INTRODUCTION OF OUTSOURCING

In business, outsourcing is the contracting out of a business process to another party. The term "outsourcing"
became popular in the United States near the turn of the 21st century. Outsourcing sometimes involves transferring
employees and assets from one firm to another, but not always.[1] Outsourcing is also used to describe the practice of
handing over control of public services to for-profit corporations.[2]
Outsourcing includes both foreign and domestic contracting,[3] and sometimes includes offshoring or relocating a
business function to another country.[4] Financial savings from lower international labor rates is a big motivation for
outsourcing/offshoring.
The opposite of outsourcing is called insourcing, which entails bringing processes handled by third-party firms inhouse, and is sometimes accomplished via vertical integration. However, a business can provide a contract service to
another business without necessarily insourcing that business process.
Outsourcing is the process by which an organization contracts with another individual or company to get some of its
work done. Viewed this way, most organizations go for some kind or other of outsourcing. Generally it is non-core
aspects of the business that are outsourced.
The firms that offer the services thus required are called service providers or third-party providers. Businesses may
thus tie up with service providers for either individual processes or whole projects or operations.
Outsourcing can be divided into two broad categories. They are BPO and KPO. Let us examine how each differs.

OUTSOURCING DEFINED
Outsourcing is any task, operation, job or process that could be performed by employees within your company, but is
instead contracted to a third party for a significant period of time. Hiring a temporary employee while your secretary
is on maternity leave is not outsourcing. In addition, the functions that are performed by the third party can be
performed on-site or off-site.

The most common model of outsourcing that is in the news today refers to jobs that are being sent over seas to
countries like India or China. This is more commonly called offshoring. Examples include telephone call centers,
tech-support and computer programming. More common examples that are not going overseas are janitorial services,
after hours answering services and security services.

WHY OUTSOURCING?
There are many reasons why a company may choose to outsource a particular function of their business. Most
managers have the end-result-in-mind that they are going to save time and/or money. Other reasons include:
Resource Shortages Relieved by Outsourcing
A particularly strong reason to outsource involves a shortage of a critical resource. This can be available employees
that possess knowledge in a certain area (e.g. engineers), availability of material (e.g. petroleum or minerals) and a
labor force at a level and price that will offset the cost of higher prices alternatives.
Outsourcing Provides the Ability to Concentrate On the Core Business
Some necessary, but peripheral operations are outsourced most frequently. This gives the managers the ability to
concentrate on the core business issues instead of getting distracted by required, yet minor matters. A good example
is a major hospital in our area that outsources its security operations to a third party company specializing in security.

Outsourcing Yields Cost Savings

The prices of labor and/or materials keep increasing and competition keeps forcing prices lower. If there is an
outsourcing solution that can save your company money and overcomes the disadvantages of outsourcing, these
areas should be investigated.
Outsourcing Provides Flexibility
Seasonal or cyclical demands that ebb-and-flow put varying demands on the resources of the company. An
outsourcing contract could provide the flexibility needed to stabilize these varying demands. Example: A business
brings in extra accountants during tax season and when being audited by the holding company that owns the
business.
Reduce Overhead Costs Through Outsourcing
Some functions require a large outlay of money just to get started. This expenditure could be avoided by contracting
with a third party. For example, expanding your call centers capacity to the point where it exceeds the capabilities of
your telephone system.Companies primarily outsource to avoid certain costs - such as peripheral or "non-core"
business expenses, high taxes, high energy costs, excessive government regulation/mandates, production and/or
labor costs. The incentive to outsource may be greater for U.S. companies due to unusually high corporate taxes and
mandated benefits, like social security, Medicare, and safety protection (OSHA regulations). At the same time, it
appears U.S. companies do not outsource to reduce executive or managerial costs. For instance, executive pay in the
United States in 2007 was more than 400 times more than average workersa gap 20 times bigger than it was in
1965. In 2011, twenty-six of the largest US corporations paid more to CEO's than they paid in federal taxes. Such
statistics imply that the reason companies outsource is not to avoid costs in general but to avoid specific types of
costs.
Digital outsourcing
One strong reason for outsourcing is the lack of available resources locally. This is particularly true for IT
outsourcing, where the US has a lack of available resources. This knowledge gap can be felt more outside major
cities.
The digital workforce of countries like India and China are only paid a fraction of what would be minimum wage in
the US. On average, software engineers are getting paid between 120,000 to 800,000 rupees ($4,000 to $23,000) in
India as opposed to the $40,000-$100,000 in countries like US and Canada.[ However, unlike typical sweatshops
and manufacturing plants, most of the digital workforce in developing countries have the flexibility to choose their
working hours and which companies to work for. With many individuals working remotely from home, the

companies that require this type of work do not need to allocate additional funds for setting up of office space,
management salary, and employee benefits as these individuals are contracted workers.
Another method of outsourcing is using a microwork service for repetitive tasks that would otherwise have to be
performed by employees.

