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Outsourcing & Offshoring


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Outsourcing & Offshoring, Advantages & disadvantages, Why outsourcing, Global market, Why India & Case study.

Published in: Business, News & Politics
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Outsourcing & Offshoring

  1. 1. Outsourcing & Offshoring Date: 15th December-13 XMBA-25,ITM-Vashi Arun Khedwal Shirish Telsang Archana Bamanale Gajendra Sawant
  2. 2. Agenda Brainstorming Definition’s History & Evolution Why to Outsource? Size of the Market Advantages vs. Disadvantages Case Study I - Apple Inc. Case Study II - Nike Inc. Future of Outsourcing Video
  3. 3. Free Trade Make or Buy Better diversification Flexible Assign task to external enterprises Globalisation Outsource Work Foreign Countries OUTSOURCING? Not sure if good or bad destroys jobs What does that means? Problems One mans blessing is another mans curse India & China Lower operational and labour costs Focus on core business Saving cost
  4. 4. Definition’s Outsourcing is any task, operation, job, process that could be performed by employees within an organization , but is instead contracted to a third party for a significant period of time generally non-core aspects of the business that are outsourced Outsourcing refers to contracting work out to an external organization Outsourcing includes both foreign and domestic contracting Sometimes includes offshoring or relocating a business function to another country
  5. 5. History & Evolution 1989- Outsourcing done via internet in mid nineties 1990- The Modern Wave: BPO (Business Process Outsourcing ) 2000-Accepted practice in Europe Any task that was not vital for the companies, (especially tedious) work like: - Data entry jobs - Accounting - Support services - Mail distribution within the company
  6. 6. Why Outsource?
  7. 7. Market size, Facts & Figures IT Services to grow 3.5% in 2013,4.7 % CAGR to 2017 BPO Services to grow 5.1% in 2013,6.0 % CAGR to 2017 Global BPO & IT Services market is US $ 952 Billion IT Services – US $ 648 Billion BPO – US $ 304 Billion A job outsourced is a job lost India maintains a strong-lead in terms of language skills and vendor maturity, together with an enviable track record and strong albeit slow legal system Availability of a fairly large and qualified pool of workers is imperative to the success of these Indian cities over the rest of the world
  8. 8. Just India  Meeting growing demands for inexpensive product  India holds leadership position in offshore outsourcing market today
  9. 9. Advantages vs. Disadvantages Cost Saving
  10. 10. Cost Savings Lower operational and labor costs are among the primary reasons why companies choose to outsource. When properly executed it has a defining impact on a company’s revenue recognition and can deliver significant savings.
  11. 11. Advantages vs. Disadvantages Cost Saving Quality Problems
  12. 12. Advantages vs. Disadvantages Specialization Cost Saving Loss of managerial control Quality Problems
  13. 13. Advantages vs. Disadvantages Loss of managerial control Specialization Cost Saving Focus Quality Problems
  14. 14. World Class Capabilities Outsourcing and offshoring also enable companies to tap in to and leverage a global knowledge base, having access to world class capabilities. Outsourcing also enables companies to realize the benefits of re-engineering.
  15. 15. Advantages vs. Disadvantages Threat to security & confidentiality Specialization Cost Saving Focus Loss of managerial control Quality Problems
  16. 16. Advantages vs. Disadvantages Lack of customer focus Threat to security & confidentiality Specialization Cost Saving Focus Loss of managerial control Quality Problems
  17. 17. Advantages vs. Disadvantages Lack of customer focus Specialization Cost Saving More Successful Focus Threat to security & confidentiality Loss of managerial control Quality Problems
  18. 18. Advantages vs. Disadvantages Lack of customer focus Increase speed to market Specialization Cost Saving Expand Service More Successful Focus Threat to security & confidentiality Loss of managerial control Quality Problems
  19. 19. Case Study I – Apple Inc.
  20. 20. About Apple Inc.  American MNC  World's second-largest information technology company  Employee - 72,000 ( As on Sep-12)  Revenue: US $ 171 billion  Net Revenue per employee : 2.375 millions  Apple Inc. is sitting at US $416.6 billion  Apple Inc. 200,000 assembly line workers making iPhones in China  In July 2011, Apple Inc. had more cash in the bank than the US government.  iPhone assembly process is 141 stage
  21. 21. Strategy
  22. 22. Case Study II - Nike
  23. 23. About Nike  American MNC  Clothing, footwear, sportswear, and equipment supplier  It has 48,000 employees worldwide  Manufacturing: They utilize an outsourcing strategy, using only subcontractors throughout the globe.  Over 500,000 people today directly engaged in the production of their products  Factories are 100% owned by subcontractors, with the majority of their output consisting solely of Nike products  With 38% in global sports footwear market, it is the most successful sports footwear manufacturer in the world!  Revenue: US$24.128 billion  Average number of Nike shoes sold each year 150 million
  24. 24. Future of Outsourcing  Outsourcing will continue to grow  Services will become more standardized, creating new norms  New service providers will appear in Eastern Europe and China  Asian players will move on-shore and compete head-on with traditional local players  Local regulations will continue to be opened up to support cross-border services  Politics will start to address increasing social issues and concerns
  25. 25. Thanks Q & A session