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Mgt704 1.5 offshoring bpo narrated a bpo ambidextrous

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Mgt704 1.5 offshoring bpo narrated a bpo ambidextrous

  1. 1. MGT704 Global Business Management 1.5 Offshoring/BPO Dr Jane Craig
  2. 2. Recall our focus: Creating value in a world of global competition Introduction to the course
  3. 3. Growing and internationalising a business Complex international diversification Emerging markets / Emerging giants Introduction to the course in course outline
  4. 4. Module 1: Growing and internationalising a business • Drivers of globalisation • Internationalising the entrepreneurial firm • Entering foreign markets • Offshoring/BPO Module 2: Complex international diversification • Structures for complexity • Managing global competitive dynamics • Local firm responses to MNCs Module 3: Emerging markets / Emerging giants • Borrowing and leveraging resources (I) • Borrowing and leveraging resources (II) • National competitive advantage • MNCs from developed economies • Emerging giants from fast-growing emerging economies Introduction to the course in course outline
  5. 5. BPO as ambidextrous global strategy India and IT outsourcing Building capabilities in software services Infosys Agenda
  6. 6. Some terminology Captive sourcing (FDI) Onshoring Domestic in- house Offshoring Locationofactivity Mode of activity In-house Foreign Domestic Outsourcing Source: Peng, Fig 3.4, p70
  7. 7. Definition • Gartner identify four segments of BPO: – Customer management (sales, marketing and customer care) – Enterprise services (HR, finance and accounting [F&A], operations and payment services) – Vertical services (vertical-industry-focused processes, such as mortgage services and credit card services for the banking sector, claims processing for insurance, and billing services for telecommunications) – Supply management services (logistics, procurement and warehousing http://search.proquest.com.ezproxy.usc.edu.au:2048/docview/1076409525/1 3FF9B7209019EB598F/13?accountid=28745
  8. 8. Opportunities for both players • Outsourcing benefits for client firms • Opportunity to develop capabilities and “move up the value chain” for service providers
  9. 9. Main reason for offshoring • Strong supply of skilled and qualified professionals at lower labour cost than in the client company’s home country • Often India • BPO is any outsourcing of knowledge-intensive processes (often IT) http://articles.economictimes.indiatimes.com/2012-04-28/news/31453472_1_outsourcing- industry-bpo-spending-indian-it-bpo
  10. 10. Reasons have evolved to include innovation In recent years, the number of companies that outsource critical business processes to outside suppliers has grown significantly worldwide. The business-process outsourcing (BPO) market has been estimated to be worth $309 billion in 2012, including activities such as finance and accounting, human resource management, procurement and legal services, and the overall volume is estimated to be growing at a rate of around 25% annually. Many organizations initiated BPO as part of an operational effort (for example, to reduce costs or access skills), but it has evolved into much more. Lacity, Mary C; Willcocks, Leslie P (2013) Outsourcing Business Processes for Innovation MIT Sloan Management Review 54 (3) 63-69.
  11. 11. Global sourcing a key trend • core component of F500 companies’ corporate strategy • scope expanding beyond traditional IT or transaction processing – using global sourcing as a way to position for long- term capability building (skills and capacity) • a competitive necessity • challenge: integrate process and IT operations to improve effectiveness and efficiency
  12. 12. Outsourcing trend “The board of directors of virtually every big company are now insisting on very articulated outsourcing strategy” – Businessweek, 2006 This isn’t about labor cost…the issue is that if you don’t do it you won’t survive – MD of Deutsche Bank Global Business, Jan 2006
  13. 13. Offshore addressable market is increasing • Leading role of Global 500 and Fortune 1000 IT spending • sets trend for rest of business world • combined IT spend represents 40% of global IT spending • IT budget constitutes 2.3% of $20 trillion combined revenues
  14. 14. Rapid growth in outsourcing • business drivers • reduce costs • build competencies • increase revenue • key segment: Indian IT services Indian IT services exports : Growth Trends Source: NASSCOM

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