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Outsourcing and Offshoring

The overview of module, based on BPO & ITO activities.

Outsourcing accounts as the process of hiring an external or internal entity or a third party to operate the specific part of the service or goods within the confirmed period of time, mostly in the format of contact by the companies and organizations. The main drivers of the outsourcing are the accessibility to broad skill sets which is not available internally existed in the organization, or cost reduction and become able of focusing on innovation and productivity by practicing on central activities. In his module on the outsourcing concept, there are two types of outsourcing which are namely tactical and strategic outsourcing, each of which has different definitions and functions.(Murphy, 2004)

In the outsourcing and offshoring module, we narrowly studied the strategic type of the outsourcing, which according to studies has three main dimensions. These dimensions are, manufacturing outsourcing, information technology outsourcing (ITO) and and business process outsourcing(BPO).

The main focus of this module was about the development process of ITO and BPO practices in all around the world and also focusing on how these practices are changing over time, the financial attractiveness of the countries as the outsourcing destinations. The other part this module's emphasis was about the consequences and impacts of outsourcing operations on the both supplier and the client’s economies beside studying the concept of strategic decision for the most optimal partner of the outsourcing contract. In this part my aim is to provide an overview of the contents of these module which are as follows.

According to studies the most common deployment of ITO practices on the business areas of the marketing, finance, sales and human resource departments, while the BPO practices usually opt to apply in IT infrastructure developments, data management, the IT and technology consultancy, design systems and architecture outlines.(Oshri and Kotlarky, 2011)

Sourcing activities mainly consist of varied modes, namely, offshoring, nearshoring, captive sourcing, crowd sourcing and also mixed sourcing activities which aim to apply the most optimized practice of sourcing for the company or organization. In other words, the practice of applying combination of varied modes of outsourcing has become remarkable for managers due to reducing the extra costs of the the outsourcing, which could instead of improving the performance of the company, deteriorate the overall result of the organization. These extra costs include the cost of coordination with the supplier company, the expenditure of controlling operations, lack of governance and all in all the overall pitfalls of hidden costs.

Moreover, with the emergent of the outsourcing and the development of this exercise over time, the need for studying on the most effective social impacts and the main risks of this execution has become crucial for all managers of client organizations.

There are varied notions and concepts in terms of outsourcing trends, which are briefly the development of applications or the maintenance of these applications and also the operations towards IT infrastructure improvements.

Furthermore the trend systems integration and the need for lesser extent business procedures could account the main trends of outsourcing activities.

In this module, we firstly focused on the overall global sourcing markets, its benefits, the most attractive current IT service providers which are dominant in this market, which will be elaborated hereinafter.

Following the researches on the outsourcing notion, there are scales and standards which scholars have defined in order to standardize different IT supplier countries in terms of their attractiveness and beneficials in the global sourcing market.

The Global Service Location Index(GSLI) is an international index in order to evaluate the overall situation of IT suppliers in terms of their financial attractiveness indicator or the availability of their human resources, the people’s skills beside the importance of the business environment in the destination countries. (ATKearney, 2014)

Throughout this module we investigated on other measurements such as the Gartner index whose variables are different with the GSLI, although the outcomes of all convey mostly same results and rankings.

In the Gartner’s index, the main criteria assessments rely on the language, government support, labor pool, political and economic environment beside considering cost, the educational systems and also the IT infrastructure.

Regarding this and statistics the current and most attractive countries in terms of IT outsourcing activities are the India, Israel, Ireland, China, Brazil, Russia and many other countries which are progressing and enhancing in this industry.

In addition to all mentioned above, we practiced about the capabilities of suppliers and clients then the procedure of strategic destination decision making beside the social impacts and responsibilities of these practices on the both client and supplier’s economies over long time.

In terms of improving financial attractiveness indicator, countries might be required to improve their management skills, education systems, resolving their bottlenecks with benchmarking, by doing so, attracting more high value development works from the western and all around world countries.

According to the scholars the crucial features of suppliers include the relationship competency, delivery competency, transformation competency and so forth.

The common variables of all these categories which mentioned before, are the leadership, the management behavior and also the domain expertise, all of which play crucial role in strategic destination sourcing decisions. (Feeny, Lacity and Willcocks, 2005)

From client point of view, the main capabilities of clients include the factors such as the business and function vision, architecture and design procedures in addition to the quality of their service delivery.

In following up the risk management process of this business practice, we discussed about the main pitfalls and problems which could negatively effect on the cultural and financial dimensions of the both countries and also the probability of deteriorates such as hidden expenditures. The problem of security and privacy of intellectual properties would be other concerns of the firms, each of which was broadly elaborated in this module.

