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Outsourcing
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{{distinguish|Offshoring}}Outsourcing is an agreement in which one company hires another company to be responsible for a planned or existing activity that is or could be done internally,WEB, Britannica.com
,weblink
, Oursourcing, JOURNAL
, Ian McCarthy, Angela Anagnostou
, The impact of outsourcing on the transaction costs and boundaries of manufacturing
, International Journal of Production Economics, 88, 1, 61–71
, 10.1016/s0925-5273(03)00183-x, 2004, 10.1.1.468.9139,
and sometimes involves transferring employees and assets from one firm to another.The term outsourcing, which came from the phrase outside resourcing, originated no later than 1981.BOOK
, The Global Supply Chain and Risk Management
,weblink 1631579592
, Stuart Rosenberg, 2018, Outsource 1979, outsourcing 1981: BOOK
, Organizing Identity, Persons and Organizations After Theory
,weblink 1497042151
, CTI Reviews, 2016, OED The concept, which The Economist says "made its presence felt since the time of the Second World War,"WEB
,weblink
, Outsourcing. The Concept
, Adrian Victor, Alexandru Dumitru Bodislav, often involves the contracting of a business process (e.g., payroll processing, claims processing), operational, and/or non-core functions, such as manufacturing, facility management, call center/call centre support).
Outsourcing is also the practice of handing over control of public services to private enterprises,Jamieson, Dave, "Public Interest Group Challenges Privatization Of Local, State Government Services" {{webarchive|url=https://web.archive.org/web/20131211181510weblink |date=2013-12-11 }}, The Huffington Post, July 1, 2013. Retrieved 2013-07-01. even if on a short-term limited basis.WEB
,weblink
, Judge Rebukes Government for Outsourcing Internal Investigation of LIBOR rigging
, June 28, 2019,
Outsourcing includes both foreign and domestic contracting,Hira, Ron, and Anil Hira. Outsourcing America: What's behind Our National Crisis and How We Can Reclaim American Jobs. New York: AMACOM, 2008. Print # 67-96. and sometimes includes offshoring (relocating a business function to a distant country)Davies, Paul. What's This India Business?: Offshoring, Outsourcing, and the Global Services Revolution. London: Nicholas Brealey International, 2004. Print. or nearshoring (transferring a business process to a nearby country).Offshoring and outsourcing are not mutually inclusive: there can be one without the other. They can be intertwined (Offshore outsourcing), and can be individually or jointly, partially or completely reversed,WEB, 2019-05-14
,weblink
, Dell moves outsourced jobs back to U.S. shores
, Elizabeth Corcoran, April 28, 2004
, customers were not happy with ..., involving terms such as reshoring, inshoring, and insourcing.

Terminology

  • Offshoring is moving the work to a distant country. If the distant workplace is a foreign subsidiary/owned by the company, then the offshore operation is a {{anchor|Offshore Captive}}captive,NEWSPAPER


, The New York Times
, Offshore insurers creating concerns among regulators
,weblink
, October 19, 1992, sometimes referred to as in-house offshore.MAGAZINE
, CIO magazine
,weblink
, Captive Audience: How to Partner with Service Providers to Improve In-House Offshore Operations
, a.k.a. internal shared-services centers in low-cost locations
, Cliff Justice, Stan Lepeak,
  • Insourcing entails bringing processes handled by third-party firms in-house, and is sometimes accomplished via vertical integration.
  • {{Visible anchor|Offshore outsourcing}} is the practice of hiring an external organization to perform some business functions ("Outsourcing") in a country other than the one where the products or services are actually performed, developed or manufactured ("Offshore").
  • {{Visible anchor|Farmshoring}} refers to outsourcing to USA rural-located companies.also called domestic outsourcing. WEB


,weblink
, Domestic Inshoring and Farmshoring,
  • {{Visible anchor|Homeshoring}} (also known as {{Visible anchor|Homesourcing}}) is a form of IT-enabled "transfer of service industry employment from offices to home-based ... with appropriate telephone and Internet facilities.".WEB, New words


, Macmillan English Dictionary
,weblink
, 2007-10-05, {{distinguish|Small office/home office}} These telecommuting positions may be customer-facing or back-office,JOURNAL
, Kevin G. Hall
, December 5, 2006, Knight Ridder
, Homeshoring Grows: Companies Cut Costs by Shipping Jobs to Workers' Homes
,weblinkweblink" title="web.archive.org/web/20071020050203weblink">weblink
, yes, October 20, 2007, and the workers may be employees or independent contractors.
  • An Intermediary is when a business provides a contract service to another organization while contracting out that same service.WEB


, Delegated authority: Outsourcing in the general insurance market
,weblink
, June 29, 2015, WEB
,weblink
, Binder and other intermediary agreements
, April 5, 2012,

Acronyms

Some of the acronyms related to BPO (Business Process Outsourcing are:{hide}columns-list|colwidth=27em| }}

Overview

Motivations

Global labor arbitrage can provide major financial savings from lower international labor rates can provide a major motivation for offshoring. Cost savings from Economies of scale and specialization can motivate outsourcing.Another motivation is speed to market; to make this work, a new process was developed: "outsource the outsourcing process."MAGAZINE, CIO (magazine), CIO, April 1, 1997, 12
, Abbie Lundberg
, Outsourcing: Letter from the editor, Details of managing DuPont's CIO Cinda Hallman's $4 billion 10-year outsourcing contract with Computer Sciences Corporation and Anderson Consulting were outsourced, thus avoiding "inventing a process if we'd done it in-house." A subsequently developed term to describe this is {{Visible anchor|midsourcing}}{{anchor|Midsourcing}}{{anchor|Mid-sourcing}}.MAGAZINE, InfoWorld, February 21, 2000, 14
,weblink
, Messaging and Collaboration
, ... will offer .. through .. "midsourcing" model, BOOK, Information Security Management Handbook, Fifth Edition
isbn=978-0-8493-1997-6author2=Micki Krause, 2003, The term midsourcing refers to ..., The term "Midsourcing" subsequently became known as contracting a local or regional manufacturing service provider to arrange for the outsourced task(s). WEB
,weblink
, Your Source for Commercial Manufacturing Services
, October 10, 2017,
Outsourcing can offer greater budget flexibility and control by allowing organizations to pay for the services and business functions they need, when they need them. It also reduces the need to hire and train specialized staff, makes available specialized expertise, and can reduce capital, operating expenses,JOURNAL, B. Olive
, Outsourcing Growing, Despite Controversy, Power, 2004, 148(4), 19–20, and risk.
"Do what you do best and outsource the rest" has become an internationally recognized business tagline first "coined and developed"WEB, Marian Haus
, Best 10 Peter Drucker quotes
,weblink pmseed, pmseed
, 26 April 2015, 2011,weblink" title="web.archive.org/web/20150416043146weblink">weblink
Peter Drucker. The slogan was primarily used to advocate outsourcing as a viable business strategy. Drucker began explaining the concept of "Outsourcing" as early as 1989 in his The Wall Street Journal>Wall Street Journal article entitled "Sell the Mailroom."Drucker Peter F, (1989) "Sell the Mailroom," Wall Street Journal, accessible at WEB
,weblink Archived copy, 2015-04-27
,weblink" title="web.archive.org/web/20150522111235weblink">weblink
, 2015-05-22,
Sometimes the effect of what looks like outsourcing from one side and insourcing from the other side can be unexpected: The New York Times reported in 2001 that "6.4 million Americans .. worked for foreign companies as of 2001, [but] more jobs are being outsourced than" [the reverse].WEB
,weblink
, Outsourcing, Turned Inside Out
, Ken Belson, April 11, 2004,

Agreements

Two organizations may enter into a contractual agreement involving an exchange of services, expertise, and payments. Outsourcing is said to help firms to perform well in their core competencies, fuel innovation, and mitigate a shortage of skill or expertise in the areas where they want to outsource.Overby, S (2007) ABC: An Introduction to Outsourcing {{webarchive|url=https://web.archive.org/web/20070630130752weblink |date=2007-06-30 }}. CIO.com.

