Information Management Assignment
Information Management Assignment
TABLE OF CONTENT
1. INTRODUCTION 3
3. DEFINITION 5
GLOBALIZATION 8
IMPROVED SERVICES 9
IMPROVED COST 9
NEW SERVICES 9
ALLOCATION OF RISK 10
OTHER BENEFITS 10
IMPROVED PLANNING 10
IMPROVED PREDICTABILITY 10
FAILURE TO DELIVER 11
EXPOSURE 11
NEGATIVE REPUTATION 11
COMPANY VALUE 12
INFRASTRUCTURE OUTSOURCING 14
MANUFACTURING OUTSOURCING 15
9. CONCLUSION 18
10. REFERENCES 19
WORKS CITED: 19
WEB 19
1. INTRODUCTION
Outsourcing practices originated in the late 1950’s, but it strategy became widely
adopted in the organization in the 1980’s, ever since, its strategy has statically
evolved from a strictly cost focused towards more cooperative nation.
Today the world experience outsourcing in virtually all parts of information system .
World statistics have shown that the rapidly growing market trend/trade is estimated
to hold $500 million in year 1996.
New findings have proven that jobs are outsourced from industrialized world to under
developed nations, e.g., need for oil riggers in certain part of Britain has called for
recruitment of 35,000 Philippines.
Recent studies by Mekinsy, 1states that more and more jobs in major sectors such
as Engineering, IT, import and exports etc. would shift bases from industrialized
countries to developing nations such as India and China.
1
Current market trend s in the world shows increase in outsource in countries like India and China.
3. DEFINITION
Gupta & Gupta, (1992) refers to outsourcing as “the concept of having external
professional services to meet the in-house needs of an organization or an agency”.
The definition of outsourcing is been seen not to be straight forward one as times
have changed worlds’ economy. Each scenario to which it has been presented into
has given it at unique definition and meaning.
A more formal definition of the term outsourcing is an activity where the suppliers
provides for the delivery of goods and services that would have been offered in-
house by the buyer organization in predetermined agreement. (Kenneth Dam, 2001)
Another definition of outsourcing says, “It is the alternative of risk that are
responsibilities for performing a function or services to another entity” (Ashley,
2003). An in-depth understanding into the definition would explain the term
outsourcing as a process of making a company or organization to perform a function,
process or services in your behalf. An example of the above explanation could be
applied in our ordinary day to day life.
Taking your clothes to the dry cleaners rather than washing them
yourself.
Rather than driving your own car to school, boarding a cab to take you
down.
Variation in the approach became obvious as new objectives are used in its
definition to convey little differences in its meaning. Other terms that has been used
synonymously with “outsourcing” are words such as out-tasking and contracting , in
other to establish differences in process models, terms like in-sourcing co-sourcing
have been recognized.
In the early 70’s and 60’s, the United State of America companies, states
outsourcing much of its manufacturing to companies overseas and since they have
not stopped. The primary aim was derive lower cost by taking advantage of low
wages in the international area, reason of outsourcing been popular is because of
white collar job are being outsourced.
Advancement have been seen in the areas of ICT as a major propellant of the
outsourcing trend, they are drastically affected by global economy societies as well
as on the way industries compete (Fitzgerald, 1998). Companies cannot compete
favourably in the world market today except they employ the use of information
technology, which creates efficiencies in many business areas, enabling
globalization of production.
GLOBALIZATION
The phenomenon “outsourcing” has become more and more associated with
globalization, time have seen business environment become increasingly global.
Globalization has led many companies to expand their geographical scope of their
business activities in terms of market reach out and the production sources for
product manufactured & services delivery.
Globalization is also known to have significant economic effects which have now
brought about liberalization of trade which has led to lose of many jobs because
developed economics continually outsource manufacturing services related activities
to developing economics with lower labour cost of a trend referred to an off shoring.
