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DISSERTATION REPORT ON Global Trends in Outsourcing and their Impact DONE AT

SUBMITTED IN PARTIAL FULFILLMENT FOR THE DEGREE REQUIREMENTS OF POST GRADUTION DIPLOMA IN MANAGEMENT

SUBMITTED BY: MEHABOOB JOIYA PGDM GENERAL

GUIDED BY: PARUL TANDON (FACULTY, DSBS)

PGDMA 1120

DAYANANDA SAGAR BUSINESS SCHOOL SHAVIGE MALLESWARA HILLS, KAMARSWAMY LAYOUT BANGALORE-560078
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GUIDE DECLARATION
This is to certify that the report titled Global Trends in Outsourcing and their Impact has been prepared under my guidance and supervision. The report is submitted in partial fulfillment of the requirement for the award of Post Graduate Diploma in Management (Approved by AICTE) by student name Mehaboob Joiya Reg. DSBSPGDMA1120 and this report / study has not formed a basis for the award of any degree or diploma in any university / institution.

Place: Bangalore

Guide Name Parul Tandon

Date:

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STUDENT DECLARATION
I hereby declare that the report/ study titled Global Trends in Outsourcing and their
Impact

prepared under the guidance of Aslam Joiya (Sourcing Specialist) and my internal

guide Parul Tandon submitted in partial fulfillment of the requirement for the award of Post Graduates Diploma in Management (AICTE) in Dayananda Sagar Business School is my original work and has not been submitted for the award of any other degree/ diploma in any university / institution.

Place: - Bangalore

Mehaboob Joiya

Date

(Signature)

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LIST OF TABLES
Organization Certificate ..................................................................................... 2 Guide Declaration ............................................................................................... 3 Student Declaration ............................................................................................ 4 Acknowledgement ............................................................................................... 5 Chapter-1 Introduction of Study ......................................................................... Objective of the Study ................................................................................ Importance of the Study............................................................................. Research Methodology ............................................................................... Limitations of the Study ............................................................................. Scope of the Study.......................................................................................

Chapter-3 Company Overview ............................................................................ Introduction of Company .......................................................................... Services offer by company ........................................................................ ..................................................................................................................... .....................................................................................................................

Chapter-5 L R .......................................................................................................

Chapter-6 Finding and Recommendation .........................................................

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Chapter-7 Conclusion ..................................................................................................................

..................................................................................................................................................................

