Outsourcing In India And Third World Countries

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Outsourcing transactional and technical work to other countries has become a common practice in the hi tech world

. Entities that provide these services are known as business process outsourcing firms (BPOs). Also those that rely heavily upon broadband Internet resources are continually referred to as information technology enabled (ITES) or BPO-ITES. Five major global BPO sectors are information technology (43%), financial services (17%), telecommunications (16%), consumer goods and services (15%) and manufacturing (9%).

India is the absolute leader in providing outsourced, offshore services, with about 63 percent share. Plenty of BPO companies have been employed by well known US internationals. Some of them include Accenture, AOL, Association, Cisco, Citibank, Dell, Delta Airlines, GE, Hewlett Packard, IBM, Motorola and Yahoo.

India relies heavily upon a plentiful, well trained, English speaking workforce, which mostly includes college graduated engineers, for the critical mass essential to make the industry a success that it is. The country enjoys good infrastructure and a healthy telecom industry; with observance to international standards for quality, security, training and the protection of intellectual property; with a tax-friendly environment and reasonably low labour costs despite the fact that, the gap in labour costs is closing.

A lot of this can be attributed to the governments backing and encouragement. Over 4, 00,000 Indians offer outsourcing services, mainly in finance, human resources and customer care services. Of these, some include the call centers and technical support, medical transcriptions, data processing, billing and management support. Other surfacing areas of interest are also pharmaceuticals and legal services. With the change in the 1990s from governments domination to privatization, India capitalized outsourcing and the industry has since then reached great heights. During the 1990s multinationals created wholly owned subsidiary in India to provide some of their back office and customer support services. These service providers have eventually taken advantage of the economies by providing services to multiple customers.

Outsourcing work is often exercised in combination with a service level management (SLA) that is included into the outsourcing contract. SLAs function is to measure the work performed and the result may determine the price paid by the outsourcer.

Financial Protection for BPOs in India

Bangalore in Karnataka state is the hub for all U.S software companies in India. This city has a skilled workforce and a well-developed telecommunications infrastructure, while a city like Hyderabad is the centre for U. S companies which are engaged in life sciences. New outsource centers are increasing in many other locales in India where labor costs are lesser than in the established metropolitan centers, especially for senior employees. Cities gaining a considerable U.S business include Pune, Chennai, New Delhi and Mumbai.

A few firms also specialize in knowledge process outsourcing (KPO) or legal process outsourcing (LPO). Knowledge transfers frequently involve core business processes and intellectual property, and hence represent a higher level of risk for the outsourcing company. In India, there are two legal routes, statutory protection and written party-to-party agreements. Both methods are used for copyright, patent and trade mark protection. For the protection of trade secrets, companies rely on agreements. Even as copyright protection is available in India for software, patent protection is not so assured.

Outsourcing Practices:

The BPO industry is a fast growing industry. New services such as biotech research, tele-radiological services, design and engineering, and tax processing, are being created. They can create a local subsidiary or buy needed services directly from a local service provider. There are joint ventures and BOTs (build, operate and transfer) that begins as an outsourcing company body, advance as independents or are relocated or sold to local businesses. BPO transitions usually involve some form of performance testing during the changing stage, a process sometimes called base-lining.

There are compelling reasons for outsourcing, not the least of which is the cost of skilled and unskilled labor and economies of scale. The BPO industry prospered in its early years due to the considerable difference in labor costs flanked by first world and third world countries. That gap has narrowed in the past couple of years. The direct costs of labor, however, represent only part of the total cost of outsourcing. The gap in salaries and benefits is offset to some degree by added enterprise costs, such as management, employee training, communications, control, efficiency, security, preservation of intellectual property rights, and transportation.

A major cost aspect that employers are having complexity with resolving is employee turnover. The annual turnover rate among employees of business process (BPO) centers in India has reached epidemic levels, averaging 40 percent in latest years. There is not only a direct cost associated with employing and training, but also the costs of productivity and efficiency associated with learning curves and the cost of errors, which can lead to lost business.

by: made-from-india.com

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