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

1. Outsourcing & Offshoring
Date: 15th December-13
XMBA-25,ITM-Vashi
Arun Khedwal
Shirish Telsang
Archana Bamanale Gajendra Sawant

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. 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. 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. 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. Why Outsource?

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. Just India
 Meeting growing demands for inexpensive product
 India holds leadership position in offshore outsourcing
market today

9. Advantages vs. Disadvantages
Cost
Saving

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. Advantages vs. Disadvantages
Cost
Saving
Quality
Problems

12. Advantages vs. Disadvantages
Specialization
Cost
Saving
Loss of
managerial
control
Quality
Problems

13. Advantages vs. Disadvantages
Loss of
managerial
control
Specialization
Cost
Saving
Focus
Quality
Problems

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. Advantages vs. Disadvantages
Threat to
security &
confidentiality
Specialization
Cost
Saving
Focus
Loss of
managerial
control
Quality
Problems

16. Advantages vs. Disadvantages
Lack of
customer focus
Threat to
security &
confidentiality
Specialization
Cost
Saving
Focus
Loss of
managerial
control
Quality
Problems

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. 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. Case Study I – Apple Inc.

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. Strategy

22. Case Study II - Nike

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. 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. Thanks
Q & A session