COMMON OUTSOURCED AREAS

Although many areas and functions are outsourced, here are some of the frequently outsourced areas:

Information Technology Functions

Network and Telecommunications

Human Resources and Insurance Administration

Accounting

Marketing

Security

THE DIFFERENT SECTORS IN OUTSOURCING

As business realities change, an increasing number of companies are looking at ways to minimize costs. Outsourcing
non-core areas to a skilled vendor like Outsource2india can be a viable alternative for them. Adopting this strategy
can help the business reduce costs without compromising on quality.
Today, businesses are outsourcing a diverse range of services. These range from the relatively low-skill call center
services to MARKET research and analysis, which requires expertise and skilled workers. In addition, Finance
and Accounting Outsourcing (FAO) is becoming increasingly wide spread as is medical outsourcing. From
healthcare providers tosoftware developers, everyone seems eager to leverage the benefits of outsourcing.
Outsource2india different sectors outsourcing
An outsourcing expert like Outsource2india offers a wide range of services to suit varied client requirements. These
services can be classified into different outsourcing sectors. These include:
1. Call center outsourcing
Typically, BPO services include:

Inbound call center services These typically include answering services that are available 24X7. Call
center agents can also be trained to up-sell and cross sell services, take orders, and provide information on the
benefits and features of products/services

Outbound call center services These include services like telemarketing services, lead generation services,
and MARKET intelligence services

Technical helpdesk services This includes technical after-sales support for products and services

2. Knowledge Process Outsourcing (KPO)

A KPO typically provides domain-based processes and employs advanced analytical skills and business expertise,
rather than just process expertise. Some research services include:

MARKET research and analysis These services help the business extract useful information that reveals
current trends and provides inputs for decision-making

Web-based MARKET research These services help collect information from different websites. As
compared to primary research where data is directly collected from respondents, data is collected from secondary
sources like government publications and newsgroups

3. Data entry outsourcing

All organizations, whether big or small, have data entry requirements. Data entry outsourcing can be divided into:

Online data entry These includes services such as compilation of data from websites and e-books,
updating online catalogs, and creation of databases

Offline data entry These include services such as offline data capture, fillings of forms, forms processing,
data entry from one format/version to another, MS Word document data entry, etc

4. IT sector outsourcing
IT outsourcing typically includes outsourcing of software development. This may take the form of end-to-end
outsourcing where all activities related to design, development, and testing are outsourced. In other cases, only a part
or portion of the overall system is outsourced for development. This is in cases where the client does not have the
requisite skills or technology for the development work.
6

5. Healthcare sector outsourcing

Medical outsourcing includes a diverse range of HIPAA compliant services. These include:

Medical transcription services These include services to transcribe information from a variety of audio
sources and file formats such as MP3, MPG, MOV, DSS, WMA, etc

Medical coding and billing services These services are delivered using popular billing software like
Medic and Lytec

Teleradiology services - These services provide 24X7 access to qualified radiologists

6. Financial sector outsourcing

Accounts outsourcing services include:

Accounting services These include preparation of FINANCIAL statements for the statutory annual audit,
cash forecasting services, and payroll services

Bookkeeping services These include preparation and maintenance of both day-to-day books as well as
monthly and quarterly accounts. It also includes preparations of different kinds of reports like sales reports

Financial analysis services These include analysis of FINANCIAL information such as FINANCIAL
statements, portfolio structures, and offer documents

7. Engineering services outsourcing

These include a range of mechanical, civil, structural, and architectural engineering services:

Computer aided design (CAD) services to develop prototypes

2D drafting services

Conversion of paper drawings into a digitized format

Design and analysis for residential and industrial buildings

Architectural visualization services (3D rendering or 3D animations)

