The Third Wave of Globalization

Offshore Outsourcing

Outsourcing, in general, differs from the use of consultants or contracts workers because the activities outsourced are usually recurring; resources for performing the activities as well as the responsibility for making many of the decisions regarding the activities are transferred to other organizations. And, offshore, is generally defined as undertaking work using labor that is normally based in a remote location.

The volatility of the business climate today hails for better business strategy. More businesses have decided to outsource some of their non-core competencies and processes to offshore destinations. Business activities commonly outsourced offshore may include call center, document processing, investment management, back office management and human resources.

In the year 2000, for the first time, more than 54% of IT services purchased in North America were outsourced. Areas offshored include application development and maintenance, infrastructure management and embedded technology solutions, to name a few.

The willingness to pay for outsourcing services is high especially among players in the banking, insurance, manufacturing, healthcare, and government sectors, driven by the fact that customers demand access to a more reliable infrastructure, with lower operational costs and greater flexibility.

According to a Gartner group survey, outsourcing is expected to grow at the rate of 8.8% between 2003 and 2006. Goldman Saches estimates the BPO market in 2005 to be US$585 billion. The growth is likely to be driven primarily through offshoring of traditional outsourced processes such as call centre support, IT support and back office processing. The growth in the use of offshored services has showed that its benefits are no longer just about price - they can include service quality improvement, scalability, better risk management and the freeing up of internal resources to focus on core value-adding activities. Recent trends also point to companies exploring the outsourcing of entire functions such as sourcing, procurement and supply chain management.

The Asian Advantage in the Outsourcing Revolution

Today's Offshore Outsourcing Challenges

"Outsourcing will represent 59% of IT services by 2005" source: Gartner. In today's connected global marketplace, organizations have discovered that outsourcing some of their non-core processes to offshore destinations will definitely generate value. By leveraging technology, works involving - designing network infrastructure, setting up of help desk, rolling out new messaging system, or building an online business application - is delivered with great efficiency and flexibility.

80% to 90% of cases indicate that cost is the deciding factor in opting for outsourcing. By thoroughly understanding the operational cost, companies will be able to detect streamlining and real value opportunities - this is the foundation of an outsourcing strategy. Outsourcing too requires setting aside the fear of losing control over operational and procedural matters by the managerial level.

Organizations also need to consider a complex mix of technical and business issues while evaluating the merits of IT offshore and outsourcing services. Selecting the right and proficient outsourcing provider who can manage a complex and continually evolving IT infrastructure is the key to successful outsourcing. Nonetheless, one of the greatest challenges will be to overcome resistance within the organization to placing work with organizations hundreds or thousands of miles away. Winning hearts and minds within the organization is a critical part of the change management necessary to deliver the benefits of offshoring.

10 High-Level Reasons for Outsourcing

"ea is the IT global outsourcing provider that understands the complexity of the outsourcing decision and has a proven approach to helping companies achieve their business targets"