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1. Introduction of study:
The term outsourcing was introduced in the mid 1980s. However, the idea of hiring someone else to do specific jobs or of dividing labour has existed for hundreds of years. In business, outsourcing can be found everywhere; whether big or small, simple or complex. During the pre-1900s, the outsourcing was primarily focused on labour intensive production tasks and business activities outside the companys core competitiveness, such as outsourcing printing press, food preparation and janitorial work, hiring the seasonal migrant farm workers and so on. In industry society, outsourcing began with manufacturing. In order to reduce the cost after the Great depression, manufacturers began to think of outsourcing complex production task instead of building their core competencies through controlling the production process from end to end vertically. Most large manufacturing firm have had outsourcing relationships for decades, such as the relationship of the automobile industry to many different producers of metal, glass, rubber, and electrical products. By the end of the 1930s two thirds of fords production came from outside sources. As a result a global outsourcing in the post war economy the cost savings and productivity benefits are achieved. Thus, many companies began turning over some or all of their production processes to business partners. Today, contract manufacturing is the norm in industries ranging from electronics to telecommunications to biotechnology, and outsourcing of primary supply chain activities has been common in industries. Some outsourcers even offer services, such as assembly, packaging and distribution, to ship customers goods anywhere in the world. By these means, outsourcing helps companies deliver new products to markets more quickly, provide a cost effective way to stay with the up to date technology and latest procedures, and concentrate on enhancing core business ability and increase global reach. Consequently, more and more companies in manufacturing industry began to outsource parts of their business. A survey released by Accenture pointed out that nearly half of companies in Europe and the USA are considering outsourcing in their procurement operations with three years, more than doubling the 22% of respondents who said they currently outsource aspects of procurement. Besides, 31% of the largest companies
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surveyed said they presently outsource some aspects of procurement, while another 34% said they intend to do so in the future. First, this paper will introduce global outsourcing types, functions and other interesting issues to readers, and then it will explore the relationship between global outsourcing and organizational effectiveness. The conclusion will demonstrate future issues and importance of global outsourcing. In general, this paper will explore the global outsourcing issue and its impacts on organizational performance. Based on different perspectives, this paper will explain that global outsourcing has strongly influenced the organizations effectiveness and efficiency. Moreover, this influence will finally lead companies to reach their competitive advantages. This project sought to identify trends in the global business sphere of outsourcing and its various subsets. This longitudinal study examines past research surrounding this complex topic and connects it with both current academic and professional opinion to target the problems that Currently surround outsourcing, identify the strengths of outsourcing, and how a business may harness these strengths to their advantage. Outsourcing is important for every business, regardless of its size or location. Every continent is now recognized in some category for outsourcing and it is apparent that this is a sustainable, proven part of many companies strategic goals. Outsourcing has significant importance to not only businesses that choose to engage in said activities, but also to the citizens of any country with involvement in outsourcing. As governments seek to increase their own prosperity, they may in fact hinder modern economic best practices such as free-trade and the autonomy of business through elaborate taxation and Legislative measures. Outsourcing is a function that combines the complexity of logistics investing, and contract management. Businesses now face a growing array of factors influencing outsourcing and it is imperative that they understand the nuances of outsourcing so they that they may readily adapt to a rapidly changing global economy. The data shows that the forces driving organizations to globally integrate are not easing, but rather, emerging trends signal the continuation and deepening of these new business practices.

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Global outsourcing explanations:

Why global outsourcing? Are there any benefits to attract companies to outsource? In practice in order to compete with other companies, a company should do its best to obtain useful sources from different channels and to build its best to obtain useful sources from different channels and to build its sustainable comparative advantages. Such comparative advantages will help companies to maintain and increase their market shares and profits. Global outsourcing will help companies find new sources such as low labour cost, unique materials, and new market opportunities, as well as encourage companies to continuously change in order to improve their flexibility. For example, the US manufacturing is headed offshore. Companies need to be aware not only of their own susceptibility to competition from low-wage countries but also of thee threat faced by their suppliers and customers, since the downstream customers in the industry may migrate offshore and substitute their products with those of local suppliers. Accordingly, the US manufacturing industry varies substantially in its exposure to competition from low-wages countries. Building sustainable comparative advantages and competitive flexibility is the major reason to push companies to conduct global outsourcing strategies. From this point of view, global outsourcing will eventually improve the organizational performance. Companies, who were lured by low cost, flexibility, and unique materials to outsource, have to handle some problems, such as loss of future talents, loss of intellectual assets property, and loss of organizational performance. Therefore, these outsourcing companies need to find a way keep outsourcing advantages as well as increase their organizational performance.

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Trends in Outsourcing: This project has discussed best practices for companies choosing to outsource which were 1) Determine the business's core competency and non-essential business functions for outsourcing, 2) identify potential outsourcers and initiate trial contracts, 3) Evaluate vendors performance, 4) Continue partnership with close oversight and feedback channels. However it hasn't addressed changes occurring on the global scale. At the turn of the century when companies outsourced or off shored to a foreign country, there were only two major destinations; China and India. Over the last decade several new players have entered the global market as major players e.g. Philippines, Malaysia, Columbia, Poland, Malaysia, and Costa Rica. These new markets for outsourcing/off shoring activity fall into three categories, 1) Business Process outsourcing, 2) Research & Development outsourcing, and 3) Production outsourcing.