7

Services for evaluation and strengthening of deteriorating structures

DIFFERENT TYPES OF OUTSOURCING

BPO
In BPO (Business Process Outsourcing), a particular process task is outsourced. An example would be payroll.
BPO work could be either back office related or front office work. By front office functions we mean customer
oriented work like MARKETING , answering calls, technical support and so on, whereas internal work like billing
and purchase come in the back office category.
Multimedia/ animation, book keeping, business consultancy, CAD/ CAM, call center, DTP, data entry, proof reading
and editing, typesetting, handwriting services, MARKETING , medical billing and transcription, web design and
development etc are all services that could be put under the BPO category.
BPOs a boon or a bane?
Say BPO and the first thing that comes to mind is the high attrition faced by the industry. According to current data,
the business process outsourcing (BPO) industry in India employs around 400 people every day with the people
exiting from this sector being around 12% of the total workforce. The presumption is that attrition is being driven by
the dead end, boring, repetitive work done in the graveyard shift.
Recent studies, however, show that contrary to general perception, most people who quit tend to stay within the
industry. And if they opt out, it is generally to pursue higher studies, while a very small percentage quit due to night
shifts. This shows that majority of the people still remains in the industry and the high attrition rates facing the
industry is largely a result of the huge supply and demand mismatch, more than anything else.
the BPO sector is beginning to be addressed comprehensively as an industry and once it moves beyond metros, there
will be a better demand-supply situation for talent. The BPO industry recorded export revenues of $ 6.3 billion
during fiscal 2005-06 and is expected to touch $ 8-8.5 billion during 2006-07. It provides direct employment to close
to half-a-million people and has been an industry that has been recording over 40% growth.
The recent Nasscom-McKinsey Report 2005 on the Indian IT industry says the addressable offshoring market of
BPO can go up to $120-150 billion from the current $11.5 billion. Even in its projections of $60 billion in IT export
revenues, it expects the BPO segment to contribute $ 25 billion. Susir Kumar, CEO, Intelenet Global Services, says
8

that the success of the BPO industry has largely been a factor of quality manpower combined with sophisticated
vendor base and improvement in the local infrastructure.
The industry, which has been around 4-5-years-old, has also taken a faster road to maturity unlike its counterpart,
the software industry, moving up both in terms of scale and value offerings. Voice-based and vanilla back-office
activity has grown into sophisticated offerings like analytical services, legal advisory, high-value financial
transaction services among others.
Nasscom vice-president Sunil Mehta says there is a possibility of specialised BPO providers appearing like an
operator of industry-standard transaction or platform based services like credit card processing. Nagarajan says that
the rapid growth witnessed by the BPO sector will sustain with continued interest from the buyer community.
Divakar Kaza, president, global HR, HTMT says, the industry has now reached a strategic inflexion point where the
rules of engagement will change as the industry matures. Having established brand India in this sector, companies
need to move up the value chain quickly, he adds. For the people-driven business, the biggest talent pool for the BPO
industry has been the college graduates though this base has been widened. Chaudhry says that the industry has been
able attract people with professional qualifications like chartered accountants and MBAs and there has been a
broad change in perception among colleges, students and parents about BPOs.
The issue of expanding the scope of talent has also seen numerous companies reaching out directly to the colleges
and engaging them early so as to make them industry ready. This includes introducing BPO curriculum in the
educational institution as well as engaging the teaching community on the various opportunities available to the
industry.
KPO
As is evident from the description, BPO activities involve carrying out standardized processes for the client. KPO or
Knowledge Process Outsourcing typically calls for work that needs higher levels of involvement from the worker.
The worker has to employ advanced levels of research, analytical and technical skills and has to make decisions of a
higher order than BPO work. Examples are pharmaceutical research and development, patent/ intellectual property
research, animation and simulation. Data research and analysis, legal services, content writing and development and
database development services. KPO industry is less older and mature than the BPO sector.
Apart from BPO and KPO, ITO or Information Technology Outsourcing is another major category. ITO is usually
overseen by the CIO of an organization. However the CIO is often called in to manage BPO and KPO operations

where no significant IT skills are involved. This is due to the expertise the CIOs would have developed in
outsourcing negotiations.

FEATURES OF OUTSOURCING
A practice used by different companies to reduce costs by transferring portions of work to outside suppliers rather
than completing it internally. Companies that decide to outsource do so for a number of reasons, all of which are
based on realizing gains in business profitability and efficiency. Principal merits of outsourcing include the
following:
Cost savings: Many businesses embrace outsourcing as a way to realize cost savings or better cost control over the
outsourced function.
Staffing levels: Another common reason for outsourcing is to achieve headcount reductions or minimize the
fluctuations in staffing that may occur due to changes in demand for a product or service.
Focus: Some companies outsource in order to eliminate distractions and force themselves to concentrate on their
core competencies.
Morale: This is an often-overlooked but still notable benefit that can sometimes be gained by initiating an
outsourcing relationship.
10

Flexibility: Still others outsource to achieve greater financial flexibility, since the sale of assets that formerly
supported an outsourced function can improve a company's cash flow.
Knowledge: Some experts tout outsourcing of computer programming and other information technology functions
as a way to gain access to new technology and outside expertise.
Accountability: Outsourcing is predicated on the understanding-shared by business and vendor alike-that such
arrangements require quality service in exchange for payment.

