2. Outsourcing is the contracting out of a business
process, which an organization may have previously
performed internally or has a new need for, to an
independent organization from which the process is
purchased back as a service.
The meaning of outsourcing includes both foreign and
domestic contracting, which may include
offshoring, described as ―a company taking a function out
of their business and relocating it to another country. An
outsourcing deal may also involve transfer of the
employees and assets involved to the outsourcing business
partner.
3. It 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.
4. The practice of purchasing a business function—
instead of providing it internally—is a common
feature of any modern economy, the term
outsourcing became popular in America near the
turn of the 21st century when it entered into
business lexicon. Outsourcing only became a force in
the global economy in the 1990s with advent of
internet.
5. Internet combining of regional computer networks
into a worldwide Internet allowed people from all
reaches of the globe to be connected to one another.
Increased computing power, data storage, and
software capabilities made it possible to manage
their labour. By 1998, outsourcing alone was
responsible for $100 000,000,000 of the global
revenues of American companies and in 2003 it had
increased to $298,500,000,000.
6. COUNTRY POPULATION AREA (Sq. Km) GDP (USD) LABOUR FORCE
NIGERIA 162 000,000 923,770 235,900,000,000 48,530,000
INDIA 1,200,000,000 3,200,000 1,848,000,000,000,000 487,600,000
BRAZIL 196, 000,000 8,500,000 2,477,000,000,000,000 104,700,000
INDONESIA 248,000,000 1,900,000 846,800,000,000 116,500,000
CHINA 1,300,000,000 9,600,000 7,298,000,000,000,000 795,000,000
7. The basic elements in the current outsourcing story
are:
-A large pool of talented and skilled providers
-An equally large market of buyers looking for
global talent and skill
-A mutually agreed compensation package
-The existence of the internet as the medium of
communication and workspace.
8. The following tasks are commonly outsourced:
Human Capital Management and Development -including
Recruitment, Training and Talent Management.
Software development – programmers, as individuals or as
a team can work on their homes apart from each other and
still deliver the needed software.
Research and Content Development – researchers and
writers can develop different types of content for anyone
needing an article on a one time or on-going basis.
9. Back office tasks – office tasks like document filing
and integration, customer support and client contact
building is being done routinely through the web.
Design work – architectural or graphic design is also
routinely outsourced through the web.
Others include cash management, IT Infrastructure,
security, human resources, payroll, insurance claims,
etc.
10. Companies outsource to avoid certain types of costs.
Among the reasons companies elect to outsource include
avoidance of the following
-Burdensome regulations
-High taxes
-High energy costs, and;
-Unreasonable costs.
11. All these may be associated with defined benefits in
labour union contracts and taxes for government
mandated benefits. Perceived or actual gross margin
in the short run incentivizes a company to outsource.
With reduced short run costs, executive
management sees the opportunity for short run
profits while the income growth of the consumer’s
base is strained. This motivates companies to
outsource for lower labour costs.
12. Moreover, companies may seek internal savings to
focus financial resources towards their core business.
A company may outsource its landscaping functions
irrelevant to the core business. Companies and
public entities may outsource certain specialized
functions, such as payroll or benefits, to Automatic
Data Processing (ADP).
13. In recent times, India has continued to blossom from
Outsourcing despite weak economies in key markets
in United States and Europe According to National
Association of Software and Services Companies
(NASSCOM) report,
―Revenues for India’s outsourcing industries are
expected to cross $100, 000,000,000 this financial
year, a 14.8 percent increase from last year and
double 2007. The group, which has over 1,200
corporate members, predicts that revenues will
reach $225, 000,000,000 by 2020.‖
14. Outsourcing industries continue to be one of the
largest employers in India. Over 230,000 jobs were
added in the current fiscal year, bringing total direct
employment to about 2,800,000 people. The number
of foreigners in the industry has grown significantly
as well – as of this year, some 40,000 employees are
not Indian.
While India is doing great with IT
outsourcing, China is doing the same with many
companies outsourcing their manufacturing to
China.
15. Against this backdrop, the opportunity vested in
outsourcing needs to be taken a lot more by the
Federal and State Government as well as the
commanding heights of the private sector.
We have these in our favour:
1. Skilled and Unskilled Manpower
2. Land Mass
3. Geographic Location
16. The latest figure for India is $101,000,000,000
(Outsourcing income is 67%) in the year that ends
March 31, 2012 out of GDP of 1,484,000,000,000.
–National Council of Applied Economic Research.
For Nigeria to experience tremendous growth in our
GDP we have to make our nation one of the leading
investor-friendly destinations. To achieve this I
believe we have a lot to learn from the Indian model.
17. According to a report by Ernst & Young, for the year
that ends March 31, 2012, out of GDP of. FDI in India
stands 5.9% of the total GDP($1,484,000,000,000)
while outsourced work done for clients outside India
is $69 000,000,000 . Also, over 230,000 jobs were
added in the current fiscal year, bringing total direct
employment to about 2,800,000 people.
18. Today, as it stands what Outsourcing contributes in
Nigeria as compared to India to our Gross Domestic
Product (GDP) is less than 2% which is very small
when compared to India of 67%. The existing
Outsourcing in Nigeria is dominated by the foreign-
owned entities from Indian, China, South Africa and
Lebanon. We can infer that if we embrace the Indian
model on outsourcing Nigeria can make the following:
19. If Outsourcing has generated 70% of the Nigeria’s
current FDI $8,900,000,000 we will be looking at
$6,230,000,000 income.
20. It can add more than 630,000 jobs yearly in the
following sectors: Banking and Financial
Services, Information Technology, Soft
Development, Telecommunications, Electronics
(either SKD-Semi Knocked Down or CKD- Complete
Knock Down), Manufacturing, Transportation, etc.
With the huge pool of unemployed graduates of
tertiary institutions, it is clear that outsourcing could
be a way out to solve a critical problem, all things
being equal.
21. In addition, a rise in global technology spending will be
a key factor behind the industry’s boost.
22. For Nigeria to reach its projected growth by 2020, we
have to take advantage of the opportunity vested in
Outsourcing. From my analysis, it is now common
knowledge that the Outsourcing will boost our
home grown business, increase gainful
employment, and fast forward our economy
generally.