History

20th century

Following the adding of management layers in the 1950s and 1960s to support expansion for the sake of economy of scale, corporations found that agility and added profits could be obtained by focusing on core strengths; the 1970s and 1980s were the beginnings of what later was named outsourcing.WEB,weblink A Brief History of Outsourcing, Kodak's 1989 "outsourcing most of its information technology systems"NEWSPAPER,weblink Outsourcing emerged as a new business strategy in early 1980s, September 20, 2010, was followed by others during the 1990s.In 2013, the International Association of Outsourcing Professionals gave recognition to Electronic Data Systems Corporation's Morton H. MeyersonEDS's founder named it for Mort Meyerson who, in 1967, proposed the business model that eventually became known as outsourcing.WEB
,weblink
, IAOP Announces Outsourcing Hall of Fame Inductees
, January 8, 2013
, IAOP.org (The International Association of Outsourcing Professionals),

IT-enabled services offshore outsourcing

Growth of offshoring of IT-enabled services, both to subsidiaries and to outside companies (offshore outsourcing) is linked to the availability of large amounts of reliable and affordable communication infrastructure following the telecommunication and Internet expansion of the late 1990s.BOOK
, Managing Projects in Telecommunication Services
,weblink 0470047674
, Mostafa Hashem Sherif, 2006
, (chapter) COMMUNICATION AND OUTSOURCING ... Roche, 1998, Services making use of low-cost countries included
  • back-office and administrative functions, such as finance and accounting, HR, and legal
  • call centers and other customer-facing departments, such as marketing and sales services
  • IT infrastructure and application development
  • knowledge services, including engineering support, product design, research and development, and analytics.

Early 21st century

In the early 21st century, businesses increasingly outsourced to suppliers outside their own country, sometimes referred to as offshoring or offshore outsourcing. Other options subsequently emerged: nearshoring, crowdsourcing, multisourcing,(Q4 2006)Mandatory Multisourcing Discipline {{webarchive|url=https://web.archive.org/web/20070928142453weblink |date=2007-09-28 }} Business Trends Quarterly(2006) Mandatory Multisourcing Discipline {{webarchive|url=https://web.archive.org/web/20071119082031weblink |date=2007-11-19 }} strategic alliances/strategic partnerships, strategic outsourcing.see Holcomb & Hitt, 2007 and Vested outsourcingFrom Drucker's perspective, a company should only seek to subcontract in those areas in which it demonstrated no special ability.JOURNAL, Rick Wartzman, Bloomberg Business
, The Drucker Difference: Insourcing and Outsourcing: the Right Mix
, February 5, 2010,weblink
, May 6, 2015, Bloomberg L.P.,weblink" title="web.archive.org/web/20150522173550weblink">weblink May 22, 2015, The business strategy outlined by his slogan recommended that companies should take advantage of a specialist provider's knowledge and economies of scale to improve performance and achieve the service needed.BOOK
, Gwynne Richards
, Warehouse Management: A Complete Guide To Improving Efficiency and Minimizing Costs In the Modern Warehouse
, 2014, Kogan Page Limited, Walnut Street Suite 1100 Philadelphia PA 19102
, 978-0-7494-6934-4, 316, Second,weblink May 6, 2015,weblink September 24, 2015,
In 2009, by way of recognition, Peter Drucker posthumously received a significant honor when he was inducted into the Outsourcing Hall of Fame for his outstanding work in the field.

Limitations due to growth

Inflation, high domestic interest rates, and economic growth pushed India's IT salaries 10 - 15%, making some jobs relatively "too" expensive, compared to other offshoring destinations. Areas for advancing within the value chain included research and development, equity analysis, tax-return processing, radiological analysis, and medical transcription.

Offshore alternatives

Japanese companies outsourced to China, particularly to formerly Japanese-occupied cities.(discussed in the book The World is Flat). German companies have outsourced to Eastern European countries with German-language affiliation, such as Poland and Romania.JOURNAL
, Stephan Manning, Jörg Sydow, Arnold Windeler
, Securing Access to Lower-cost Talent Globally: The Dynamics of Active Embedding and Field Structuration
, Regional Studies, 46, 2012, 9, 1201–1218, 10.1080/00343404.2011.571243, French companies outsource to North Africa for similar reasons.
For Australian IT companies, Indonesia is one of the major choice of offshoring destination. Near-shore location, common time zone and adequate IT work force are the reasons for offshoring IT services to Indonesia.

Growth of white-collar outsourcing

Although offshoring initially focused on manufacturing, white-collar offshoring/outsourcing has grown rapidly since the early 21st century. The digital workforce of countries like India and China are only paid a fraction of what would be minimum wage in the US. On average, software engineers are getting paid between 250,000 and 1,500,000 rupees (US$4,000 to US$23,000) in India as opposed to $40,000–$100,000 in countries such as the US and Canada.Gillis, A. (2001, Digital sweatshops. This, 34, 6-6. Closer to the USA, Costa Rica has become a big source for the advantages of a highly educated labor force, a large bilingual population, stable democratic government, and similar time zones with the United States. It takes only a few hours to travel between Costa Rica and the US. Companies such as Intel, Procter & Gamble, HP, Gensler, Amazon and Bank of America have big operations in Costa Rica.NEWSPAPER
, Cincinnati Business Courier
,weblink
, Former P&G manager elected president of Costa Rica
, Barrett J. Brunsman, April 3, 2018,
Unlike outsourced manufacturing, outsourced white collar workers can choose their working hours, and for which companies to work. Clients benefit from telecommuting, reduced office space, management salary, and employee benefits as these individuals are contracted workers.Ross, J; Irani, L; Silberman, M.S.; Zaldivar, A; Tomlinson, B (2010). "Who are the Crowdworkers? Shifting Demographics in Mechanical Turk". CHI 2010.However, ending a government oursourcing arrangement has its difficulties too.WEB, The Washington Post
,weblink
, Insourcing Functions Performed by Federal Contractors: An Overview of the Legal Issues
, Kate M. Manuel, Jack Maskell, May 5, 2011,

