Outsourcing Research Paper

Outsourcing Research Paper-26
For some reason, outsourcing of manufacturing never came to be known as off-shoring.The concept of off-shoring came into prominence only when IT work was outsourced to destinations in India.

For some reason, outsourcing of manufacturing never came to be known as off-shoring.The concept of off-shoring came into prominence only when IT work was outsourced to destinations in India.The most frequently cited benefits of IT outsourcing include cost reduction, service-quality improvement, and the ability to focus on the core business.

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In addition to cost reduction, service-quality improvement, and focus on core business, the following reasons are usually cited as possible reasons for outsourcing IT services: One often finds that even large companies that have efficient and innovative IT departments (examples include Dupont, British Petroleum Exploration, Lufthansa, Swiss Bank Corporation, and J. Morgan) and are large enough to provide the same scale and specialization benefits as an outsourcing vendor are nevertheless engaged in significant outsourcing deals.

There are two reasons for the advances that support the rationale for outsourcing by such large firms.

In a more recent article that appeared in Mc Kinsey Quarterly, Stephen Mc Guckin, managing director for IT at Deutsche Post World Net, the corporate parent of Deutsche Post and DHL, indicated that they were able to cut their IT costs by 40% within a year of off-shoring.

Even when there are other benefits sought and expected from outsourcing functions, those benefits are measured and tend to be valued in terms of cost reduction.

A recent review of outsourcing (Espino-Rodriguez & Padron-Robaina, 2006, p.

51) provides different definitions of outsourcing that has evolved over time.Broadly, the form of outsourcing can be any or a combination of the following depending on the vendor location: Most of the initial outsourcing happened in manufacturing sector when automobile and apparel manufacturing companies used companies in China and Far East Asian countries to manufacture relevant components and accessories for their end products. However, the recent advances in telecommunication and information technologies have enabled the possibility of outsourcing even “white-collar” tasks.Today India is a leading destination for outsourcing IT and business process outsourcing (BPO) work.More significantly, a considerable amount of such outsourced work now goes to offshore service providers in LCCs such as India and China.Even global consulting and service providers such as IBM, Cap Gemini, and Accenture have in recent years started creating delivery infrastructure in countries like India to provide cost-effective services to their global clients.Today, the outsourcing of software services has become a standard business practice in organizations rather than an exception.The Outsourcing Institute’s survey of 1,200 companies indicates that 50% of all companies with IS budgets of million or more are either outsourcing or evaluating the option of outsourcing.Outsourcing of activities can range from the most basic to the most complex.For example, an industrial manufacturing firm may provide transportation facilities to its employees to reach the office from their residence and back.On the other hand, a large automobile manufacturer, say General Motors, may contract with an automobile ancillary manufacturing unit in India to manufacture some components for their automobiles.This can be seen as an instance of outsourcing where the firm uses an external vendor to outsource activities related to its main line of business.


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