To achieve this, organization must understand that services & benefits do not just fall
in place; to succeed work on the part suppliers of these services are needed, the
following headings below describe most common benefits of outsourcing.
IMPROVED SERVICES
IMPROVED COST
NEW SERVICES
Vendors may have the capacity such as size and scale that enable the delivery
services you have been unable to deliver, or simply that services require
infrastructure that would be cost consuming to invest in. They can spread their loss
for infrastructural development across many customers, this makes easy for the
vendors to invest in delivery of the services efficiently, and these services may be
delivered in various ways, customized and packaged etc.
ALLOCATION OF RISK
Outsourcing does not diminish risk, but significantly allows for the transfer of risk to
another organization (vendor) in lieu of taking another risk. Though risk may have
been transferred to an organization that can still face the problem of making sure
that vendors deliver services in the right fashion
e.g., a company may be in the computer business, but have a large information technology
department and would want to see the problems of dealing with computer maintenance and
services away; this is an option for allocation of such to a vendor who can deliver services at
a beneficial cost.
OTHER BENEFITS
Organization may also benefit in other ways in outsourcing its business activities
number of ways for the benefit of employers is unique to organization however, other
benefits could be:
IMPROVED PLANNING
Services can be planned to be delivered at a certain time, you can predict the time of
completion of task with outsourced services, making it easier for activities to be
scheduled.
IMPROVED PREDICTABILITY
Because services are consistent and there is a dedicated services vendor, times of
delivery for outsourced function are predictable.
FAILURE TO DELIVER
The option of outsourcing brings together trust between the organisations and
vendors. Third parties are now entrusted with the power to deliver a certain
quantity/quality of deliverables. Failure to provide on time delivery, will lead to
tremendous consequences despite service level agreements you had in place.
EXPOSURE
The power that outsourcing gives the vendor is but tremendous because vital and
sensitive information may be shared to respective vendor by the firm. The risk of this
be done is that third party and vendors are previewed to certain part of
organisational business. And this can be hampered by shielding business to third
party, preventing a possible breach of confidentiality, the malicious use of system
access, and other vulnerabilities in our organization.
NEGATIVE REPUTATION
overview of offshoring certain business processes especially if it means that you are
terminating a part of your domestic operation.
COMPANY VALUE
The major risk of outsourcing is that you may not be building the value of your
company in terms of personnel, in-house knowledge, and infrastructure. In this case,
the value of an outsourcing agreement with a provider will be less effective than an
internal department.
Cost may become higher than expected due to an unanticipated work that is
required by an outsourcing staff.
Outsourcing may increase cost overtime than its estimated cost and this may
add to the consumption of more resources and failure to deliver on time.
Inflexibility of organization to change a response to new request may be
limited because of the labour to do the work not under the control of the
organization.
Outsourcing firm are the non-functional tools which makes it more difficult to
move activities either back inside to another firm.
It is the most sophisticated and skilled category of outsourcing which has had its
popularity for over twenty years now and counting. The reason for its popularity is:
Software development now reduces time and expenditure now making companies
efficient and productive. A critical look at the Western Europe and American firms,
they had their software development done internally at first; but as the demand for
software resources became high, they were faced with the problem of meeting to the
demands of software resources. While America and Western Europe are bedevilled
by this plague, developing countries like the China’s and India’s were seeing a large
pool of computer scientist under nurture. This is proving of the fact that a huge
investment strategy by their government in the education sector is producing a good
number of computer scientists. Their services were soon explored to be cheaper
than their neighbours in the Western Europe and the Americas’ and still are so till
date. Transfer of software development burden to these nations was the next big
agenda.
Other choices that outsourcers may make while thinking of its options to outsource
may be the proximity and location of its vendor. Decision may boil down to the fact of
an outsourcer and the vendor working in the same location at a very close proximity
or at distance from each other. Sometimes, the outsourcer and the vendor may work
from the same location at close proximity from each other or at a distant place.
Usually, both options are combined.