Reasons for outsourcing

While U.S. companies do not outsource to reduce high top level executive or managerial costs,NEWSPAPER
, The New York Times, Albert R. Hunt
,weblink
, Letter From Washington: As U.S. rich-poor gap grows, so does public outcry – Americas – International Herald Tribune
, February 18, 2007, they primarily outsource to reduce peripheral and "non-core" business expenses.Forey, Gail, and Jane Lockwood. Globalization, Communication and the Workplace: Talking across the World. New York: Continuum, 2011. Electronic Book #21-26. Further reasons are higher taxes, high energy costs, and excessive government regulation or mandates.
Mandated benefits like social security, Medicare, and safety protection (OSHA regulations) are also motivators.Buchholz, Todd G. Bringing the Jobs Home: How the Left Created the Outsourcing Crisis â€” and How We Can Fix It. New York: Sentinel, 2004. Print 97-118. By contrast, executive pay in the United States in 2007, which could exceed 400 times more than average workers — a gap 20 times bigger than it was in 1965. is not a factor.Other reasons include reducing and controlling operating costs, improving company focus, gaining access to world-class capabilities, freeing internal resources for other purposes, streamlining or increasing efficiency for time-consuming functions, and maximizing use of external resources. For small businesses, contracting/subcontracting/"outsourcing" might be done to improve work-life balanceNEWSPAPER, Wall Street Journal (WSJ)
,weblink
, Outsourcing Your Life
, Ellen Gamerman, June 2, 2007, October 10, 2018,

Outsourcing models

There are many outsourcing models, and they've variedWEB
,weblink
, Define Outsourcing Models: 5 Forms of Business Process Outsourcing
, January 29, 2015, by country,MAGAZINE, The Economist,weblink Britain's outsourcing model, copied around the world, is in trouble, June 28, 2018, yearWEB
,weblink
, Vested: A Business Model for 21st Century Outsourcing
, May 29, 2012, Vested outsourcing and industry.WEB, ADLittle (Arthur D. Little),weblink Outsourcing model redesign, WEB
,weblink
, Models of Outsourcing, Nicholas Sinclair
, August 21, 2014, The Outsourced Accountant
,weblink" title="web.archive.org/web/20180627170819weblink">weblink
, June 27, 2018, February 19, 2019,
Another approach is to differentiate between tactical and strategic outsourcing models. Tactical models include
  • staff augmentation
  • project-based
  • to gain expertise not available in-house.
Strategic consultancy includes for Business process improvement.MAGAZINE, Network World
,weblink
, Outsourcing Engagement Models, Serhiy Haziyev, Halyna Semenova
, June 4, 2015, IDG
,weblink
, May 19, 2018
, February 19, 2019,

Innovation outsourcing

When offshore outsourcing knowledge work, firms heavily rely on the availability of technical personnel at offshore locations. One of the challenges in offshoring engineering innovation is a reduction in quality.JOURNAL
, Nils Brede Moe, Darja Å mite, Geir Kjetil Hanssen, Hamish Barney
, 2013-08-29, From offshore outsourcing to insourcing and partnerships: four failed outsourcing attempts
, Empirical Software Engineering, 19, 5, 1225–1258
, 10.1007/s10664-013-9272-x, 1382-3256,

Co-sourcing

Co-sourcing is a hybrid of internal staff supplemented by an external service provider.WEB, hreonline.com
,weblink
, 'Co-Sourcing' and More, Andrew R. McIlvaine
, March 16, 2008, May 23, 2012
,weblink" title="web.archive.org/web/20130513092203weblink">weblink
, May 13, 2013, WEB, informationweek.com,weblink
author=Diane Rezendes Khirallahaccessdate=May 23, 2012, Co-sourcing can minimize sourcing risks, increase transparency, clarity and lend toward better control than fully outsourced.Business Dictionary: WEB,weblinkaccessdate=2016-08-18,weblink" title="web.archive.org/web/20160819235940weblink">weblink 2016-08-19, Co-sourcing services can supplement internal audit staff with specialized skills such as information risk management or integrity services, or help during peak periods, or similarly for other areas such as software development or human resources.

Identity management co-sourcing

Identity management co-sourcing is when on-site hardwareWEB,weblink
publisher=microsoft.com, WEB, IBM.com
, extending messaging to enterprise collaboration
,weblink interacts with outside identity services.
This contrasts with an "all in-the-cloud" service scenario, where the identity service is built, hosted and operated by the service provider in an externally hosted, cloud computing infrastructure.

Offshore Software R&D Co-sourcing

Offshore Software R&D is the provision of software development services by a supplier (whether external or internal) located in a different country from the one where the software will be used. The global software R&D services market, as contrasted to Information Technology Outsourcing (ITO) and BPO, is rather young and currently is at a relatively early stage of development.WEB,weblink
, Globalisation shakes the world
, January 21, 2007, April 10, 2019, news.bbc.co.uk,

Countries involved in outsourced software R&D

Canada, India, Ireland, and Israel were the four leading countries as of 2003. Although many countries have participated in the Offshore outsourcing of software development, their involvement in co-sourced and outsourced Research & Development (R&D) was somewhat limited. Canada, the second largest by 2009, had 21%WEB
, UN Information Economy Report 2010, 49
,weblink
As of 2018, the top three were deemed by one "research-based policy analysis and commentary from leading economists" as China, India and Israel."WEB
,weblink
, The IT revolution and the globalisation of R&D
, Lee Branstetter, Britta Glennon, J. Bradford Jensen
, August 21, 2018,
Gartner Group adds in Russia, but doesn't make it clear whether this is pure R&D or run-of-the-mill IT outsourcing.WEB
,weblink Offshore Outsourcing: Why Russia?
, April 10, 2019,

Usability issues in offshore development

The main driver for offshoring development work has been the greater availability of developers at a lower cost than in the home country. However, the rise in offshore development has taken place in parallel with an increased awareness of the importance of usability, and the user experience, in software. Outsourced development poses special problems for development, i.e. the more formal, contractual relationship between the supplier and client, and geographical separation place greater distance between the developers and users, which makes it harder to reflect the users' needs in the final product. This problem is exacerbated if the development is offshore. Further complications arise from cultural differences, which apply even if the development is carried out by an in-house offshore team.Historically offshore development concentrated on back office functions but, as offshoring has grown, a wider range of applications have been developed. Offshore suppliers have had to respond to the commercial pressures arising from usability issues by building up their usability expertise. Indeed, this problem has presented an attractive opportunity to some suppliers to move up market and offer higher value services."Usability Issues in Offshore Development: an Indian Perspective", accessed January 8, 2013"What Happens to Usability when Development goes Offshore?", accessed January 8, 2013"Offshore Development Culture and User Experience", accessed January 8, 2013

Legal issues

Offshore Software R&D means that company A turns over responsibility, in whole or in part, of an in-house software development to company B whose location is outside of company A’s national jurisdiction. Maximizing the economic value of an offshore software development asset critically depends on understanding how best to use the available forms of legal regulations to protect intellectual rights. If the vendor cannot be trusted to protect trade secrets, then the risks of an offshoring software development may outweigh its potential benefits. Hence, it is critical to review the intellectual property policy of the potential offshoring supplier. The intellectual property protection policy of an offshore software development company must be reflected in these crucial documents: General Agreement; Non-Disclosure Agreement; Employee Confidentiality Contract.How to protect intellectual property and confidential information dealing with offshore software development company?weblink

2000-2012 R&D

As forecast in 2003,WEB
,weblink
, R&D the Latest Target of Silicon Valley Outsourcing - InternetNews.
, internetnews.com, April 10, 2019, R&D is outsourced. Ownership of intellectual property by the outsourcing company, despite outside development, was the goal. To defend against tax-motivated cost-shifting, the US government passed regulations in 2006 to make outsourcing research harder.WEB
,weblink
, US tightens grip on Indian R&D centres
, Rediff, April 10, 2019, Despite many R&D contracts given to Indian universities and labs, only some research solutions were patented.WEB
,weblink
, Desi scientists help MNCs with R&D solutions
, Sujata Dutta Sachdeva, December 3, 2006
, April 10, 2019, The Economic Times,
While Pfizer moved some of its R&D from the UK to India,BOOK
, India Inside: The Emerging Innovation Challenge to the West
,weblink 142214240X
, Nirmalya Kumar, Phanish Puranam, 2011, a Forbes article suggested that it is increasingly more dangerous to offshore IP sensitive projects to India, because of India's continued ignorance of patent regulations.WEB
, It's time to stop Outsourcing Pharma R&D to India
, October 2012
,weblink In turn, companies such as Pfizer and Novartis, have lost rights to sell many of their cancer medications in India because of lack of IP protection.