WHAT ARE THE DIFFERENT TYPES OF OUTSOURCING SERVICES

There are four types of outsourcing services: professional, manufacturing, process-specific and operational. Each of
these services have grown in popularity as more businesses look to reduce their overhead costs while maintaining
the same level of output or support. There are risks and benefits to outsourcing that must be considered when looking
at different types of outsourcing services. The greatest benefit typically is cost reduction, because the company saves
in both equipment and labor costs. The largest risks are related to quality and control.
Professional outsourcing services include accounting, legal, purchasing, information technologysupport and other
specialized services. This is the most common area for these types of services, because of the potential cost savings
associated with this type of arrangement. The business has access to high quality resources while paying only for
services actually provided. This substantially reduces the organization's overhead costs.
Manufacturer outsourcing services usually are quite industry-specific. For example, an automobile manufacturer can
have an outsourcing arrangement for the creation andinstallation of windows in all of their models. This
arrangement will have huge implications on the operations but can result in significant cost savings and reduced
assembly time. The primary risks with this type of arrangement are related to interruption of the production line and
quality issues.
11

Other outsourcing services can be specific to a unique process or internal procedure. In many cases, it is more costeffective to have different parts or components manufactured by other companies. This simplifies the assembly
process, reducing costs and the total amount of time required to create a complete unit.
This type of outsourcing also is found in other industries. In the service industry, it is quite common to outsource
specific aspects of the operation to other companies that specialize in that service. For example, a bakery can
outsource the delivery of the final product to a couriercompany. This contract can provide details on delivery time
lines, customer contacts and costs. This type of business arrangement allows each company to focus on its respective
strength and improves customer service.
Outsourcing services for operational activities are more common in the manufacturing sector than in other industries.
The nature of manufacturing creates opportunities for very specific operational activities to be delegated to outside
companies. Machine maintenance and equipment repair can be obtained from outsourcing services that specialize in
the specific equipment. Other types of operational activities include cleaning, landscaping, facilities maintenance and
property management.

12

WHAT IS GLOBAL OUTSOURCING?

Outsourcing is an allocation of specific business processes to a specialist external service provider. Most of the times
an organization cannot handle all aspects of a business process internally. Additionally some processes are temporary
and the organization does not intend to hire in-house professionals to perform the tasks. Once the task is outsourced
to the service provider, he will take the responsibility of carrying out the tasks and maintaining the organizations
assets.
However prior to outsourcing any component of your business to a third-party vendor, it is essential to understand
the advantages and disadvantages of outsourcing. Although outsourcing presents a variety of benefits to your
organization, it could also pose difficulties if not outsourced to the right service provider.
The most commonly outsourced streams of business include:

IT outsourcing

Legal outsourcing

ContentDevelopment

Web Design and Maintenance

Recruitment

Logistics

Manufacturing

Technical/Customer Support
Why do organizations outsource their business process?
The key factors which have led to a growing trend of outsourcing are

Lack of expert-labor in some portions of the business process

13

Availability of cheaper labor, whilst not comprising on the quality of output

Ability and feasibility to concentrate on the other crucial business process

ADVANTAGES AND DISADVANTAGES OF OUTSOURCING

Outsourcing most commonly known as offshoring has pros and cons to it. Most of the time, the advantages of
outsourcing overshadow the disadvantages of outsourcing.
The Advantages of Outsourcing

Swiftness and Expertise: Most of the times tasks are outsourced to vendors who specialize in their field. The
outsourced vendors also have specific equipment and technical expertise, most of the times better than the ones at the
outsourcing organization. Effectively the tasks can be completed faster and with better quality output

Concentrating on core process rather than the supporting ones: Outsourcing the supporting processes
gives the organization moretime to strengthen their core business process.

Risk-sharing: one of the most crucial factors determining the outcome of a campaign is risk-analysis.
Outsourcing certain components of your business process helps the organization to shift certain responsibilities to the
outsourced vendor. Since the outsourced vendor is a specialist, they plan your risk-mitigating factors better.

