Outsourcing Akshay Kochar

What is Outsourcing? “Outsourcing refers to a company that contracts with another company to provide services that might otherwise be performed by in-house employees”

Why do it? Saves Money Focus on other business issues Salaries Hardware Software (updates) Focus on other business issues Other facets of the businesses operations Utilize the resources that are available more efficiently Expanding By making a presence in other countries, a firm may be able to expand globally with greater ease in the future

Who’s doing it? “HCL Technologies (India) bags $350 million contract from Reader’s Digest” Banks TD Canada Trust Scotia Citigroup Service providers Bell Rogers GE

Leading the way “India has many prestigious technical universities, but the Indian Institute of Technology stands apart as one of the world's best. India produces 75,000 IT graduates and 2 million English-speaking graduates annually” “Labor costs have crept upward over the years but have been offset by falling telecom rates. Typical salaries range from $5,000 to $12,000 for technical staff, while back-office salaries range from $3,500 to $7,500”

Leading the way “The Philippines turns out 380,000 graduates annually, but only 15,000 of them are focused on technology. The country has cultural affinities with the U.S., is well-versed in U.S. accounting and customer service standards and has low employee turnover” “Higher labor costs than India; technical salaries range from $5,000 to $10,000 annually and back office from $3,000 to $8,000”

Leading the way “U.S. neighbor to the north has solid educational system, with a qualified labor force of more than 16 million. “ “Being a nearshore alternative to the U.S. means IT salaries are much higher than most offshore countries, ranging from $25,000 to $50,000” (Canada 5th)

Disadvantages Loose managerial control Giving up power for a part of your company Threats to security and confidentiality Payroll information Must disclose all information related to the job being outsourced Changing business conditions Must make sure outsourcing company is aware

Future of Outsourcing Hard to say Competition of vendors Countries competing for contracts Economic downturns Made firms more cautious and wanting to cut costs

Extreme Scenario “Instead of paying vendors and companies who are accepting outsourced jobs, perhaps US companies will offer shares as payment. Therefore, rather than paying $4 million for a company in India to do a job, the US firm may offer $2 million cash and $2.5 million in stocks. This may lead to countries wanting more control of US firms and in turn gaining a vast amount of control in major US companies” - Akshay Kochar

Your Opinion? “So now I pose the question to you. As a manager, would you consider outsourcing jobs from your firm to another company? If so, what would be the deciding factor and if not, why wouldn't you outsource?”