.

1. GLOBAL
OUTSOURCING
Contemporary issues

2. Index
Sno. Topic Slide no.
1. What is outsourcing ? 3
2. Types of outsourcing 4
3. Key trends in outsourcing 5-6
4. Contemporary issues in outsourcing 7 – 14
5. Case studies 15 - 16
6. How to overcome outsourcing challenges 17 – 18
7. Future of outsourcing 19 – 20
8. Conclusion 21
Presented by :
BHUMIKA - BCH/23/186
MUSKAN - BCH/23/80

3. What is outsourcing
The term “outsourcing” refers to: the practice of a business contracting with a third-party supplier to provide products
or services that are currently handled in-house by staff. That is the simple outsourcing def.
Because of outsourcing, many businesses have been able to reduce expenses, gain access to specialized expertise
(such as outsourced logistics hr support), and improve overall performance.
◦ HOW OUTSOURCING WORKS
Outsourcing involves transferring specific tasks or functions from within an organization to an outside contractor
When businesses outsource logistics, their employees can focus on their strengths and the goals of the business while
depending on external vendors for specialized assistance in areas including IT, customer service, labor management,
finances, warehousing and fulfillment, and more.
Outsourced activities can range from simple administrative tasks like data entry to complex projects like network
design and order fulfillment.

4. Types of outsourcing
There are several types of outsourcing. Because every business has its own requirements,
expenses, and systems in place, the business must carefully assess the benefits of
outsourcing, and the type of outsourcing most applicable to the company’s needs.
Here are the most common types of outsourcing and a quick explanation for each one:
◦ BPO (BUSINESS PROCESS OUTSOURCING)
◦ LPO (LEGAL PROCESS OUTSOURCING)
◦ KPO (KNOWLEDGE PROCESS OUTSOURCING)
◦ ITO (INFORMATION TECHNOLOGY OUTSOURCING)
◦ FACILITIES MANAGEMENT OUTSOURCING
◦ CREATIVE PROCESS OUTSOURCING
◦ MANUFACTURING OUTSOURCING

5. Key trends in outsourcing
Constantly, the future of outsourcing is being shaped by several transformative trends . As businesses
navigate a rapidly changing global landscape, understanding these trends is crucial for maintaining a
competitive edge.
◦ 1. Rise of Artificial Intelligence and Automation
AI-Powered Automation and Process Efficiency
Predictive Analysis and Data-Driven Decisions
AI in Customer Service and RPA Integration
◦ 2. Expansion of the Remote and Distributed Workforce
Growth in Global Talent Pool
Freelance and Independent Contracting
Collaboration Tools for Real-Time Communication

6. ◦ 3. Emphasis on Data Security and Compliance
Addressing the Threat Landscape in Outsourcing
Compliance with Global Data Regulations
Best Practices for Securing Outsourced Data
◦ 4. Shifts in Outsourcing Destinations
Nearshoring vs. Offshoring: Pros and Cons
Emerging Markets and Regional Preferences
Smartshoring and Ecosystem-Based Outsourcing
◦ 5. Focus on Sustainable and Ethical Outsourcing
Environmentally Friendly Outsourcing Practices
Impact of Social Responsibility on Outsourcing Choices
◦ 6. Increased Demand for Innovation and R&D Outsourcing
Outsourcing for Competitive Advantage
R&D and Product Development Partnerships

7. Contemporary issues in outsourcing
1. Data Security & Privacy Risks
2. Quality Control & Service Delivery Issues
3. Over-Reliance on Third-Party Vendors
4. Ethical & Social Responsibility Concerns
5. Political & Economic Uncertainties
6. Hidden Costs & Legal Complexities
7.Insufficient vendor evaluation
8.Difficulty coordinating different vendors
9. Limitations on innovation
10. Loss of control over processes and outcomes