All in all beside whatever mentioned above there are other concerns and impacts which the outsourcing activities might result on the ecosystem of countries and the international social responsibility standards which should be considered by leaders of countries and the organizations,

One of the international social guidance papers is the “International Standards” guidance in social responsibility practices, ISO26000, which states that organizations should unitedly follow the social responsibilities and standards in order to gain sustainable development progress.(2010)

We studied the lifecycle of the outsourcing process in this module which are in order the determining sourcing strategy, defining operational model, developing the contract, selecting the provider, transition of the provider and also management of provider performance beside ensuring the quality of services which are provided. According to scholars if the monitoring and controlling management of outsourcing procedure operates improperly, the organization might start to involve in deteriotoral performance procedure. ”High contract management costs and Inadequate contract management arrangements and the loss of control are associated with the pitfalling process of organizations”, which mentioned above.(Cullen, Seddon and Willcocks, 2005)

All in all, the conclusion to be drawn is that the outsourcing operations and more importantly the strategic decision of IT provider partners, could be the most challenging situation for all clients in terms of sourcing activities. In addition to all crucial points considered before, managers with the strategic and proper decision for their sourcing activity, not only can gain the advantages of the outsourcing, but they become able to leverage their knowledge and skill sets, if they deploy the most optimal mode, trend and strategy in terms of their IT outsourcing contractors.

Outsourcing is the process of hiring an external entity or third party to operate the specific part of the service or goods within confirmed period of time, mostly in the format of contact by the companies and organizations. The main drivers of the outsourcing are the accessibility to broad skill sets which is not available internally in the organization, or cost reduction and become able of focusing on innovation and productivity. In his paper on the outsourcing concept. There are two types of outsourcing which are namely tactical and strategic outsourcing, each of which has different definitions and functions.(Murphy, 2004)

In our outsourcing and offshoring module we narrowly studied the strategic type of the outsourcing, which according to studies has three main dimensions. These dimensions are, manufacturing outsourcing, information technology outsourcing(ITO) and and business process outsourcing(BPO).(Jalalinia and Yazdi, 2009)

The main focus of this module was about the development process of ITO and BPO practices in all around the world and also focusing on how these practices are changing over time, the financial attractiveness of the countries as the outsourcing destinations. The other part this module's emphasis was about the consequences and impacts of outsourcing operations on the both supplier and the client’s economies beside studying the concept of strategic decision for the most optimal partner of the outsourcing contract. In this part my aim is to provide an overview of the contents of these module which are as follows.

According to studies the most common deployment of ITO practices on the business areas of the marketing, finance, sales and human resource departments, while the BPO practices usually opt to apply in IT infrastructure developments, data management, the IT and technology consultancy, design systems and architecture outlines.(Oshri and Kotlarky, 2011)

Sourcing activities mainly consist of varied modes, namely, offshoring, nearshoring, captive sourcing, crowd sourcing and also mixed sourcing activities which aim to apply the most optimized practice of sourcing for the company or organization. In other words, the practice of applying combination of varied modes of outsourcing has become remarkable for managers due to reducing the extra costs of the the outsourcing, which could instead of improving the performance of the company, deteriorate the overall result of the organization. These extra costs include the cost of coordination with the supplier company, the expenditure of controlling operations, lack of governance and all in all the overall pitfalls of hidden costs.

Moreover, with the emergent of the outsourcing and the development of this exercise over time, the need for studying on the most effective social impacts and the main risks of this execution has become crucial for all managers of client organizations.

There are varied notions and concepts in terms of outsourcing trends, which are briefly the development of applications or the maintenance of these applications and also the operations towards IT infrastructure improvements.

Furthermore the trend systems integration and the need for lesser extent business procedures could account the main trends of outsourcing activities.

In this module, we firstly focused on the overall global sourcing markets, its benefits, the most attractive current IT service providers which are dominant in this market, which will be elaborated hereinafter.

Following the researches on the outsourcing notion, there are scales and standards which scholars have defined in order to standardize different IT supplier countries in terms of their attractiveness and beneficials in the global sourcing market.

The Global Service Location Index(GSLI) is an international index in order to evaluate the overall situation of IT suppliers in terms of their financial attractiveness indicator or the availability of their human resources, the people’s skills beside the importance of the business environment in the destination countries. (ATKearney, 2014)

Throughout this module we investigated on other measurements such as the Gartner index whose variables are different with the GSLI, although the outcomes of all convey mostly same results and rankings.

In the Gartner’s index, the main criteria assessments rely on the language, government support, labor pool, political and economic environment beside considering cost, the educational systems and also the IT infrastructure.

Regarding this and statistics the current and most attractive countries in terms of IT outsourcing activities are the India, Israel, Ireland, China, Brazil, Russia and many other countries which are progressing and enhancing in this industry.

In addition to all mentioned above, we practiced about the capabilities of suppliers and clients then the procedure of strategic destination decision making beside the social impacts and responsibilities of these practices on the both client and supplier’s economies over long time.

In terms of improving financial attractiveness indicator, countries might be required to improve their management skills, education systems, resolving their bottlenecks with benchmarking, by doing so, attracting more high value development works from the western and all around world countries.

According to the scholars the crucial features of suppliers include the relationship competency, delivery competency, transformation competency and so forth.

The common variables of all these categories which mentioned before, are the leadership, the management behavior and also the domain expertise, all of which play crucial role in strategic destination sourcing decisions. (Feeny, Lacity and Willcocks, 2005)

From client point of view, the main capabilities of clients include the factors such as the business and function vision, architecture and design procedures in addition to the quality of their service delivery.

In following up the risk management process of this business practice, we discussed about the main pitfalls and problems which could negatively effect on the cultural and financial dimensions of the both countries and also the probability of deteriorates such as hidden expenditures. The problem of security and privacy of intellectual properties would be other concerns of the firms, each of which was broadly elaborated in this module.

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