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TRENDS IN OUTSOURCING IN INDIA: Now, we are in a borderless world, in which both thought and works are borderless. The concept of global village has become a reality due to the telecommunication revolution. Business activities have crossed the boundaries of geographical distances. Every country, both developed and developing is taking full advantage of this borderless market to exploit its resources to the best use and grow economically strong.

Outsourcing- INDIA: Outsourcing- INDIA holds a 70% market share in the world wide Outsourcing market. More than half of fortune 500 companies outsourced to India. 2010: $ 150 billion Contribute 1% to the GDP growth. INDIA- OUTSOURCING CHRONOLOGY: Early 1980s- several European airlines started using Delhi as a base for back office operations, British Airways being one among them. The BA captive was finally spun off as a separate organization called WNS Global Services in 2002 AMEX Late 1980s- , American Express consolidated its JAPAC (Japan and Asia Pacific) back office operations into New Delhi and NCR region . This centre was headed by Raman Roy, and has been a source of several leading names in the Indian BPO Industry. General Electric 1990s General Electric started back office operations in India (Gurgaon) - GECIS (GE Capital International Services) . Hired Raman Roy and several of his management from American Express. In 2004 GECIS was spun off as a separate legal entity by GE, called Genpact. THIRD PARTY BPOS 1999 - Daksh eServices in Gurgaon- email support service. 2000 - Efunds started in Mumbai and Gurgaon 2000 - Raman Roy quits GECIS to set up Spectra mind in Gurgaon. Customer Asset and 24/7 Customer setup shop in Bangalore. ENTRY OF IT MAJORS 2001 Dell, HSBC, standard chartered, HP, Lead the boom. 2002 Wipro acquired Spectramind . 2002 - Infosys, HCL, Satyam , Patni 2004 WNS becomes first Indian third party BPO firm to hit $100 million revenues .IBM buys daksh for $130 million.

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2005- onwards Genpact,1-one source, WNS, Convergys, HP integrated IT and BPO services. Infosys, Wipro, IBM Accenture etc.

WHY INDIA: Large pool of highly qualified and English speaking force Low cost of labor appropriate time zone difference with the west. Large number of qualified workers Proven to be the best in the IT and computer software fields Produce around 100,000 engineers annually. Infrastructure: Telecom facility Power sector. Realize potential for economic development Liberalization, Privatization and Globalization-1991 Favorable policies have turned India in to BPO/IT hub. e.g.- Investment promotion, Telecom policy, IT act. Outsourcing cost per hour.: Outsourcing cost per hour. U.S. - $27 Canada - $22 Mexico- $18 Carrabien$16 Philippines - $15 India - $12 67-72% of costs to call centers operating in the US/UK is directly linked to man power costs. India only spends 33-40% of costs on man power. This includes training, benefits and other incentives for labor. Size of Indian Population Improvement in Education Dreaming of Foreign Jobs Respectability and Job Satisfaction Why India? We depend on: U.S : 59% Europe , mainly U.K. : 27 % Asia-Pacific :9% Rest of the world :5% We depend on Different Types of services being offered : Different Types of services being offered Customer Support Services Technical Support Services Telemarketing Services Employee IT Help-desk Services Insurance Processing Data Entry Services / Data Processing Services Financial Services(Accounting) Internet / Online / Web Research Health Care Services Outsourcing to India: Outsourcing to India BPO : Business Process Outsourcing CRM, Medical Transcription, Call Centers ITES : Information Technology Enabled Services Software development, Data entry, Programming, Web development services KPO : Knowledge Process Outsourcing Financial Analysis, Legal Services Current Top Indian Rankers: Current Top Indian Rankers Infosys (2) Wipro (4) TCS (7) ACS (11) Genpact (20) Neusoft (26) HCL (32) iGate (35) Mind Tree (43) TechMahindra (44) source: International Association of Outsourcing Professionals http :// trak.in/tags/business/2010/04/23/top-best-100-outsourcing-companies-2010 /
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Impact of outsourcing in indian economy: Improved Indian economy primarily by employing a large number of people and maintenance of infrastructure. It is because of the outsourced projects that people at large in India get opportunities to know and work in MNCs. BPO companies also provide ample opportunities for women and as such help them in their liberation and liberalization. Losing many traditional and cultural benefits. The outsourcing companies and projects emphasize on the foreign cultural values Impact of outsourcing in Indian economy Risk in depending on outsourcing: Over dependence on outsiders job is risky because of the uncertain world of politics are controlling the economics. A war or a foreign policy decision may snatch the outsourcing job. For e.g.; as the US unemployment level is rising, the American politicians are bringing out more proposals that appear to limit the use of off shoring. In Europe unemployment is not much better with especially Southern European countries suffering from rates up to 21,3% in Spain . Risk in depending on outsourcing.
Conclusion:

Business Process outsourcing is going to see bigger growth than IT in this decade. It will reduce transaction costs and allow companies to disintegrate into process. They would retain their core competency and outsource even critical processes to specialist firms. Off shoring, infect, is going to become a new management discipline. Wharton Business School is already offering courses to equip executives with skills to manage the new style of functioning. Even big companies are entering into BPO and new entrants will have to find a niche. The outsourcers looking to implement outsourcing their non-core functions have to consider the issues rose above. It will enable them to choose the right kind of vendor and can look forward to implement the outsourcing job more effectively and efficiently. But yet, disputes on costs, quality, lack of communication, lack of streamlining of processes, non-adherence to SLAs, mismatch on expectations and delivery are the major reasons for collapsed outsourcing deals. Outsourcing is a three-legged race, both the teams have to move at a planned pace. For things to workout, changes need to be minimized during build-up hase, or requirements need to be frozen at some stage of the project. An outsourcing relationship fails due to a disconnect between customer expectations and perceived results. The costs of things going wrong are huge on both sides. It can be thus concluded that, selection of the right activities to outsource, identifications of the right supplier of the services and the right governance approach (Service level agreements) for the relationship are the major thrust areas in BPO
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Trends and developments in outsourcing in Canada:

The past year has seen trends continue that have been prevalent in the outsourcing market in Canada for several years. There are, however, significant new developments, especially with respect to companies considering the effect of outsourcing on their carbon footprint. In this article we provide a snapshot of the existing trends in the outsourcing market in Canada by reference to The State of Canadian Outsourcing, a report prepared by the Centre for Outsourcing Research & Education (CORE) and presented in January 2008 (the CORE Report). We also list trends identified by Blakes in its outsourcing practice over the past couple of years. We conclude by briefly discussing developments in respect of green initiatives in Canada and their impact on the outsourcing market.
CONTINUING TRENDS

CORE Report The CORE Report covers outsourcing across all industry sectors in Canada from 1 January 2002 to 30 June 2007.1 It focuses on the larger end of the outsourcing market (transactions with a total contract value in excess of C$10m) and provides an indicative (but not definitive) picture of the outsourcing market in Canada. The CORE Report identifies the following notable continuing trends in the Canadian outsourcing market:
Value of the market:

The total value of major outsourcing deals in the time period covered by the CORE Report was approximately C$50bn. About half of the market was represented by deals worth C$1bn or more in contract value and the average contract value of all reported deals was about C$200m. There were approximately 300 major deals in total, for 40 of which the contract value was not disclosed.
Reasons for outsourcing:

Two-thirds of companies still use outsourcing as a tactic to achieve business targets, but companies are increasingly using outsourcing to achieve strategic objectives. The primary reason for outsourcing in Canada today is to access expertise and additional capabilities rather than to reduce costs.
What is outsourced?