Future trends

A 2018 "The Future of Outsourcing" report began with "The future of outsourcing is digital."WEB
, 2019-04-17, The Future of Outsourcing, 2018
,weblink
, Rebecca S. Eisner, Daniel A. Masur, Brad L. Peterson, The ""Do what you do best and outsource the rest" approach means that "integration with retained systems" is the new transition challenge - people training still exists, but is merely an "also."
There is more complexity than before, especially when the outside company may be an integrator.While the number of technically skilled labor grows in India, Indian offshore companies are increasingly tapping into the skilled labor already available in Eastern Europe to better address the needs of the Western European R&D market.Indian BPOs Dial Eastern Europe. Jun 2009.weblink

Changed government outsourcing focus

Forbes considers the USA 2016 election "the most disruptive change agent for the outsourcing industry,"MAGAZINE
, Forbes
,weblink
, Outsourcing In The New Normal: Three Trends Reshaping The Global Industry
, Anna Frazzetto, March 21, 2018, 2019-04-17, especially renewed "invest in America" goals.
Furthermore, there are growing legally required data protections, whose obligations and implementation details must be understood by both sides.e.g. NYS-mandated cybersecurity standards affecting "all institutions authorized ... to operate in New York..."This includes dealing with customer rights.South Korea requires giving digital service even when "the user refuses to give permission for data or functions that are not necessary to the provision of the service."

Implications

Performance measurement

Focusing on software quality metrics is a good way to maintain track of how well a project is performing.

Management processes

Globalization and complex supply chains, along with greater physical distance between higher management and the production-floor employees often requires a change in management methodologies, as inspection and feedback may not be as direct and frequent as in internal processes. This often requires the assimilation of new communication methods such as voice over IP, instant messaging, and Issue tracking systems, new time management methods such as time tracking software, and new cost- and schedule-assessment tools such as cost estimation software.{{Citation needed|date=August 2018}}The term Transition methodologyTransition Methodology describes the process of migrating knowledge, systems, and operating capabilities between the two sides.WEB
, HP Business Process Outsourcing transition management
,weblink

Communications and customer service

In the area of call center outsourcing, especially when combined with offshoring,Nadeem, S (2009) Macaulay's (Cyber) Children: The Cultural Politics of Outsourcing in India {{webarchive|url=https://web.archive.org/web/20100620105537weblink |date=2010-06-20 }}. Cultural Sociology. agents may speak with different linguistic features such as accents, word use and phraseology, which may impede comprehension.Alster, N (2005) Customer Disservice. {{webarchive|url=https://web.archive.org/web/20070702092211weblink |date=2007-07-02 }} www.CFO.com.The words "100% U.S.Based Customer Service" (followed by "Talk to a real person any time") are on the back of envelopes mailed by a major USA corporation.WEB
,weblink
, Discover card's 100% U.S. Based Customer Service
, March 18, 2019, WEB,weblink Dis..., March 29, 2019,

Governance

In 1979, Nobel laureate Oliver E. Williamson wrote that the governance structure is the "framework within which the integrity of a transaction is decided." Adding further that "because contracts are varied and complex, governance structures vary with the nature of the transaction."Williamson, Oliver E. (1979) "Transaction-Cost Economics: The Governance of Contractual Relations," Journal of Law and Economics: Vol. 22: No. 2, Article 3|accessible at: WEB,weblink
accessdate=2016-08-16,weblink" title="web.archive.org/web/20160919093134weblink">weblink 2016-09-19, University of Tennessee researchers have been studying complex outsourcing relationships since 2003. Emerging thinking regarding strategic outsourcing is focusing on creating a contract structure in which the parties have a vested interest in managing what are often highly complex business arrangements in a more collaborative, aligned, flexible, and credible way.KATE VITASEK >TITLE=THE VESTED OUTSOURCING MANUAL PUBLISHER=PALGRAVE MACMILLANISBN=978-0-230-11268-1, first, Also see relational contract

Security

Reduced security, sometimes related to lower loyaltyWEB, BBC.co.uk
url=http://news.bbc.co.uk/2/hi/business/4094894.stm, June 16, 2005, may occur, even when "outsourced" staff change their legal status but not their desk. While security and compliance issues are supposed to be addressed through the contract between the client and the suppliers, fraud cases have been reported.In April 2005, a high-profile case involved the theft of $350,000 from four Citibank customers when call-center workers acquired the passwords to customer accounts and transferred the money to their own accounts opened under fictitious names. Citibank did not find out about the problem until the American customers noticed discrepancies with their accounts and notified the bank.WEB
, J. Ribeiro, 2005, InfoWorld.com
,weblink
, Indian call center workers charged with Citibank fraud, {{webarchive|url=https://web.archive.org/web/20150924042721weblink}}

Information Technology

Richard Baldwin's 2006 The Great Unbundling work was followed in 2012 by Globalization's Second Acceleration (the Second Unbundling) and in 2016 by The Great Convergence: Information Technology and the New Globalization.BOOK,weblink The Great Convergence: Information Technology and the New Globalization
Richard Baldwin (economist)>Richard Baldwin, It is here, rather than in manufacturing, that the bits economy can advance in ways that the economy of atoms and things can't: an early 1990s Newsweek had a half page cartoon showing someone who had just ordered a pizza online, and was seeking help to download it.

