Abhinav Singh Diana Wadiwalla Kaushik Anand Natarajan
• Introduction to Outsourcing
• Offshoring and Evolution
• Models of Offshoring
• Evolution and Causes of Offshoring
• Types of IT offshoring, Evaluation Criteria, and Jobs Impacted
• Economic Impact
• Advantages and Benefits of Offshoring
Introduction - Outsourcing
“Outsourcing can be defined as designating the use of goods and services produced outside the enterprise. “
Outsourcing can occur within the country where the enterprise is located (domestic outsourcing) or abroad
(outsourcing abroad/Offshoring)” (OECD, 2007).
Outsourcing is assigning work to a third party for the production of goods or rendering services.
Types of Outsourcing:
Offshoring is defined as the transfer of worker’s productivity to abroad as part of outsourcing or as part of an
in-house transfer of work.
Offshoring allows US companies to capture economic values by creating markets, jobs, and production of goods
in other countries.
Major jobs offshored are in the fields of information technology, financial services, human resources,
purchasing and manufacturing.
TYPES OF OFFSHORING
IT Enabled Offshoring
Models of Offshoring
Global Shared Services - Mass insourcing, something like captive centres, this is followed primarily to
combine internal operations to large centers.
Hybrid Model- Known as “Dual Shore” - 30% work onsite( requirement gathering, client interaction) and 70%
offshore ( coding, testing and fixes).
Multi-sourcing model- Having multiple off-shores to get wide range solutions or “best-of-breed” strategy.
Global Delivery model - also termed as blended outsourcing, this model has advantage of backup delivery
locations in case of failures. Eg: TCS, CTS, Accenture etc.
Build-Operate-Transfer Model (BOT) - company can create a shared services or development center in
offshore and manage it for a limited period of time by signing a contract with an offshoring corporation. This
ensures quick time to achieve stability in the project progress.
Evolution and Cause of Offshoring
Initially offshoring started with blue collar jobs in early 70’s.
By 80’s white collared jobs also started moving to other countries.
Development of Internet accelerated R&D and manufacturing offshoring.
Access to skilled personnel
Long term Benefits
Lack of skilled labor
Decrease in Work Age population
Types of IT Offshoring
Off-site/Offshore Outsourcing Model
Global Delivery Model
Offshoring Vendor Evaluation Criteria
Relevant Work Experience
Availability, Size and Education of Workforce
Language capabilities (Multilinguality and fluency)
Low skilled and repetitive jobs
Complex IT jobs and product design
Manufacturing and R&D jobs
Skilled labor at cheap price will boost the economy in developed country.
Creation of new wealth and jobs in developing country.
With the theory of comparative advantage, both countries can enjoy greater total consumption and well
being in aggregate by trading with each other.
Offshoring firms to lower costs and save scarce resources.
Capture domestic market and generate revenues.
What goes around comes around - Developing countries look back at US for more complex work.
Total exports from US companies to India / China have grown manifold.
Economic benefits are also linked to improved political relations.
Value adds from offshoring
TIME ZONE ADVANTAGE
Enables 24*7 operation.
Provides business opportunities to local economy.
Reduced downtime (maintenance during client off work hours).
SKILLED AND LOW COST LABOR
Education system focussed on IT skills from early age.
Catalyzed by evolving industry, refined speciality in the area of work.
Production of Quality Product from long time, i.e. trust is built.
Low wages and salary.
Quality and Waiting Penalty Group (QWP)
Capability Maturity Model Integration (CMMI)
International Organization for Standardization (ISO Levels)
Intellectual and Proprietary Rights
Offshore Development Centers
Network Security Planning
OTHER MAJOR BENEFITS:
Focus on core activities (Innovation,Research and Development).
Reduced Waiting Time.
Accelerated Process Cycles.
Fragmentation of supply chain enables side by side development.
Elimination of recruitment costs, liabilities of employees.
Flexibility - Eliminating hiring and termination costs.
Increased GDP for both countries.
Better Technology and Infrastructure.
Benefits from Profits.