Most outsourcing involves information technology infrastructure and related activities (ITO). There is, however, increased outsourcing in application development and maintenance of
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software applications (ADM) and business process outsourcing (BPO). ITO and ADM are often done in combination.
Industries outsourcing

The financial services sector is the largest adopter of outsourcing arrangements. In the time period covered by the CORE Report, 34% of all deals were conducted by financial services providers. Other major industries that have adopted outsourcing include telecommunications (8% of deals), the public sector (22% of deals), and energy and utilities (6% of deals).
Results of outsourcing

The satisfaction levels of companies that outsource (clients) are mixed. Levels are high for functions such as ITO and ADM (70-80%), but only 50% for BPO, reflecting the complexity of BPO and its recent adoption. Despite mixed satisfaction levels, clients are optimistic that the results of outsourcing are improving and 70% of those surveyed expected to increase their outsourcing levels in the next three years.
Management of outsourcing

Clients are moving away from a one -size-fits-all approach (where several functions are outsourced to a single, trusted service provider), towards a be st-of-breed approach where service providers are selected based upon their expertise in performing the specific function to be outsourced to them. A service providers specific expertise is now considered more important than the existence of a previous relationship. Clients are choosing to split deals, notwithstanding that it requires them to manage and integrate the work of various providers. In part due to this trend, clients are also investing heavily in their outsourcing governance and management skills. For example, clients are establishing outsourcing centres of expertise within larger companies and more carefully selected stay back teams to manage individual outsourcing relationships. Clients are also more willing to have work (especially ADM and call-centre work) performed offshore.
TRENDS APPARENT IN BLAKES OUTSOURCING PRACTICE

Canada as choice outsourcing destination Companies are re-evaluating their international outsourcing plans in response to the recent turmoil in global financial markets, political stability concerns, changes in international labour rates and foreign exchange changes. A number of these changes favour the reconsideration of Canada as a preferred outsourcing destination:
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It is politically stable, has a technologically skilled English-speaking workforce, and a highly developed and dependable communications and transport infrastructure. For call-centre operations, those outsourcing to Canada can draw upon an employee cohort speaking almost any language. Moreover, exchange rates have recently returned to levels that give the US dollar and the euro a significant purchasing power advantage in Canada. There is very little direct legal regulation of outsourcing transactions in Canada. Canada has an open, market-orientated economy in which businesses are generally free to contract for the goods and services they require.
Growing number of parties outsourcing

The ongoing development of computer and communications technologies is continuing to accelerate the use of external specialist service providers. Outsourcing in Canada is expanding from IT into finance, human resources, facilities management and other business process areas, and is moving from financial services, telecommunications and other large companies into healthcare and mid-market companies.
Onshore/offshore outsourcing

There are increasingly more offshore and onshore/offshore combination deals being completed in Canada. These deals have increased the complexity of the transactions and have legal implications for data privacy, intellectual property rights, enforceability and remedies.
Deal structure

Deals tend to be smaller, shorter and focused on particular areas of specialization. Multivendor environments that provide co-ordination and governance challenges, and require more active management, are becoming increasingly common.
Software as a service (SAAS)

In ITO there is an increase in hosted deals and IT environments are normally hosted and arranged by the service provider. This fact reinforces the trend in ITO towards SAAS, a model of software deployment where software is hosted as a service provided by service providers to clients across the internet or other telecommunications networks. By eliminating the need to install and run software on the customers own computer, SAAS aims to alleviate the burden of software maintenance, ongoing operation and support. It does, however, raise several new issues and concerns (especially in circumstances where many companies are examining the financial viability of key vendors).
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1. Increased focus on audits and internal controls

Stricter governance requirements, including those under applicable securities law, are increasing the focus on compliance, audits and appropriate controls.
2. Increased security and privacy obligations

Security and privacy are increasingly critical. There is greater emphasis on security, including IT systems, people and premises, especially in offshore services. This includes increased focus on business continuity and a growing focus on redundancy, failover capabilities, data back-up and recovery (which may be provided by different service providers in diverse locations).
GREEN INITIATIVES IN THE PRIVATE SECTOR IN CANADA AND THEIR IMPACT ON OUTSOURCING