Issues and reversals

(File:Gambling table - Zensar (3630410644).jpg|thumb|Demonstrating need to ensure outsourcing gains are realised and losses avoided at a summit in London in 2009)A number of outsourcings and offshorings that were deemed failuresMAGAZINE,weblink Why IT Outsourcing Often Fails, ineffectual leadership, process failures, talent issues
magazine=InformationWeek, WEB
,weblink
, IT Outsourcing Gone Bad: 4 Painful Lessons
, In the .. $4 billion deal between the U.S. Navy and .. EDS, .. in 2003, ... reasons behind the failure are complex, but ..
, Ephraim Schwartz, led to reversalsMAGAZINE, Forbes,weblink Why Some U.S. Companies Are Giving Up On Outsourcing
author2=Andy Sealock, Christopher Stacy, GM is not the only company to pull back at least a portion of its previously outsourced offshore IT operations.#Insourcing>Insourcing and reshoring. The New York Times reported in 2017 that IBM "plans to hire 25,000 more workers in the United States over the next four years," overlapping India-based Infosys's "10,000 workers in the United States over the next two years."WEBSITE, NYTimes.com
,weblink
, Hot Spot for Tech Outsourcing: The United States
, Steve Lohr, July 30, 2017, A clue to a tipping point having been reached was a short essay titled "Maybe You Shouldn’t Outsource Everything After All"NEWSPAPER, The New York Times,weblink Maybe You Shouldn’t Outsource Everything After All
date=May 7, 2018, and the longer "That Job Sent to India May Now Go to Indiana."Among problems encountered were supply-and-demand induced raises in salaries and lost benefits of similar-time-zone. Other issues were differences in language and culture. Another reason for a decrease in outsourcing is that many jobs that were subcontracted abroad have been replaced by technological advances.According to a 2005 Deloitte Consulting survey, a quarter of the companies which had outsourced tasks reversed their strategy.WEB,weblink Here, There and Everywhere - After decades of sending work across the world, companies are rethinking their offshoring strategies
, ''The Economist [London], January 17, 2013, January 19, 2013, Tamzin Booth,weblink" title="web.archive.org/web/20130118202607weblink">weblink January 18, 2013,
These reversals, however, didn't undo the damage. New factories often:
  • were in different locations
  • needed different skill sets
  • used more automation
Public opinion in the US and other Western powers opposing outsourcing was particularly strengthened by the drastic increase in unemployment as a result of the 2007–2008 financial crisis. From 2000 to 2010, the US experienced a net loss of 687,000 jobs due to outsourcing, primarily in the computers and electronics sector. Public disenchantment with outsourcing has not only stirred political responses, as seen in the 2012 US presidential campaigns, but it has also made companies more reluctant to outsource or offshore jobs.A counterswing depicted by a 2016 Deloitte survey suggested that companies are no longer reluctant to outsource."Outsourcing accelerates forward," (2016) Deloitte 2016 Global Outsourcing Survey accessed 18 August 2016 at WEB
,weblink
, Archived copy, 2016-08-18
,weblink
, 2017-01-12, Deloitte's survey identified three trends:
  • Companies are broadening their approach to outsourcing as they begin to view it as more than a simple cost-cutting play
  • Organizations are "redefining the ways they enter into outsourcing relationships and manage the ensuing risks."
  • Organizations are changing the way they are managing their relationships with outsourcing providers to "maximize the value of those relationships."

Insourcing

Insourcing is the process of reversing an outsourcing, possibly using help from those not currently part of the inhouse staff.WEB, Plunkettresearch.com
,weblink
, Outsourcing, BPO & Contract Manufacturing Market Research-Access Industry Trends, Revenues, Statistics, Forecasts, Technologies, Mailing Lists
, 2017-05-23, WEB, Whatis.techtarget.com
, Margaret Rouse
,weblink
, What is insourcing? - Definition from WhatIs.com, 2017-05-23, Marc J. Schniederjans, Outsourcing and Insourcing In an International Context(New York: M.E. Sharpe, 2005) 3.
Outsourcing has gone through many iterations and reinventions, and some outsourcing contracts have been partially or fully reversed. Often the reason is to maintain control of critical production or competencies, and insourcing is used to reduce costs of taxes, labor and transportation.Shermon, G (2017). "Digital Talent – Business Models and Competencies" Page 190Regional insourcing, a related term, is when a company assigns work to a subsidiary that is within the same country. This differs from onshoring and reshoring: these may be either inside or outside the company.

Regional insourcing

Regional insourcing is a process in which a company establishes satellite locations for specific entities of their business, making use of advantages one state may have over anothersuch as taxes, education, or workforce skill setsDavid Van Adelsberg, and Edward A Trolley, "Strategic Insourcing: Getting the Most from the Best," Training and Development 52. no. 7 (1998): 57-59. This concept focuses on the delegating or reassigning of procedures, functions, or jobs from production within a business in one location to another internal entity that specializes in that operation. This allows companies to streamline production, boost competency, and increase their bottom line.This competitive strategy applies the classical argument of Adam Smith, which posits that two nations would benefit more from one another by trading the goods that they are more proficient at manufacturing.Adam Smith, The Wealth of Nations: Part II (New York: Princeton Library, 1902), 102-104Robert C. Feenstra, Gordon H. Hanson, "Globalization, Outsourcing, and Wage Inequality." American Economic Review 86. no 2 (1996): 240-245.

Net effect on jobs

To those who are concerned that nations may be losing a net number of jobs due to outsourcing, someWEB
, Harold L. Sirkin
,weblink
, Made in America, Again, Bcg.perspectives
, 2011-08-25, 2017-05-23, point out that insourcing also occurs. A 2004 studyWEB
, Mary Amiti, Shang-Jin Wei, 2004
,weblink
, Fear of Service Outsourcing: Is it Justified?, WP/04/186, International Monetary Fund
, 2017-05-23, in the United States, the United Kingdom, and many other industrialized countries more jobs are insourced than outsourced. The New York Times disagreed, and wrote that free trade with low-wage countries is win-lose for many employees who find their jobs offshored or with stagnating wages.NEWSPAPER
, The New York Times, December 12, 2007
,weblink
, Paul Krugman
, The Trouble with Trade,
The impact of offshore outsourcing, according to two estimates published by The Economist showed unequal effect during the period studied 2004 to 2015, ranging from 150,000 to as high as 300,000 jobs lost per year.MAGAZINE, The Economist
,weblink
, What to Do Now: Shape Up, January 2013,
In 2010, a group of manufacturers started the Reshoring Initiative, focusing on bringing manufacturing jobs for American companies back to the country.NEWS
,weblink
, Top Reasons for Reshoring in Manufacturing - Manor Tool
, 2015-01-29, Manor Tool, 2018-02-08, Their data indicated that
140,000 American jobs were lost in 2003 due to offshoring. Eleven years later in 2014, the United States recovered 10,000 of those offshored positions; this marked the highest net gain in 20 years.NEWS
,weblink
, Reshoring: By the Numbers, 2017-03-20, IndustryWeek
, 2018-02-08, More than 90% of the jobs that American companies "offshored" and outsourced manufacturing to low cost countries such as China, Malaysia and Vietnam did not return.

Insourcing crossbreeds

The fluctuation of prefixes and names give rise to many more "cross-breeds" of insourcing. For example, "offshore insourcing" is "when companies set up their own "{{visible anchor|captive}}" process centers overseas, sometimes called a ''Captive Service,WEB
, OutsourceNews, Business Process Outsourcing – Captive service or third party vendors?
,weblink
, 2008-10-09, yes
weblink >archivedate=2008-10-11, taking advantage of their cheaper surroundings while maintaining control of their back-office work and business processes."WEB, Searchcio.techtarget.com,weblinkdate=2003-09-04 Remote insourcing}}" refers to hiring developers to work in-house from virtual (remote) facilities.WEB,weblinkaccessdate=2013-03-25, yes,weblink" title="web.archive.org/web/20130303212216weblink">weblink 2013-03-03,