8. 1. Data security and privacy risk
◦ A data breach costs an average of $9.44 million to rectify, and there are 2,200 cyber attacks daily. Your outsourcing
vendor might need to access your critical systems in order to get their work done. Outsourcing can represent a
cybersecurity risk because the workers will be using networks and computers that aren’t owned or overseen by your in-
house cybersecurity team.
◦ However, with remote work being so common, most companies have remote cybersecurity measures in place. Just make
sure that you’re able to extend these to the outsourcing company, or that your internal cybersecurity team reviews the
vendor’s procedures.
◦ In our tech-driven world, data is gold. As businesses, we hold sensitive information, from customer data to internal
operations, intellectual property, and even strategic plans. When we entrust a part of our operations to outsourcing
companies, we inevitably share some of this sensitive data, sparking privacy and security concerns – one of the most
common outsourcing risks.
◦ Take, for instance, a healthcare marketing firm that outsources its customer support. The outsourcing company now has
access to sensitive patient information, making it a potential target for cybercriminals. If the outsourcing company
doesn’t have airtight data security protocols, it can lead to a data breach, impacting both patient privacy and the firm’s
reputation.

9. 2. Quality control and service delivery
issues
Quality control is paramount to any business operation, and it becomes a focal concern when tasks or processes
are outsourced. The risk of compromised quality is a significant outsourcing risk that can mar an otherwise fruitful
relationship with an outsourcing firm.
When working with remote teams, especially those situated in different parts of the world, ensuring that the
quality standards are uniform and meet the expectations of the business becomes a challenging endeavor. Poor
quality work not only affects the final product but can also tarnish a company’s reputation and lead to a loss of
trust among customers or clients.
Ensuring the quality of work is upheld to your standards can be challenging when an external party completes
tasks. Different standards and procedures between your business and the outsourcing provider can lead to
inconsistencies and quality control issues.
Despite these challenges, quality control is not an insurmountable obstacle in outsourcing. Here are ways to
ensure quality control with your outsourcing partner:
• Define Quality Standards
• Implement Regular Checks
• Encourage Open Communication

10. 3. Dependence on provider
In the business world, outsourcing is not merely a transaction; it’s a relationship. While leveraging an
outsourcing company’s expertise can be highly beneficial, there lies a hidden danger in becoming
overly reliant on them. This risk is especially pronounced when the contractor’s expertise is pivotal in
areas that align closely with the company’s core competencies.
The decision to outsource shouldn’t lead to a relinquishing of knowledge or essential capabilities.
Excessive dependence on your outsourcing partner may place your company in a vulnerable
position, especially if the relationship turns sour or if the partner fails to meet project requirements.
◦ Here’s how to avoid excessive dependence on an outsourcing partner:
1. Maintain In-House Expertise
2. Invest in knowledge transfer
3. Diversify your outsourcing partners
4. Define clear boundries

11. 4. Cultural and time zone difference
In our increasingly globalized business world, outsourcing often implies working across different cultures and time zones.
While this presents exciting opportunities, it also introduces two significant outsourcing risks: cultural differences and time
zone discrepancies.
Cultural differences can manifest in various ways, from contrasting work ethics to varying communication styles, which may
lead to misunderstandings, poor communication, and discrepancies in work output. Similarly, time zone differences can
complicate scheduling, coordination, and timely responses, thereby hindering the smooth execution of tasks and progress
toward business goals.
Overcoming these challenges requires conscious effort, understanding, and the implementation of smart strategies:
• Cultural Sensitivity Training
• Clear Communication Guidelines
• Flexible Scheduling
• Language proficiency

12. 5. Hidden costs and legal complexities
Outsourcing is often hailed for its cost-savings potential. However, one of the common risks that can undermine all the benefits
of this business strategy is the potential for unforeseen and hidden costs. Many companies start their outsourcing journey with a
focus on the anticipated cost savings, only to be surprised by additional expenses down the line.
Hidden costs may come in various forms, such as training costs, technology or software upgrades, transaction fees, or even costs
associated with communication or time zone differences. For instance, a company might outsource its customer service to take
advantage of lower labor costs, only to face unexpected expenses like additional training or higher telecommunication fees.
To steer clear of such pitfalls, here are some strategies that can help:
1. Thoroughly Understand Your Agreement
2. Clarify Costs Beforehand
3. Regularly Review Expenses
4. Opt for a Transparent Pricing Model

