to compete with their bigger competitors capable of setting up offshore locations or of arriving at major contracts with offshore companies. See Freelancing on the Internet.
[edit] Source of conflict
There are different views on the impact on the various societies affected, which reflects the attitude of Protectionism versus Free Trade. Some see it as a potential threat to the domestic job market in the developed world and ask for government protective measures (or at least closer scrutiny of existing trade practices), while others, including the countries who receive the work, see it as an opportunity. Free-trade advocates suggest economies as a whole will obtain a net benefit from labor offshoring, but it is unclear if the displaced receive a net benefit.
One issue offshoring of technical services has brought more attention to is the value of education as an alleged solution to trade-related displacements. Education may no longer be a comparative advantage of high-wage nations because the cost of education may be lower in the nations involved in the controversy. [1] While it is true that education is usually considered helpful to competitiveness in general, an "education arms race" with low-wage nations may not pay off.
[edit] Sources
Economist.Com Recommendations from November 11, 2004 Special Survey Edition
For a new topic, outsourcing has produced a huge volume of research, not all of it worthwhile. Here is a sprinkling of some of the better stuff:
From the McKinsey Global Institute
“Offshoring: Is It a Win-Win Game?”, August 2003
“New Horizons: Multinational Company Investment in Developing Economies”, October 2003
“Can Germany Win from Offshoring?”, Diana Farrell, July 2004
“Exploding the Myths of Offshoring”, Martin Baily and Diana Farrell, July 2004
From the Boston Consulting Group
“China: The Pursuit of Competitive Advantage and Profitable Growth”, July 2003
“Capturing Global Advantage”, April 2004
Academia
“The New Wave of Outsourcing”, Ashok Deo Bardham and Cynthia Kroll, University of California at Berkeley, Fisher Centre for Real Estate and Urban Economics Research Report, Fall 2003
“Globalisation of IT Services and White Collar Jobs: The Next Wave of Productivity Growth”, Catherine Mann, Institute for International Economics, December 2003
From The Brookings Institute
“Offshoring Service Jobs: Bane or Boon - and What to Do?”, Lael Brainard and Robert Litan, April 2004
“Offshoring, Import Competition, and the Jobless Recovery”, Charles Schultze, August 2004
“The Outsourcing Bogeyman”, Daniel Drezner, Foreign Affairs, May/June 2004
“Hardheaded Optimism About Globalisation”, Amar Bhide, Columbia University, forthcoming
From the Bureau of Labour Statistics
“Occupational Employment Projections to 2012”, Daniel Hecker, Monthly Labour Review, February 2004
“The 1988-2000 Employment Projections: How Accurate Were They?”, by Andrew Alpert and Jill Auyer, Occupational Outlook Quarterly, Spring 2003
From Forrester
“3.3m US Services Jobs To Go Offshore”, John McCarthy, November 2002
“Low-Cost Global Delivery Model Showdown”, John McCarthy, August 2004
“Two Speed Europe: Why 1 Million Jobs Will Move Offshore”, Andrew Parker, August 2004
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