Reduced Operational and Recruitment costs: Outsourcing eludes the need to hire individuals in-house;
hence recruitment and operational costs can be minimized to a great extent. This is one of the prime advantages
of offshore outsourcing.
The Disadvantages of Outsourcing

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

Synchronizing the deliverables: In case you do not choose a right partner for outsourcing, some of the
common problem areas include stretched delivery time frames, sub-standard quality output and inappropriate
categorization of responsibilities. At times it is easier to regulate these factors inside an organization rather than with
an outsourced partner.

14

Hidden costs: Although outsourcing most of the times is cost-effective at times the hidden costs involved in
signing a contract while signing a contract across international boundaries may pose a serious threat.

Lack of customer focus: An outsourced vendor may be catering to the expertise-needs of multiple
organizations at a time. In such situations vendors may lack complete focus on your organizations tasks.
With all these pros and cons of outsourcing to be considered before actually approaching a service provider, it is
always advisable to specifically determine the importance of the tasks which are to be outsourced. It is always
beneficial for an organization to consider the advantages and disadvantages of offshoring before actually outsourcing
it.

15

TIPS FOR SELECTING A RIGHT VENDOR WHEN OUTSOURCING TO INDIA

India has gained huge fame for its highly skilled human resource availability for servicing IT industry and meet
outsourcing needs worldwide. By growing demand the Indian market has been flooded with small to mid size
outsourcing companies offering offshore software development services. In this article I am going to share some tips
which can help you to select a right offshore outsourcing company when you are planning for outsourcing to India.
An ideal offshore outsourcing company should be well equipped in terms of Infrastructure and qualified human
resource. It is important to examine the employees skill set, but it is more important to make sure that the software
company you choose must be a process driven company but not human dependant.
The accreditation like CMMi, ISO certificates, Microsoft competency certificates, etc. can acknowledge the
company for following a well defined process which manage projects, maintain quality and deliver the work. While
selecting an offshore software development company it is advisable to understand the Software Development Life
Cycle adopted by that outsourcing company and how successfully it is been implemented in its previous work. You
can also do a reference check with its present and past customers to get a feedback or testimonials on company
performance.
An unavoidable step is to examine how well the company is maintaining Intellectual Property, proprietary software
and new development specifications of its customers. Its after sales support and risk management policies should be
reviewed based on your project requirements.
The companies which can use its skilled resources follow well defined processes for software development and
project management life cycles and maintain security for your project is the right offshore software development
company to work with. These are some of the most important parameters which you can consider while examining a
best suited service provider while outsourcing to India.

OUTSOURCING BOON OR BANE

INTRODUCTION
To put it in simple words outsourcing is basically shifting the of jobs from developed countries to underdeveloped
countries. In the present world of cut throat competition, many companies in the so called first world nations like the
USA and UK, outsource or shift some of their jobs to the so called third world or developing countries like India,
China, Vietnam, Romania etc. Generally, the jobs outsourced are back office jobs or research and development jobs.
16

No one knows the possible future implications of this phenomena, but most positive thinkers believe that this is an
evolution that had to take place and that this is a win-win situation for everybody.
Outsourcing is not a recent phenomena, but has been going on since years. Developed countries have since long
outsourced manufacturing jobs to countries like Africa, Latin America etc. But as these jobs involved manufacturing
of solid substances there had to be transportation and sifting of the goods and this resulted in employment generation
in a different way. But the outsourcing being done today is IT based and hence no transportation is involved except
for shifting of data from one computer to another. And as no additional costs are involved, big companies wanted to
cash in on it and others followed suit, and all this seemed to happen in a very short time. Also this resulted in no new
employment generation as in case of manufacturing jobs. All these factors have led to a hue and cry against
outsourcing in developed countries.
When there was a shift in the economy from manufacturing jobs to IT related jobs, there were oppositions and
protests over job losses, but over the years people seem to have adapted to this change. Experts claim that this will be
the case for outsourcing also.