In the United States

A 2012 series of articles in Atlantic MagazineJanuary: MAGAZINE,weblink The Past and Future of American Manufacturing, February: MAGAZINE
,weblink
, Manufacturing is Special: Why America Needs its Makers, June:MAGAZINE,weblink The Amazing (and Puzzling) Manufacturing Recovery, December: MAGAZINE,weblink
accessdate=2010-03-15, yes,weblink" title="web.archive.org/web/20090109171714weblink">weblinkdate=June 2018}} and the practice of taxing revenues earned outside of U.S. jurisdiction, a very uncommon practice. Some counterclaim that the actual taxes paid by US corporations may be considerably lower than "official" rates due to the use of tax loopholes, tax havens, and "gaming the system".WEB
,weblink
, High Corporate Tax Rate Is Misleading
, Smartmoney.com, 2010-03-15
,weblink" title="web.archive.org/web/20100210200332weblink">weblink
, 2010-02-10,
Sarbanes-Oxley has also been cited as a factor.{{See also|Disney litigation}}

Europe

In Europe, nearshore outsourcing (nearsourcing) relationships are between clients in larger European economies and various providers in smaller European nations.Major centers are Czech Republic, Hungary, Portugal, Poland, Slovakia, Romania, Bulgaria, Belarus and the Baltic.Spain, although not in Eastern Europe, offers nearshore outsourcing: WEB
, Lisbon Nearshore – IT Nearshore Services
,weblink There are others in larger markets, such as Russia and Ukraine. The attraction is lower-cost skilled labor forces, and a less stringent regulatory environment, but crucially they allow for more day to day physical oversight. They also have strong cultural ties to the major economic centers in Europe.JOURNAL
, Deutsche Bank, 2006-08-14, Meyer Thomas
, Offshoring to new shores: Nearshoring to Central and Eastern Europe
,weblink
, 2009-03-22, For example, Bulgaria is now considered to be a viable outsourcing destination for such companies as German software company SAP, where labor costs are low, and the skills available, but which is also closer to home.NEWS
, Andy Reinhardt
, Forget India, Let's Go To Bulgaria
, Business Week, 2004-03-01
,weblink
, 2009-11-07, In 2009, the Central-Eastern European Outsourcing Association (CEEOA) published research estimating that the Eastern European region has over 95,000 IT specialists involved in the industry, working for close to 5000 companies.REPORT, 2010
, Cerntral and Eastern European Outsourcing Review 2010
,weblink 2013-07-22,

European Union

Council Directive 77/187 of 14 February 1977 protects employees' rights in the event of transfers of undertakings, businesses or parts of businesses (as amended 29 June 1998, Directive 98/50/EC & 12 March 2001's Directive 2001/23).Rights acquired by employees with the former employer are to be safeguarded when they, together with the undertaking in which they are employed, are transferred to another employer, i.e., the contractor.Case subsequent to the European Court of Justice's Christel Schmidt v. Spar- und Leihkasse der früheren Ämter Bordesholm, Kiel und Cronshagen, Case C-392/92 [1994] have disputed whether a particular contracting-out exercise constituted a transfer of an undertaking (see, for example, Ayse Süzen v. Zehnacker Gebäudereinigung GmbH Krankenhausservice, Case C-13/95 [1997]). In principle, employees may benefit from the protection offered by the directive.Many Western European firms have been transferring tech projects eastward. Deutsche Bank has some of its software developed in Ukraine,WEB, AgileEngine.com
,weblink
, Outsourcing software development in Ukraine vs Poland, July 23, 2018, Siemens possesses an R&D center in Romania.
The outsourcing services market continued to flourish in Central and Eastern European during 2007–2009. In Poland alone, during 2009, despite a global economic downturn, approximately 10,000 jobs were created in business process outsourcing (BPO).WEB, BPO and Shared Services Centers – Polish Investment and Trade
, Poland as the destination for Shared Services Centers
,weblink

Labor issues in Japan

Article 44 of Japan's Employment Security Act implicitly bans the domestic/foreign workers supplied by unauthorized companies regardless of their operating locations. The law will apply if at least one party of suppliers, clients, labors reside in Japan, and if the labors are the integral part of the chain of command by the client company, or the supplier.
  • No person shall carry out a labor supply business or have workers supplied by a person who carries out a labor supply business work under his/her own directions or orders, except in cases provided for in the following Article.
    • A person who falls under any of the following items shall be punished by imprisonment with work for not more than one year or a fine of not more than one million yen. (Article 64)
  • Unless permitted by act, no person shall obtain profit by intervening, as a business, in the employment of another.WEB,weblink 日本法令外国語訳データベースシステム - [法令本文表示] - 労働基準法, www.japaneselawtranslation.go.jp, April 10, 2019,
Victims can lodge a criminal complaint against the CEO of the suppliers and clients. The CEO risks arrest, and the Japanese company may face a private settlement with financial package in the range between 20 and 100 million JPY (200,000 - million USD).

China

A China-based company, Lenovo, outsourced/reshored manufacturing of some time-critical customized PCs to the U.S. since "If it made them in China they would spend six weeks on a ship."

Asia

{{anchor|Information technology outsourcing}} Countries that have been the focus of outsourcing include India,Outsourcing Opportunities in India ,weblink and the Philippines for American and European companies, and China and Vietnam for Japanese companies.The Asian IT service market is still in its infancy, but in 2008 industry think tank Nasscom-McKinsey predicted a $17 billion IT service industry in India alone.Global Sourcing of Business and IT Services,weblink

Defining Near

When the New York Times headlined "Near Source of Supplies the Best Policy"NEWSPAPER, The New York Times
,weblink
, How to handle material: Founding Industries Near Source of Supplies the Best Policy
, November 30, 1913, 2, their main focus was on "cost of production."
Although transportation cost was addressed, they did not choose among:
  • transporting supplies to place of production
NEWSPAPER, The New York Times
,weblink
, Factory migration, August 6, 1939, 5,
  • transporting finished goods to place(s) of sale
  • cost and availability of labor


Nearshoring vs. Nearsourcing
The former refers to employees. Both refer to out-of-country but relatively nearby locations.WEB
, Nearshoring
,weblink For U.S.-based employers: China or India, vs. Canada or Mexico

Nearshoring

Nearshoring is having business processes, especially information technology processes, in a nearby country, often sharing a border with the target country.Sourcingmag.com Dictionary definition Commonalities usually include: geographic, temporal (time zone), cultural, social, linguistic, economic, political, or historical linkages.WEB, Communications of the ACM
,weblink
, Why 'nearshore' means that distance matters
, October 2007, Erran Carmel, Pamela Abbott,

Nearsourcing

There are two very different usages of this term:
  • The hybrid term "nearshore outsourcing" is sometimes used as an alternative for nearsourcing,MAGAZINE


, CIO magazine, Stephanie Overby, October 6, 2011
,weblink
, IT Outsourcing: Study Ranks Best Nearshore Locations for U.S. customers
, March 31, 2019, since nearsourcing workers are not employees of the company for which the work is performed. It can also be a reversal, by contracting with a development partner in a different country but in close proximity (same or nearby time zone), facilitating communication and allowing frequent visits.WEB
,weblink
, When IT challenges overwhelm your company – Start Nearshoring
, startnearshoring.com, en, 2018-10-19,
  • Near-sourcing also known as near-sourced or near-source,note the dash/hyphen is a business strategically placing some or all of its operations close to where its products are sold. Typically, this is contrasted with the trend to outsource low-wage manufacturing operations to developing nations (offshoring), and reflects a reversal of that trend. Businesses can near-source manufacturing, to customer serviceincluding repairing and IT services. It is a form of outsourcing, in that the work is done by an outside contracted company rather than internally (insourcing), but unlike offshore outsourcing, the work is done in fairly close proximity to either the company headquarters or its target market.