General Observations: There have been several recent developments in Canada with respect

to the nascent regulation of greenhouse gas (GHG) emissions in the private sector. These developments, whether mandated legally or initiated by parties seeking to obtain a competitive advantage in the marketplace, may impact on whether, how and to whom companies outsource certain functions. With growing requirements for GHG reporting and carbon pricing on the horizon, investors are increasingly demanding disclosure of information about energy consumption and direct and indirect production of GHG; especially for sectors of the economy where energy represents a significant portion of production costs. Companies may improve their management of GHG emissions and reporting through the outsourcing of functions such as logistics, facilities management, manufacturing, print and mail, and IT operations to specialized service providers. For example, the exponential growth in data storage requirements, which are forecast to expand at an annual rate of over 50% over the next few years, is leading to corresponding increases in power consumption and associated GHG emissions. It is therefore more difficult for companies to achieve net reductions in GHG emissions. Outsourcing can provide the expertise and concentrated investments required to substantially reduce the GHG footprint of data centre operations, including through strategies such as the concentrated co-location of data centres at locations that are proximate to renewable energy and cooling resources. Green issues such as GHG emissions, electronic waste, and reporting obligations are beginning to factor into long-term outsourcing contracts as clients and service providers attempt to hedge and allocate the risks associated with future legal and market requirements.
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Such concerns are also expected to become increasingly important considerations when selecting service providers.

Carbon Disclosure Project 2008

The increasing focus of Canadian companies on the reduction of their GHG emissions is reflected in the trends identified in The Carbon Disclosure Project Report 2008 Canada 200 (the 2008 CDP Report).3 The report is prepared by The Conference Board of Canada, an independent, not-for-profit research organization. The 2008 CDP Report analysed the results of the Carbon Disclosure Project (CDP) for Canadian investors. The CDP, which was launched in 2000, consists of 385 global investors, including 40 Canadian investors, and is the largest investor coalition in the world. Each year the CDP requests climate change-related information from the senior management of the worlds largest companies. The 2008 request for information (the CDP6) was sent to over 3,000 companies worldwide. Companies are encouraged to disclose information on the financial and business implications of climate change risks and opportunities, GHG emissions, accounting, and GHG management strategies. The 2008 CDP Report analysed the level and quality of Canadian company disclosures and listed some examples of the actions Canadian companies are taking to mitigate and adapt to climate change. The CDP6 was signed by 200 of the most valuable companies by market capitalisation listed on the Toronto Stock Exchange (Canadian recipients), with a combined asset base of C$57trn.

Some notable facts from the 2008 CDP Report are Number, quality and type of responses The CDP6 request was responded to by 55% of the Canadian respondents, representing 77% of the total market capitalisation of the 200 companies that received the questionnaire. The completeness and quality of responses have improved from 2007, with the vast majority of major GHG emitters and large-cap companies fully completing the CDP questionnaire. The high-carbon impact sector companies that responded included Gaz Metro LP, EnCana Corporation, Enbridge Inc, Abitibi Bowater, Bombardier Inc, Nexen Inc, Suncor Energy Inc, Penn West Energy Trust, ARC Energy Trust and Catalyst Paper. The low-carbon impact sector companies that responded included Royal Bank of Canada, Canadian Imperial Bank of Commerce, Alimentation Couche-Tard, Bank of Nova Scotia and BCE Inc.
Risk strategiesClimate

change was integrated into the risk management strategies of 84% of the 200 Canadian companies surveyed. Formal GHG management programmes and emission reduction activities are being implemented by both high- and low-GHG emissions impact companies in 49% of those surveyed.

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CONCLUSION

While it is impossible to forecast the impacts of the current economic turbulence on the Canadian outsourcing market, we expect the current trends towards the more sophisticated use of outsourcing as a management tool will continue into the foreseeable future. We also expect that green issues, particularly concerns about GHG reporting and emissions reductions, will become a more significant factor in outsourcing deals in Canada (not to mention around the world) during the coming years.

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