13. 6. Loss of control over processes and
outcomes
◦ When you outsource, you often lose control over the work processes and procedures—
which in turn represents a loss of control over the final outcomes.
◦ This is especially true when hiring a fully managed agency. They will be managing
individual players, and you might not even have access to the customer support reps or
developers working for your brand. This can be a good thing if their managers are skilled
(because you don’t have to do that work), but it can also be a bad thing if you don’t like the
way they operate.
◦ When interviewing vendors, make sure you’re aligned on work philosophies so you’re
pleased with the process and more likely to achieve your desired outcomes.

14. 7. Insufficient vendor evaluation
◦ It is not easy to evaluate third-party vendors. You might only talk to their sales team, and
never have a chance to interview the people who will actually be doing the work. This
means you have to trust their technical interview processes, instead of being able to
interview candidates yourself the way you would if you were hiring for a full-time role.
◦ Outsourcing services might also blatantly lie about their capabilities in order to win your
business. Or, salespeople might make promises that the vendor can’t fulfill.
◦ To mitigate this issue, you’ll want to talk with former clients to hear their experience. You
should also ask the vendor what sort of guarantees and cancellation policies they offer in
case you’re not satisfied.

15. Outsourcing Failure Case 1 : IBM and
Queensland
In the year 2007, Queensland took an initiative to create an application to manage the payroll of the health department of
Queensland. This project was outsourced to IBM and the company promised to finish the project by the mid of 2008 with a
budget of $6 Million.
After the project began, IBM was experiencing some technical difficulties and informed the state the budget will go up to $27
million. Years after that IBM kept dragging the project and the payroll system kept on failing to work correctly.
This distressed situation led to numerous miscalculations in payout for employees like unpaid employees or overpaid
employees. As the project gradually came to an end the amount of money that stood as a cost was $1.2 billion(which is
16,000% more than the initial budget).
This outsourcing failure incident made Queensland bar IBM from working further on any such government projects thus IBM
taking a huge toll on its reputation.
Key Takeaways:
• Provide realistic deadlines to third-party vendors.
• Assess the skills of the outsourced team rather than just their brand value.
• Prioritize project risks and budget projections.

16. Outsourcing Failure Case 2 : Accenture and hertz
This outsourcing failure case happened in the year 2017 when Hertz hired Accenture as an outsourced partner for a
project. In order to make the project right, Hertz has spent months planning, defining goals, strategies, business
planning, and development roadmaps.
However, when Accenture came into the picture, it deliberately neglected several of the platform’s scalability criteria
and limited its applicability to a particular geographical region. Making it impossible for the brand to use the
application outside North America.
This incident was a huge blow to the reputation of the IT giant Accenture which faced a lawsuit for outsourcing failure
from Hertz in the year 2019, which also gained many people’s attention.
Key Takeaways:
• Always provide a clear description of what you expect from the project.
• Stay in touch with the contracted team at all times.
• Formalize the assertions made by outsourcing suppliers.

17. How to Overcome Outsourcing
Challenges
1. Project Control
◦ The Solution: The easiest method to tackle this difficulty in software development outsourcing is to clarify how much control
the outsourcing company’s workers have over the project in the outsourcing contract. What kinds of decisions may a service
provider make about outsourced work should be clear. Both the organization requesting outsourcing services and the
vendor’s workers should be aware of the service contract’s terms
2. Outsourcing Experience
◦ The Solution: An expert vendor will help you in avoiding bottlenecks and mitigating any hazards through the process. They
will assist you in defining requirements and identifying the best candidates for the task. Ultimately you will always keep in
mind that outsourcing is hazardous, you’re ready to take the correct supplier will be there to help you every step of the way.
3. Challenges in Data Security and Intellectual Property
The Solution: By signing legally enforceable contracts with the outsourcing firm, such as a non-disclosure agreement you can
solve this challenge. When a service provider maintains strict data rules, the danger of a data breach is reduced.

