IT- Offshore Outsourcing to India.

University Degree Business and Administrative studies

IT- Offshore Outsourcing to India

Abstract

Outsourcing has taken a new dimension since the development of Information Technology and its competitive use by business firms. Traditionally off shoring is done in relatively cheaper place which can contribute to cost effectiveness of business processes, and today Information Technology enabled outsourcing has become a major tool for businesses to cut the cost incurred on their business and hence adds value towards business contribution. Business firms especially from US and UK are now looking forward to India as their off shore destination, Although there are other destinations, but still India is in leading position, and is a loved destination due to availability of cheap labor, strong and reliable infrastructure and vast pool of talent. This essay takes a comprehensive coverage about the various aspects which make India suddenly a leader in outsourcing destination.

Introduction

India is observing a change, a change which is introducing a new wave and a new model of economy in India. This is reflected in Bill Gates comments “Three years ago, during my visit to India, the country was emerging as an IT superpower. Today, the country is handling the most sophisticated projects in the world...I am impressed with the talent we have in our India Development Center and the quality of software being developed.” (offshoreitoutsourcing.com, 2004)

This gives an indication, about a revolution observed in economy of India, which is highlights in form of rapid growth in ecommerce and IT related business processes. One of such major buzz words is BPO which is Business Processes Outsourcing.

The definition of outsourcing given by Webster's Universal Dictionary is: "A company or person that provides information; to find a supplier or service, to identify a source". And according to definition given by Australian Computer Society about Outsourcing (T.Worthington, President ACS), on their web page ., states that in business scenario outsourcing means is a pure contracting transaction whereby one company purchases services from another while retaining ownership and responsibility for the underlying processes; the clients tells the provider what they want and how they want the work performed. Here the client authorizes the provider not only to own and operate, but also redesign underlying processes, to reap even greater cost and efficiency benefits.

But what is that which makes India, a preferred destination for Business Process Outsourcing, a phenomenon boom in Indian economy, which is now attracting business gurus from world class business institutions from Wharton, Sloan, Kellogg, and Berkeley, to come for research in India.(Rediff.com,2004)

Business Process Outsourcing and India have now become a complementary term for each other.

BPO: What actually is BPO?

Business Processes Outsourcing is in reality a modern management concept. Evidences from business books indicate outsourcing as an activity primarily followed by global businesses such as heavy industrial manufacturing giants, to produce or manufacture some parts of their supply chain to other location in order to lower the cost of production and add value to business and business related processes.

A very common example of outsourcing is case study of Nike Shoes. (Bhatnagar et al, n.d.)

Nike does not own any of the factories that produce its famous sports shoes. Nike designs its shoes in Beaverton, Oregon, but prototype shoes are produced in Seoul or Taipei, and a final production run is done in the contract factories or ‘sweatshops’ in countries like China, Indonesia or Vietnam. The subcontracting arrangement has been highly profitable for Nike, with annual sales reaching US$9.6 billion in 1998. Nike could thus create competition between subcontractors, push down production costs, shift risk, and avoid the difficulties of managing large workforces. However, Nike has also used the subcontracting system as an excuse to avoid responsibility for environmental and work conditions in the sweatshops manufacturing Nike shoes. ( )

But in today’s era of technology, outsourcing has taken a new avatar, it is not just limited to offshore manufacturing to save cost, it has developed itself in information technology enabled business processes which are handed over to an external agency or service provider, who takes control and performs operations of selected processes according to defined measures of performance. (Gartner Dataquest,2004)

This means that BPO has became a part of business strategy which is focused towards outsourcing various key business processes, further

A leading BPO operator in India () suggests that firms and multinational’s prefer to outsource there business ...