Reasons to near-source

Culture

Cultural alignment with the business is often more readily achieved through near-sourcing due to there being similarities between the cultures in which the business is located and in which services are sub-contracted, including for example proficiency with the language used in that culture.

Communication

Communication on business projects between management and the project team is often of particular concern. Constraints imposed by time zones can make communication a labor intense process, so near-sourcing provides a solution for facilitating the communication process through eliminating or reducing time zone constraints. Proximity also facilitates communication by allowing various actors within the business to meet on a regular basis when required. Traveling from the United States to Canada only takes a few hours depending on the location, but traveling to China or Europe often entails a much longer flight time.

Overview

Nearshoring is a derivative of the business term offshoring.In the USA, American clients nearshore to Canada and Mexico,WEB
,weblink
, Nearshoring: A Smart Alternative to Offshore
, IT Today, January 9, 2011, Sam Cinquegrani
, Auerbach Publications, NEWS, Michael Kanellos, Mexico sells itself as 'nearshore' outsourcing hub for US: Venga! Venga!
date=2009-05-18
,weblink
, 2009-03-22, or both,NEWS, Rae Anne Marsh, Trade across the border. Arizona is building strong ties with Mexico and Canada.
date=2014-01-01,weblink 2014-11-03, as well as to many nations in Central and South America.Software development nearshoring is mainly due to available low cost skilled developers.NEWS
,weblink
, Custom Software Development Company, 2018-01-22
, nearshore-it.eu, The nearshoring of call centers, shared services centers, and (Business Process Outsourcing) rose as offshore outsourcing was seen to be relatively less valuable.NEWS,weblink As Philippines Value Prop Sinks, Nearshore Steps Up, Says Atento Exec – Nearshore Americas
work=Nearshore Americas, 2018-08-20, The complexities of offshoring stem from language and cultural differences, travel distances, workday/time zone mismatches, and greater effort for needed for establishing trust and long-term relationships. Many nearshore providers attempted to circumvent communication and project management barriers by developing new ways to align organizations. As a result, concepts such as remote insourcing were created to give clients more control in managing their own projects. Nearshoring still hasn't overcome all barriers, but proximity allows more flexibility to align organizations.English language skills are the cornerstone of Nearshore BPO and IT services. Collaboration by universities, industry, and government has slowly produced improvements.NEWS, Nearshore Americas,weblinkaccess-date=2018-09-14,

Visa requirements

The United States has a special visa, the H-1B,H1B which enables American companies to temporarily (up to three years, or by extension, six) hire foreign workers to supplement their employees or replace those holding existing positions. In hearings on this matter, a United States senator called these "their outsourcing visa."WEB
,weblink" title="web.archive.org/web/20110108195825weblink">weblink
, Floor Statement: H-1B Visa Reform, Senator Richard Durbin,

Examples

  • In 2003 Procter & Gamble outsourced their facilities' management support, but it did not involve offshoring.NEWS,weblink 5 Facts About Overseas Outsourcing, 2012-07-09
access-date=2018-05-31,
  • Dell offshored to India in 2001 but reversed since "customers were not happy with the prior arrangement ..."

Print and mail outsourcing

Print and mail outsourcing is the outsourcing of document printing and distribution.The Print Services & Distribution Association was formed in 1946, and its members provide services that today might involve the word outsource. Similarly, members of the Direct Mail Marketing Association were the "outsourcers" for advertising agencies and others doing mailings. DMMA celebrated their 100th anniversary in 2017.The term "outsourcing" became very common in the print and mail business during the 1990s, and later expanded to be very broad and inclusive of most any process by the year 2000. Today, there are web based print to mail solutions for small to mid-size companies which allow the user to send one to thousands of documents into the mail stream, directly from a desktop or web interface.examples: Neopost.com's IS-330 Mailing System (desktop), Click2mail.com, USPS Web Tool Kit Application Program Interface ... web-based WEB
, Business Shipping Services & Direct Mail Options
,weblink

Marketing outsourcing

The term outsource marketing has been used in Britain to mean the outsourcing of the marketing function.WEB
,weblink
, Guardian News & Media to outsource marketing design services
, Jason Deans, May 17, 2010, April 10, 2019
, www.theguardian.com, The motivation for this has been:


|website=RSM Connect|language=en-US|access-date=2018-06-11{edih}
  • specialized expertise.WEB, forbes.com,weblink Leave It To The Experts: Should You Outsource Your Marketing?, 2018-06-11,
  • speed of execution
  • short term staff augmentationWEB,weblink Employee Augmentation – Marketing Outsourcing – THiNK – Marketing Operations Advisory
access-date=2017-12-05, While much of this work is the "bread and butter" of specialized departments within advertising agencies, sometimes specialist are used, such as when the Guardian newspaper outsourced most of their marketing design in May 2010.NEWS,weblinkwork=The Guardian, Jason Deans, Guardian News & Media to outsource marketing design services, May 17, 2010,

Business process outsourcing

Business process outsourcing (BPO) is a subset of outsourcing that involves the contracting of the operations and responsibilities of a specific business process to a third-party service provider. Originally, this was associated with manufacturing firms, such as Coca-Cola that outsourced large segments of its supply chain.Tas, J. & Sunder, S. 2004, Financial Services Business Process Outsourcing, Communications of the ACM, Vol 47, No. 5BPO is typically categorized into back office and front office outsourcing.WEB, Forbes, Getting A Piece Of Business Process Outsourcing,weblink BPO can be offshore outsourcing or to a neighbouring (or nearby) country: nearsourcing (nearshore outsourcing). Information Technology Enabled Service (ITES-BPO),BOOK
, J. G. Nellis, David Parker
, Principles of Business Economics
,weblink 2006
, Financial Times Prentice Hall, 978-0-273-69306-2, 213, Knowledge process outsourcing (KPO) and Legal process outsourcing (LPO) are some of the sub-segments of BPO.
Although BPO began as a cost-reducer, changes (specifically the move to more service-based rather than product-based contracts), companies now choose to outsource their back-office increasingly for time flexibility and direct quality control.Sagoo, Anoop. "How IT is reinvigorating business process outsourcing" CIO. 6 Sep 2012. Retrieved 25 March 2013. Business process outsourcing enhances the flexibility of an organization in different ways:BPO vendor charges are project-based or fee-for-service, using business models such as Remote In-Sourcing or similar software development and outsourcing models.BPM Watch. "In-Sourcing Remotely: A Closer Look at an Emerging Outsourcing Trend" WEB,weblink Archived copy, 2013-03-25, yes,weblink" title="web.archive.org/web/20130303212216weblink">weblink 2013-03-03, WEB,weblink Archived copy, 2013-03-25
weblink >archive-date=2014-10-25, yes, This can help a company to become more flexible by transforming fixed into variable costs.Willcocks, L., Hindle, J., Feeny, D. & Lacity, M. 2004, IT and Business Process Outsourcing: The Knowledge Potential, Information Systems Management, Vol. 21, pp 7–15 A variable cost structure helps a company responding to changes in required capacity and does not require a company to invest in assets, thereby making the company more flexible.Gilley, K.M., Rasheed, A. 2000. Making More by Doing Less: An Analysis of Outsourcing and its Effects on Firm Performance. Journal of Management, 26 (4): 763-790.BPO also permits focusing on a company's core competencies.Kakabadse, A., Kakabadse. N. 2002. Trends in Outsourcing: Contrasting USA and Europe. European Management Journal Vol. 20, No. 2: 189–198Supply chain management with effective use of supply chain partners and business process outsourcing can increase the speed of several business processes.Tas, Jeroen, Sunder, Shyam. 2004. Financial Services Business Process Outsourcing. COMMUNICATIONS OF THE ACM Vol. 47, No. 5