OUTSOURCING: BOON OR BANE FOR INDIA

Over last few years, business process outsourcing industry has grown tremendously. Outsourcing actually came to
India long time back in eighties when many foreign airlines opened their back office centres in India. Huge
difference between Indian National Rupee and US Dollar and cheap labour availability, who were willing to work in
shifts (to provide 24 hours support to front office), prompted multinationals to come to India to increase their profit
margin.
Outsourcing flourished in India as it realised Indias needs also. Increasing population, poverty and unemployment
have always been long lasting issues for the biggest democracy of the world. Limited government jobs and fistful of
companies in India were not sufficient enough to create ample job opportunities. Outsourcing came as a big relief to
India. Good number of jobs was created. Indian foreign reserve started increasing providing a boost to economy.
People who could not continue their studies after 12th standard, were also able to earn decent money, which was a
17

mirage earlier. Once upon a time, educated people were wandering on streets, now even 12th standard pass out was
able to sustain a decent life style. I could remember, when we were kids, we were often told to study hard by our
parents and become IAS or other government servant. With each passing year, qualifying a government service, even
upper divisional clerk or lower divisional clerk, became increasingly tougher. Probably population, with limited
resources and slow economy growth were the reason behind that. In that scenario, outsourcing was nothing less than
a boon for India.
But then, anything good comes at a cost. I do not know if I am qualified enough to pass such comments, but my
expressions are the outcome of what I have observed and studied on outsourcing and Indian economy.
Many people have written on the cultural shock that Indian society has received with the advent of outsourcing.
Youth is moving away from our culture and values.. blah blah. I wont get into that, rather I would like to draw
attention to the gradual intellectual incapability and complacency creeping into the youth of the nation.
Based on my professional experience, I can say that only left over work comes to Indian software industry, which is
labour intensive and does not require brain (with few exeptions as well), for example data entry, software testing etc.
If I try to draw an analogy between software development works and constructing a multi-story building, the
architecture, foundation and design part take place in US or Europe, the finishing or patching part comes to India. We
paint a wall or do toilet/kitchen fittings, or if a wall was erected wrong and demolishing the wall and re-erecting
would cost more there, then it would be sent to us. This is absolutely my understanding; please correct me if I am
wrong. Such kind of work limits the learning curve as we do not get the exposure of high end work, which ends at
the point where outsourcing starts. Over to that, todays youth tastes money right after 12th standard while working
in call centres. This is the time when youth passes through the transition phase of life. Instant money, with malls and
pubs around, are enough to drift him away from long term goals and ambitions in life. Many a time it has been seen,
that student intentionally left school after 12th standard as they found good source of income in call centres. In future
India can witness huge number of school dropouts which would in turn affect Indian economy in many ways.
This outsourcing could be a big bubble in the making, which could shatter Indian economy in coming years,
probably 10 years or 20 years or even after that.

18

OUTSOURCING: BOON OR BANE IN INDUSTRIES

Outsourcing is nothing new. It has been practiced for decades. Industries such as retail, automotive, and others have
used the specialized services of contract organizations to drive down costs and increase efficiencies. The
pharmaceutical industry, however, has always closely guarded proprietary projects, compounds, and processes and
has only recently, in the face of escalating costs and decreasing R&D productivity, warmed up to the idea of routine
outsourcing.
Outsourcing in the pharmaceutical market is certainly on the rise, as evident by the rising numbers of contract
research organizations (CROs) and contract manufacturing organizations (CMOs), both in the United States and in
countries such as India and China. The types of services offered have also intensified and diversified. Many
equipment manufacturers and reagent providers are also now including contract services as a part of their portfolio of
offerings.
Cost-cutting definitely sparked this trend, but there is also increased pressure to do things fast and to do it right the
first time around. The other factor contributing to this growing trend is the advancement in informatics technologies.
The availability of better tools for monitoring quality control and maintaining client confidentiality by preventing
data security breaches have been crucial in making companies feel connected and in control of the work being done
at a contractor's site.
This month's cover story by senior editor Patrick McGee profiles TAP Pharmaceutical Products Inc., which has taken
outsourcing to new heights. TAP owns no laboratories, relies almost entirely on licenses and contract agreements,
and functions almost like a virtual company. It outsources nearly all elements of the pharmaceutical pipeline
including drug discovery, development, manufacturing, and clinical trials.

19

How successful is this outsourcing model? It seems to have worked well for TAP, but I am not sure how likely other
companies are to adopt a similar business model. TAP has been able to maintain a rigorous control on the design and
implementation of its goals by its contractors. It also found this model useful when making go/no-go decisions
because there is not much emotional attachment to any particular project.
However, this business model is restricting because there are certain limitations with in-licensing and outsourcing in
terms of procuring compounds, pursuing therapeutic areas, or using specific technologies and processes. A lack of
emotional attachment can be both a boon and a curse. We hear of numerous examples in the industry where
management would have killed a research project, that ultimately resulted in a blockbuster, had it not been for a
champion who had emotional ties to the project or compound and actively fought for its survival. It will be
interesting to see how the outsourcing trend evolves in the coming years.