INFRASTRUCTURE OUTSOURCING
Operation of firms in this approach involves the connection of various sites in the
organisation. Outsourcer in this approach concerns their activities or responsibilities
for relevant software and hardware components, installation and maintenance of the
software, data communication, data storage and recovery, security, internet
connection, printers, laptops, etc. infrastructure outsourcing firms may sometimes be
located on shore.
This is an IT enabled outsourcing and may possible be the broadest form of the
approaching approaches. Business Process Outsourcing perform a wide variety of
activities.
Customer support,
Telemarketing,
Medical transcription,
Language translations,
Warehousing,
MANUFACTURING OUTSOURCING
This may be the oldest form of outsourcing. This outsourcing approach relates
production of parts manufactured. This may be done either offshore or onshore.
Companies in USA are dependent on firms in other countries for components used
in the manufacture of specific goods. These companies may outsource the
manufacture of these components or even build manufacturing sites in other
countries were raw materials can be found to meet this needs.
IBM, which has about 39,000 employees in India, plans to take its India
headcount to 55,000 by the end of 2007.
Dell India is expected to hire about 10,000 additional professionals over the
next two years, taking its total India strength to 20,000 by 2009.
Accenture announced in 2005 that it would hire 30,000 professionals in India,
China and the Philippines, with the majority in India, by 2008.
JP Morgan Chase intends to double its Indian workforce in the next year,
which is currently just under 4,000.
In 2006, EDS acquired a controlling stake in MphasiS, an Indian IT-services
company, adding 9,500 to its rolls in India.
Capgemini acquired Kanbay, an Indian IT company, and added another 6,000
to its India staff. The two company’s together plan to create 23,000 jobs in the
next four years.
These figures are merely samples of the kind news that we must read daily. But it is
most surprising that India is on the brink of manpower crisis. Their educational
system is now not able to produce enough quality workers which is as a result of
short-sighted political leaders who aren’t doing enough to reform the educational
system.
In parallel, the widening difference in earning capacity between the educated middle
class and upper classes and those that are unable to participate in India's economic
boom are worsening social tension. This manifests in outbreaks of violence, such as
what has been seen in some Indian cities recently. It's further fuelled by political
exploitation of rising tensions along the lines of caste and religion. If this trend
accelerates, the risk perception of US customers will worsen.2
What could India's outsourcing scene be like in 10 years? The possibilities range
from exhilarating to frightening.
2
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9. CONCLUSION
Outsourcing trend is seen to linger on as many organizations are expected to do
more with little resources at their disposal. Outsourcing today has brought about
much impact on business that has contributed to significantly competitive
advantages. Studies have shown that organization are becoming more sophisticated
in both their objectives and approach towards outsourcing. With benefits and
drawbacks tied around outsourcing it has been that the principal motive behind
employers outsourcing business activities are technological and strategic, with less
concern for cost reduction. It also enables organization adopt new technologies and
respond quickly to consumer’s needs.
Increasingly, facts for organizational move towards outsourcing has its focus on cost
reduction
10. REFERENCES
WORKS CITED:
Ashley, E. (2003). Overview of Outsourcing. In E. Ashley, Outsourcing for Dummies (pp.
11-12). Indianapolis, Indiana: Witley Publishing Inc.
Barthelemy, J. (1996). The Academy of Management Executive. In B. J., The seven deadly
seens of outsourcing (pp. 87-98, no.2, Vol.17). Chicago: Adventure Work Press .
Kenneth Dam. (2001). The Rules of the Global Game. In M. Slaughter, A New Look at U.S.
International Economic Policymaking. Washington: Institute for International
Economics.
Lientz, B. P. (1998). Draw Backs to Outsourcing. In K. P. Rea, Transform your Business into
E: Going beyond the dot com disasters (pp. 141-142).
WEB
http://www.microsourcing.com/info/outsourcing-drawbacks.asp
http://www.roseindia.net/services/outsourcing/various-approaches-outsourcing.shtml
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