Outsourcing and Its Potential

OUTSOURCING AND
ITS POTENTIAL FOR

INDIA
BY-JAYA NARULA
WHAT IS OUTSOURCING?
 Outsourcing refers to the process in which
companies entrust the processes of their business
functions to external vendors.
 Generally, companies outsource functions that are
non-core to their business.
 Call centre services, payroll, maintenance, order
and inventory management etc are some of the
kinds of work typically outsourced.
FORMS OF OUTSOURCING
 Onshore Outsourcing- It refers to
procurement of services from someone
outside the company but within the same
country.
 Offshore
Outsourcing- It refers to
procurement of services from abroad.
ADVANTAGES OF OUTSOURCING
1. Cost advantages
 The most obvious and visible benefit relates to
the cost savings that outsourcing brings about.
 Due to the difference in wages between western
countries and Asia, the same kind of work that is
done over there can be done in India at a
fraction of the cost. There is a cost savings of
around 60% by outsourcing your work to India.
2. Swiftness and Expertise
 Most of the times tasks are outsourced to vendors who
specialize in their field.
 The outsourced vendors also have specific equipment
and technical expertise, most of the times better than the
ones at the outsourcing organization.
 Effectively the tasks can be completed faster and with
better quality output.
3. Focus on core areas

Outsourcing your business processes would free your
energies and enable you to focus on building your brand,
invest in research and development and move on to
providing higher value added services.
4. Save on infrastructure and technology-
Outsourcing eliminates the need for investment in
infrastructure as the outsourcing partner takes the
responsibility of the business processes and hence develops
infrastructure for the same.
5. Access to skilled resources

 Providers of services take care of the resourcing needs
with their pool of highly skilled resources.
 The resources employed are well educated in the

respective business areas and are experienced in handling
the business needs of companies that want to outsource.
6. Time zone advantage
 Apart from the cost advantage, the other much touted
benefit has to do with the time zone differential between your
country and the location you are outsourcing to.
 Get your job done while you are closed for the day and
wake up to your service being delivered the next morning.
This unique advantage gives you the benefit of round-the-
clock business operations.
7.Risk-sharing
 one of the most crucial factors determining the outcome of a
campaign is risk-analysis.
 Since the outsourced vendor is a specialist, they plan risk-
mitigating factors better.
5. Staffing Flexibility-Outsourcing will allow
operations that have seasonal or cyclical demands to
bring in additional resources when you need them and
release them when you're done.
Example: An accounting department that is short-handed
during tax season and auditing periods. Outsourcing these
functions can provide the additional resources for a fixed
period of time at a consistent cost.
DISADVANTAGES OF OUTSOURCING
1. Risk of exposing confidential data: When an
organization outsources HR, Payroll and Recruitment
services, it involves a risk of exposing confidential
company information to a third-party.
1. Synchronizing the deliverables: In case you

do not choose a right partner for outsourcing, some of
the common problem areas include stretched delivery
time frames, sub-standard quality output and
inappropriate categorization of responsibilities. At
times it is easier to regulate these factors inside an
organization rather than with an outsourced partner.
3. Hidden costs: Although outsourcing most of the
times is cost-effective at times the hidden costs
involved in signing a contract while signing a
contract across international boundaries may pose
a serious threat.
4. Lack of customer focus: An outsourced

vendor may be catering to the expertise-needs of
multiple organizations at a time. In such situations
vendors may lack complete focus on your
organization’s tasks.
WHY OUTSOURCE TO
INDIA?
THOLONS TOP 100 OUTSOURCING
DESTINATIONS 2015
 Using the proprietary and industry-leading Tholons
Location Assessment Framework,
Tholons(Services Globalization and Investment
Advisory firm) has identified the Top 10 Emerged,
Top 50 Emerging, and 40 Aspiring outsourcing
locations around the world through the
implementation of primary and secondary research,
as well as quantitative and qualitative analysis.
MORE INDIAN CITIES
 Chandigarh (22nd)
 Kolkata (23rd)
 Coimbatore (31st)
 Bhubaneshwar (55th)
 Ahmedabad (63rd)
 India
has the largest technical and
professional talent pool in the world
India remains unmatched when it comes to its vast
pool of skilled and talented human resources. The
country has a population of over 1.2 billion people
and around 3.1 million graduates are added to the
workforce each year. India also holds the distinction
of being the largest English speaking nation in the
world, larger even than the US and UK combined.
 India offers flexible pricing options
 The India remains a top outsourcing provider is due to the