20

BALANCING OUTSOURCING: BOON OR BANE?

Talking about outsourcing will right away bring up cheap labor in our minds. The fact is that outsourcing
is more than it meets the eye; it is not all about having your job done cheaply. Outsourcing is about having your
work done from aprofessional outsourcing company, a skilled professional team, or an individual expert outside your
organizational structure, yet holding all the rights and responsibilities to the production and distribution of the
product. This can be both either advantageous or disadvantageous, at the end of it all that matters is the personal
perspective.
So when did it all begin? Well, giving an exact date is impossible but yes, it may have started when people saw the
benefits of TRADING jobs during the ancient civilizations. People started to form groups of likeminded peers and
divide tasks that were respective to the experts in the group. Inability to perform a job due to competent reasons
forced the group to collaborate with other groups. This wild fire spread across societies, civilizations, and even
countries. Seeing this everybody began to choose specializations and there were born the specialists. Traditionally,
companies thought of doing all their work single-handedly in-house. But the work grew and thus the production
costs as well. During the Industrial Revolution the industrialists sought to gain profits and their goals were well
defined profits only! To cut on the production costs organizations went to others to get their work done cheaply.
And so, it all started. Talking about software outsourcing, it didnt popularize until the 90s. 90s saw the Internet
boom and so everybody dipped their hands in the flowing IT river that seemed the most beneficial at that time. Today
it is highly impossible to find a task that is not being outsourced. Growing economies like India, China, Brazil, and
Russia are the hot destinations to find outsourcing vendors as skilled labor is easily available and the economies help
in checking the business processing bills. The overlooked feature that outsourcing provides is that companies can
concentrate on their core business competencies and have their sidetrack jobs done inexpensively at the same time.
Now let us talk about the reasons why any enterprise should outsource. As mentioned above, outsourcing gets your
work done efficiently yet inexpensively.

Other reasons to outsource work are:

Look for corporate growth

Spend more time with the customers to improve MARKET share

Bring in innovation
21

Lack of technical advancements in the house

Access to expert competency and talent

Reduce the time to MARKET the product

Reap from a pool with variety in knowledge and skills

Tax benefits this will stay respective to the country that work is being outsourced to

The list is endless, and as said before, its the perspective that matters the most. So is outsourcing a boon or a bane?
Good question. For the short term the country whose companies are outsourcing may see it as a shortcoming. But in
the long run, the economy will be booming again. Thus to conclude, even if the outsourcing industry may seem to be
a disgrace to the MARKET , in the long term it is going to be the significant market share contributor. The seeds
have been sown and the flowers are blooming, the fruits are not far to be reaped.

OUTSOURCING A BOON OR BANE? INDIA IS STILL DECIDING

The Outsourcing industry came to India almost way back in the 1980s with some European airlinesbringing
their back office operations to India. In the last two decades the industry has seen an unprecedented rise and is
providing employment to almost millions in the country yet there are some who are still deciding if its advent has
been for the good or the bad. The rise of outsourcing in India is often associated with the death of its rich culture and
values however its not fair to single out the industry.

22

Over the years India has been changing and the outsourcing Industry has only been a part of this change. No
outsourcing organization has an induction program aimed at training its employees on consumption of drugs, extra
marital affairs, casual sex or the likes. The availability of high disposable income in the hands of the youth may
account for such activities. In India where poverty has been an issue for years and continues to be, the outsourcing
industry came as a huge relief. It provided employment opportunities to even those who could not complete
their education after their twelfth standard. It came as a ray of hope in the lives of retired personnel from the armed
services, women with no vocational background or formal degrees and physically disabled people. Its advent gave
business and increased avenues in the supporting industries like catering, training and
development,transport vendors and security agencies. The role of outsourcing in the progress of the Indian economy
can be substantiated by the fact that the government is planning to initiate a separate ministry for it.

OFFSHORE OUTSOURCING OF CUSTOMER SERVICES BOON OR BANE?