BPO caveats

Even various contractual compensation strategies may leave the company as having a new "single point of failure" (where even an after the fact payment is not enough to offset "complete failure of the customer's business").WEB
, Westlaw.com
,weblink
, Risk transfer in outsourcing contracts
, Dan Burge, Catherine Bingham, Amanda Lewis
, February 1, 2012, July 11, 2019, Unclear contractual issues are not the only risks; there's also changing requirements and unforeseen charges, failure to meet service levels, and a dependence on the BPO which reduces flexibility. The latter is called lock-in; flexibility may be lost due to penalty clauses and other contract terms.Michel, Vaughan, Fitzgerald, Guy. 1997. The IT outsourcing market place: vendors and their selection. Journal of Information Technology 12: 223-237 Also, the selection criteria may seem vague and undifferentiatedAdsit, D. (2009) Will a Toyota Emerge from the Pack of Me-Too BPO's?, In Queue WEB,weblink
accessdate=May 6, 2009, yes,weblink" title="web.archive.org/web/20090410035351weblink">weblink April 10, 2009, Security risks can arise regarding both from physical communication and from a privacy perspective. Employee attitude may change, and the company risks losing independence.Bunmi Cynthia Adeleye, Fenio Annansingh and Miguel Baptista Nunes. "Risk management practices in IS outsourcing: an investigation into commercial banks in Nigeria", International Journal of Information Management 24 (2004): 167-180.K. Altinkemer, A. Chaturvedi and R. Gulati. "Information systems outsourcing: Issues and evidence", International Journal of Information Management 14- 4 (1994): 252- 268.Risks and threats of outsourcing must therefore be managed, to achieve any benefits. In order to manage outsourcing in a structured way, maximising positive outcome, minimising risks and avoiding any threats, a business continuity management (BCM) model is set up. BCM consists of a set of steps, to successfully identify, manage and control the business processes that are, or can be outsourced.Forbes Gibb, and Steven Buchanan. "A framework for business continuity management", International Journal of Information Management 26- 2 (2006): 128- 141.Analytical hierarchy process (AHP) is a framework of BPO focused on identifying potential outsourceable information systems.Chyan Yang and Jen-Bor Huang. "A decision model for IS outsourcing", International Journal of Information Management 20- 3 (2000): 225- 239. L. Willcocks, M. Lacity and G. Fitzgerald identify several contracting problems companies face, ranging from unclear contract formatting, to a lack of understanding of technical IT processes.L. Willcocks, M. Lacity and G. Fitzgerald. "Information technology outsourcing in Europe and the USA: Assessment issues", International Journal of Information Management 15-5 (1995): 333–351.

Technological pressures

Industry analysts have identified robotic process automation (RPA) software and in particular the enhanced self-guided RPAAI based on artificial intelligence as a potential threat to the industry{{Citation|title=Robotic Automation Emerges as a Threat to Traditional Low Cost Outsourcing|publisher=HfS Research|url=http://www.hfsresearch.com/Robotic-Automation-as-Threat-to-Traditional-Low-Cost-Outsourcing|deadurl=yes|archiveurl=https://web.archive.org/web/20150921062911weblink|archivedate=2015-09-21}}{{Citation
|title=Gartner Predicts 2014: Business and IT Services Are Facing the End of Outsourcing as We Know It
|publisher=Gartner
|url=https://www.gartner.com/doc/2656215/predicts--business-it-services}} and speculate as to the likely long term impact.{{Citation |publisher=Outsource Magazine |title=Visions of the Future: The Next Decade in BPO
|url=http://outsourcemagazine.co.uk/visions-of-the-future-the-next-decade-in-bpo |deadurl=yes
|archiveurl=https://web.archive.org/web/20150413032822weblink
|archivedate=2015-04-13}} In the short term, however, there is likely to be little impact as existing contracts run their course: it is only reasonable to expect demand for cost efficiency and innovation to result in transformative changes at the point of contract renewals. With the average length of a BPO contract being 5 years or more{{Citation |publisher=Gartner|title=Market Trends: Outsourcing Contracts, Worldwide|url=http://www.gartner.com/DisplayDocument?ref=g_search&id=490855}} – and many contracts being longer – this hypothesis will take some time to play out.
On the other hand, an academic study{{Citation |publisher=London School of Economics|title=Robotic Process Automation at Xchanging|url=http://www.xchanging.com/system/files/dedicated-downloads/robotic-process-automation.pdf}} by the London School of Economics was at pains to counter the so-called "myth" that RPA will bring back many jobs from offshore. One possible argument behind such an assertion is that new technology provides new opportunities for increased quality, reliability, scalability and cost control, thus enabling BPO providers to increasingly compete on an outcomes-based model rather than competing on cost alone. With the core offering potentially changing from a "lift and shift" approach based on fixed costs to a more qualitative, service based and outcomes-based model, there is perhaps a new opportunity to grow the BPO industry with a new offering.

Industry size

One estimate of the worldwide BPO market from the BPO Services Global Industry Almanac 2017, puts the size of the industry in 2016 at about US$140 billion.WEB, itproportal.com,weblink The battle of the BPO titans: Eastern Europe vs. India, India, China and the Philippines are major powerhouses in the industry. In 2017, in India, the BPO industry generated US$30 billion in revenue according to the national industry association.WEB, ETCIO.com,weblink
date=February 2019}}The BPO industry and IT services industry in combination are worth a total of US$154 billion in revenue in 2017.WEB,weblink BPM sector sees faster growth than IT services: Nasscomdate=October 12, 2017, The BPO industry in the Philippines generated $22.9 billion in revenues in 2016,WEB,weblinkaccess-date=2017-12-07,weblinkdead-url=yes, while around 700 thousand medium and high skill jobs would be created by 2022.{{citation needed|date=February 2019}}In 2015, official statistics put the size of the total outsourcing industry in China, including not only the BPO industry but also IT outsourcing services, at $130.9 billion.NEWS, China Daily, China's service outsourcing grows in 2015,weblink January 20, 2016,

See also

{{div col|colwidth=25em}} {{div col end}}

References

{{Reflist|30em}}

Further reading

  • WEB, Digitalcommons.ilr.cornell.edu


,weblink
, Outsourcing and Insourcing Jobs in the U.S. Economy: Evidence Based on Foreign Investment Data (RL32461)
, 2008-06-24, Congressional Research Service
, James K. Jackson, 2017-05-23,
  • WEB, Fas.org


,weblink
, Insourcing Functions Performed by Federal Contractors: Legal Issues
, 2013-02-22, Congressional Research Service
, Kate M. Manuel, Jack Maskell, 2017-05-23,

External links

{{Wiktionary|outsourcing|nearshore#English}}
{{-}}{{Trade|state=expanded}}{{Authority control}}


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GETWIKI 09 JUL 2019
Eastern Philosophy
History of Philosophy
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M.R.M. Parrott
Biographies
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