significant cost savings that companies can achieve.
 This is mainly because of the wide gap that exists
between personnel costs in India and that of the
developed countries. For example, a good developer in
the U.S. can cost anywhere from $50 to $80 an hour (for
a full-time staffer depending on skills and experience). In
comparison, the hourly cost of a developer in India can be
negotiated down to as low as $15 per hour.
 This pricing flexibility allows companies the freedom and
creativity in managing their budget and helps them reap
large profits.
 India provides consistent high quality
services
 While the cost factor plays a huge role in outsourcing,
the consistently high quality provided by Indian
outsourcing firms has also enabled India to remain as the
top outsourcing destination.
 "Cost reduction was only part of the reason that
companies were considering offshore outsourcing, there
were benefits to be had in time-to-market and quality,
leading to an adage that companies initially chose India
to save costs but stayed for the speed and quality!"
AT KEARNEY GLOBAL SERVICES LOCATION
INDEX(2014)
 GSLI seeks to bring rigor to companies decisions
about where to locate offshore operations.
 GSLI tracks the contours of offshoring landscape in
51 countries across 3 major activities:
1. Financial Attractiveness
2. People skills and availabilities
3. Business Environment
 India boasts of the best in Infrastructure and
technological capabilities
 In India, Clients are offered the latest and best in
software technology, including customized solutions for
various applications such as e-commerce, business
process re-engineering, system migration, legacy system
maintenance, system integration, and much more.
 Outsourcing companies also maintain uninterrupted
communication channels with clients by providing high-
speed bandwidth via satellite connectivity, submarine
cables and fiber optic networks.
 The Indian Government is stable and offers
attractive IT policies
 The Indian outsourcing industry is supported by a stable
pro-IT government whose policies on the economy, GDP
growth, taxation, power, telecom, industrial parks and
special zones have been helpful in improving
infrastructure as well as communications systems.
 IT is regarded as one of the top 5 priority industries in
India, and the government has framed policies to obtain
maximum benefit from IT outsourcing to India.
 The government has offered its support to the IT industry
by providing various tax-related and other benefits and by
enacting the Information Technology Act.
 Indian companies provide the quickest time-
to-market
 Indian outsourcing companies are able to provide the
quickest time-to-market due to the advantages gained by
time zone differences.
 The 12-hour time difference between India and the USA
provides companies with numerous opportunities for
work to be completed earlier than expected, leading to
greater efficiency, increased productivity and more time
to focus on other crucial tasks.
 The time difference makes India an ideal option for
clients who wish to outsource various service-related
options, such as 24X7 Customer Support and Helpdesk
services.
TOP OUTSOURCING COMPANIES IN THE
WORLD
International Association of Outsourcing
Professionals (IAOP) has recently come
out with “The Global Outsourcing 100” for 2014
which enlists the top outsourcing companies in the
world.
What is unique about this list is – It does not rank
the companies on its size alone but based on
various different Outsourcing parameters which
include:
 Customer References
 Balanced performance
 Management Capabilities
 Size & Growth
 Demonstrated Competencies
The various companies have given the following
ranks:
1. ISS (Integrated Service Solutions)-Balanced
performance, Co. based in Denmark
2. Accenture(Ireland)- Balanced Performance
3. CBRE (US based Commercial Real Estate
Company)- Balanced Performance
4. Kelly Outsourcing and Consulting Group(US)-
Balanced Performance
5. Colliers International(US)- Management
Capabilities
Indian Companies:
o HCL Technologies ranked 6th
o L&T Infotech ranked 22nd
o Mindtree ranked 33rd
o Datamatics Global Services ranked 39th
GROWING AREAS OF OUTSOURCING
 Knowledge Process Outsourcing(KPO)
With the evolution and maturity of companies,
businesses are moving towards outsourcing high-
end processes such as legal processes, market
research and analytics, engineering processes,
design and product development. Such off shoring
of high-end knowledge intensive work is termed as
KPO.
 The industry has also finally come of age, with the
sector now providing a variety of services such as
clinical trial management, along with advanced
research &analytics. Popular KPO services include
services to the financial sector
(such as insurance & actuarial services, corporate
credit & project finance services, equity research,
and investment banking) intellectual property
research, medical &legal research, and research in
biotechnology &pharmaceuticals.
 According to ASSOCHAM, the Indian KPO sector
accounts for about 70% of the global KPO industry
and is expected to grow at a CAGR of 30% to reach
$30Bn in 2015, with financial services being the
largest contributor.
PHILIPPINES AS A EMERGING DESTINATION
 Philippines attracts vendors because it possessed an
outsourcing bond that’s maturing, improved macro-
economic environment, and an expanding domestic
market.
 Apart from a highly literate and fluent population, the
country was seen as having an edge over other rising
stars like because it invested heavily in training
programs for BPO employees and managers. Such
continued learning initiatives did not only provide
trainees with basic outsourcing knowledge but also
equipped them with skills that enabled them to compete
with the best from around the world.
 Government is putting an effort to develop an operating
platform for the IT-BPO industry through grants and
enhanced infrastructure.
CHINA AS AN EMERGING DESTINATION
 Chinese vendors offer specific business knowledge in
areas such as banking, insurance, and healthcare. Such
specialization creates closer links between vendor and
client, resulting in higher productivity and profitability for
both.
 Government have also launched initiatives to develop
education, training, and other supporting infrastructure.
 One of China’s strengths in outsourcing is its vast talent
pool of skilled technicians and engineers.
 Most outsourcing service providers in China have
adopted strict security measures to prevent customers’
intellectual property from falling into the wrong hands.
INDIA LACKING?
 Human resource experts have also uncovered
potential areas for concern in India’s current labor
scene:
•Gradual salary increase that has affected cost

savings advantage
•Higher labor costs resulting in an intense
competition to get employees with the right skill
sets
•Low company loyalty and high attrition rates
•Poaching of key employees by competitors
But still its better than other destinations.
CONCLUSION
 India remains the preeminent destination for
outsourcing services with excellence in IT, BPO and
voice services.
 According to National Association of Software and
services Companies(NASSCOM) the outsourcing
sector today employs one million people and
represents 25% of India’s total Exports.
 The IT service sector dominates the industry with
exports of $40 billion followed by BPO exports of
$20 billion.
 According to survey by AT Kearney, India’s share in
world outsourcing is 55%.
THANK
YOU

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OUTSOURCING AND

ITS POTENTIAL FOR

3. Focus on core areas

5. Access to skilled resources

 The resources employed are well educated in the

1. Synchronizing the deliverables: In case you

4. Lack of customer focus: An outsourced

 The India remains a top outsourcing provider is due to the

 Size & Growth

•Gradual salary increase that has affected cost

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