In business, outsourcing is when a company contracts an external company to assist with internal processes to cut cost, improve efficiency or due to lacking internal expertise. The alternative enhances performance because the hired contractor is specialized in the outsourcing issue. Peter Drucker’s states that the back of a company is like the front of the outsourced company. Meehan (2005) notes that when IT expertise is outsourced from India, greater job opportunities are locally created. For instance, between the 1980s and the 1990s, occurring changes created a berth for international companies to outsource to India due to low wages, especially in the information technology field (Meehan, 2005). Therefore, multiple companies started using India developed software by reorganizing it to fit their needs at subsidized costs and expenses (Meehan, 2005). By the mid-1990s, global IT expansion and proliferation culminated in the hiring of thousands of talented Indians to work in software firms since they charged lower rates than professionals from the developed world (Meehan, 2005). In return, these companies trained the hired Indians, laying a foundation for a future India recognized for external outsourcing. Therefore, Drucker’s claim is exemplified by India and how she established herself as an IT outsourcing destination especially for a majority of European and American firms.
Benefits of Outsourcing
Bannerjee and Williams (2010) discovered that internal outsourcing primarily uses offshore analysis to elaborate value-adding factors in a company. The purpose of outsourcing is to parse out entities beyond the scope of use set by an organization, such as reducing operational costs, headcount, and scarcity of resources particularly in purchasing specialized items by unfound skills at the principal domain (Bannerjee & Williams, 2010). Outsourcing from India leads to such benefits as reduced costs, specialized professional skills and expertise, round-the-clock support and assured quality.
Outsourcing creates a closer link and ties between the outsourcing firm and the contracted one through accessibility to back-end functions. Thus, the outsourcing company focuses on other core activities while improving the quality of services and products handled by the outsourced to or vendor companies. Foreign companies also assist mother companies to focus on innovation, which proffers advantages, such as improvement of quality, cost reduction, and focus on core activities by fostering change (Bannerjee & Williams, 2010). As such, and in line with Drucker’s claim, the same occurs that the back of one company is the front of the other company.
Several disadvantages or risks result from outsourcing, such as loss of control, long-term costs and a likely exit strategy. Outsourced to companies may also lead the parent firm to lose power and control over the outsourced activities. Moreover, when the relationship between a foreign and parent company is not smooth, the parent company ends up outsourcing again because of future activities, which increases costs further (Bannerjee & Williams, 2010). Also, premature stoppage of the contract or exit of the outsourced firm can affect the parent company’s long-term effectiveness due to its activities being handled by numerous different firms boasting different levels of technical know-how and expertise. It is also hard for companies to train and identify new vendors to match expectations for ongoing activities. Ultimately, the company’s work culture and ethics are drastically affected as not one single firm stays long enough to acclimatize itself to the parent company’s modalities.
Outsourcing and India
Studies uphold that India is the best place to outsource IT because of readily available skilled and low-cost talent. Elias and Mathew (2012) say that most countries prefer India as a foreign outsourcing hub because of cost efficiency in the advancement of IT and communication. India’s active labor force cajoles other nations of the need to outsource IT there hoping to cut costs and attain efficiency (Elias & Mathew, 2012). As the manager, I would recommend India as the outsourcing destination. Besides, their big data management is profoundly reliant on the Cloudera platform. Distance is not an issue since IT advancement has turned the world into a global village with conference calls Skype, WhatsApp and other online communication platforms reducing the distance factor to a non-issue.
References
Banerjee, A and Williams, S. A. (2010). International Service Outsourcing: Using offshore analytics to identify determinants of value-added outsourcing. Strategic Outsourcing: An International Journal, 2(1), pp 68-79.
Elias, A. A, and Mathew, S. K. (2012). Offshore IT outsourcing between India and New Zealand: A qualitative system dynamics model. In Proceedings at the 30th International Conference of the System Dynamics Society, St. Gallen, July (pp. 22-26).
Meehan, M. J. (2005). Outsourcing Information Technology to India: Explaining Patterns of Foreign Direct Investment and Contracting in the Software Industry. Intel L. & Mgmt. Rev., 2, 285.