18. 4. Communication Challenges
◦ The Solution: Using Instant messaging and video calling capabilities may solve communication problems. Utilize remote
working technologies like Basecamp and Jira. Choose outsourcing partners in English-speaking nations like India or other
countries where workers can fluently speak English. By doing this you may overcome language barriers.
5. Differences in Organizational Culture
◦ The Solution: The best solution for this challenge is, when you going to outsource a project, then establish a training
program to educate its staff about the outsourced service provider’s organizational and regional cultures. An outsourced
service provider might run a similar training for its personnel that focuses on the clients’ organizational and geographical
cultures.
6. Challenge in Transferring Knowledge
◦ The Solution: Create one document regarding a detailed plan about knowledge transfer, including the features, code logic,
and technology by this your vendor should be able to understand the project.

19. Future of Outsourcing
Constantly, the future of outsourcing is being shaped by several transformative trends . As businesses navigate a rapidly
changing global landscape, understanding these trends is crucial for maintaining a competitive edge.
1. Rise of Artificial Intelligence and Automation
◦ AI-Powered Automation and Process Efficiency
◦ AI-powered automation is transforming outsourcing by improving efficiency, reducing costs, and increasing accuracy.
Tools like AI-driven chatbots handle routine tasks, enabling human agents to focus on complex issues, and enhancing both
productivity and customer satisfaction.
2. Expansion of the Remote and Distributed Workforce
◦ Growth in Global Talent Pool
◦ The growth of remote work is expanding the global talent pool, enabling businesses to access skilled professionals
worldwide. This shift offers cost-effective, high-quality solutions, especially for startups and marketing agencies.

20. 3. Emphasis on Data Security and Compliance
◦ Addressing the Threat Landscape in Outsourcing
◦ As outsourcing grows, data security is a top priority. Companies must implement robust measures like encryption, access
controls, and regular audits to safeguard sensitive information from cyber threats.
4. Shifts in Outsourcing Destinations
◦ Nearshoring vs. Offshoring: Pros and Cons
◦ Businesses are rethinking outsourcing destinations, balancing nearshoring’s proximity and cultural alignment with
offshoring’s cost benefits. Evaluating specific needs helps companies determine the most effective approach.
◦ Emerging Markets and Regional Preferences
◦ Emerging markets like Latin America and Eastern Europe are rising as top outsourcing destinations, offering skilled talent
and competitive costs. Understanding regional strengths ensures successful outsourcing partnerships.
5. Focus on Sustainable and Ethical Outsourcing
◦ Environmentally Friendly Outsourcing Practices
◦ Sustainability is now a major factor in outsourcing decisions, with companies embracing eco-friendly practices like
reducing carbon footprints and adopting green technologies. These efforts support the planet and strengthen its brand
reputation.

21. Conclusion
◦ Lastly, outsourcing may be a great method for businesses to reduce expenses and increase efficiency, but it’s crucial
to be aware of the possible dangers and take precautions to prevent them.
◦ Failure to communicate clearly, cultural differences, problems with quality control, a lack of trust, an inadequate
technology infrastructure, misaligned goals, poor management, reliance on a single vendor, unforeseen difficulties,
and a lack of planning are some of the causes of outsourcing failure.
◦ Companies may improve their chances of success when outsourcing by recognizing and resolving these problems.
It’s crucial for businesses to create trust, develop quality control procedures, maintain open lines of communication
with the outsourcing partner, consider cultural differences, and make sure their technical infrastructure is
competent.
◦ A plan to handle and mitigate unanticipated issues should also be in place, as well as a varied vendor strategy and
effective project management. Companies may benefit from outsourcing while limiting risks by taking the required
procedures to prevent the typical causes of outsourcing failure.