We outsource several functions in our daily lives to other people and agencies. Some of these daily functions are
laundry and house-cleaning services, painting of our house, or plumbing services. We outsource them mainly because
somebody else is better equipped and knows how to do it better, faster, and cheaper than us. Similarly, companies
have been outsourcing several activities such as travel, legal, and cleaning services to outside agencies for several
years and it has been a win-win situation for all involved. Today, most companies, including those from the Fortune
500, are outsourcing services such as customer care, back office operations, engineering and design, H R management,
accounting, data entry, and many other services (these services are also referred to as IT Enabled Services ) to
What is outsourcing?
Business Process Outsourcing (BPO) means the delegation of one or more IT and manpower intensive business processes
to an external provider that owns, administers and manages that selected process, based on defined and measurable
performance metrics. It calls for examining the processes that make up the business and its functional units, and
then working with specialized service providers to both improvise and outsource these at the same time.
is becoming a winning strategy for forward thinking managements. It is no longer merely a means of reducing costs
but also a tool for adding value to business. It enables organizations to concentrate on their core business, carry
out business reengineering, and provide information that is valid, timely, and adequate to assist decision making at
the management level and quality and cost control at the middle and lower levels
Since 1990 there has been an explosive growth in the use of outsourcing. From near zero when outsourcing first emerged
in the late 1980's from $100 Billion in 1996 (according to Harvard Business Review) to an estimated $318 Billion in
2001. Dun and Bradstreet estimates that outsourcing will soon touch the $ 1 Trillion mark globally.
One of the earliest outsourcing deals was conducted in 1989 when Eastman Kodak gave an order worth $ 250 million to
IBM. The deal took place cause Kodak had identified its core competencies, realized that IT was not one of them, and
wanted to partner with a provider to deliver on this non-core activity while it focused on its own core competencies.
The ITES market
According to industry estimates, the ITES market globally was of the order of US$ 13.5 billion during 2000 and is
expected to grow to US $ 142 billion by 2008. The Pricewaterhouse Coopers Global Top Decision-Makers Study SM is a
landmark study — the first to focus exclusively on ITES at billion-dollar multinationals. Conducted by Yankelovich
Partners for Pricewaterhouse Coopers, the study provides an in-depth report of the attitudes and behavior of senior
executives and their companies toward ITES. Interviews were conducted with 304 top decision-making executives in
14 countries: CEOs, Presidents, CFOs, COOs and CIOs. Among this group, 192 companies (63%) reported outsourcing one
or more business processes.
Technology is shrinking global distances to the point where, in reality, having work
performed halfway around the world is not much different from having it done in an office building across the street.
Outsourcing has emerged as the single most powerful tool for companies seeking to stay competitive by transforming
themselves using its benefits.
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