ABSTRACT Purpose Offshore outsourcing of customer services is growing rapidly but there is little known
about its impact on customer perceptions and behavior. This paper aims to combine the learnings from the countryof-origin and service research to address this gap. Design/methodology/approach An online survey was conducted
by contacting a sample of 5,000 customers randomly chosen out of a database of over 100,000 customers provided
by a large American retail FINANCIAL services company, immediately after they had an interaction with an
offshore service representative, resulting in 548 complete and usable questionnaires. Findings Consumer
ethnocentrism has a negative influence on the attitude towards offshore outsourcing and the perceived service quality
and customer satisfaction with offshore call centers. Customer satisfaction also mediates the influence of perceived
service quality on customer complaint behavior, brand image, brand loyalty, and repeat purchase intentions. Research
limitations/implications This paper focuses on the effects of consumer ethnocentrism and attitudes towards
offshore outsourcing on several perceptual and behavioral variables in a B2C context with American customers and
Indian customer service executives. Hence, its findings may not apply to the B2B context and other country settings.
23

Practical implications The findings highlight the need for greateremployee training as well as customer education
for firms using offshore customer service centers, to minimize customer complaints and protect their brand image,
loyalty, and repeat purchase intentions. Originality/value The study offers new insights on the impact of consumer
ethnocentrism and attitude towards offshore outsourcing on customer perceptions and behavioral intentions,
mediated by customer satisfaction and perceived service quality.
Offshore outsourcing is the practice of hiring an external organization to perform some business functions in a
country other than the one where the products or services are actually developed or manufactured. 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 information
technology sectors (data processing, computer programming, and technical support) in countries such as the United
States and the United Kingdom - have been or are potentially affected.

24

OUTSOURCING HR FUNCTION A BOON OR BANE

After the advent of BPO (Business Process Outsourcing) and KPO (Knowledge Process Outsourcing), it is now the
turn of HRO (Human Resource Outsourcing). The concept of HRO is growing at a faster pace as days are passing by.
Human Resource is a very important department in an organization. It is rather an intense pillar of an organization.
Companies are realizing the importance of hiring, training and retaining their employees, therefore tremendous
importance is needed to be given to HR Portfolio. HR outsourcing is the outsourcing of peripheral but necessary
administrative tasks such as payroll, benefits, After the advent of BPO (Business Process Outsourcing) and KPO
(Knowledge Process Outsourcing), it is now the turn of HRO (Human Resource Outsourcing). The concept of HRO
is growing at a faster pace as days are passing by. Human Resource is a very important department in an
organization. It is rather an intense pillar of an organization. Companies are realizing the importance of hiring,
training and retaining their employees, therefore tremendous importance is needed to be given to HR Portfolio. HR
outsourcing is the outsourcing of peripheral but necessary administrative tasks such as payroll, benefits,Outsourcing
HR function is a question of great importance. Today with the growing scenario of industries, we come accross lots
of companys are going for outsourcing their HR Functions.
There are various reasons for this, which may be the companies inability to meet the changing trends in HR or may
due to the increasing cost or lack of adequate talent within the organization.
Here is a presentation which our group of MPM students had prepared to dicuss whether outsourcing is a Boon or
Bane.
The conclusion defines that it depends and varies from organization to organization and also which function is being
outsourced.

25

Why Do Companies Outsource Their HR Functions?

Human Resource Outsourcing (HROs) organizations exist to support, extend, or replace the
human resources (HR) functions for other companies. HROs core business is finding the
ways to make their clients HR functions more efficient and delivering them to the client
organizations. For that reason many of these organizations strive to stay on top of the best
HR practices, emerging workforce technologies, as well as relevant laws, and regulations.
This allows client companies to focus on what is core to their business and re-allocate
internal resources for initiatives focused on increasing revenue and profitability.
HRO provides a unique outside perspective and can result in a true strategic partnership that
may be much harder to achieve within the client organization. The internal HR organization
is expected to be a partner helping attract, groom, and support the key asset of the company
the people.

26

CONCLUSION

The decision on whether or not an organization should outsource a part of their business is a complicated one,
and should not be taken lightly. Searching for short-term cost savings is not a bad idea, but choosing outsourcing
based solely on cost reduction or tactical problems is a short-term solution and will undermine a company's
potential for long term success. The organization should have sufficient management skills and the ability to
adapt new behaviors and processes to successfully manage an external part of their business. These skills should
include knowledge management abilities and a willingness to apply them to a new and more challenging
situation. Tacit knowledge must specifically be considered when planning an outsourcing strategy, particularly if
the component of the business to be outsourced already exists internally and valuable institutional knowledge
will be lost. The transfer of tacit knowledge can have a profound effect on quality and overall strategic business
value. Cultural and language barriers add challenges to the already difficult process of transferring tacit
knowledge and are of particular concern in cases of cross-border outsourcing. Finally, once a decision has been
made to outsource aspects of a business, specific knowledge management strategies can be implemented that will
maximize the benefits that are available from a decentralized business model.

27