Introduction to Offshoring and Pro's

1. Abhinav Singh Diana Wadiwalla Kaushik Anand Natarajan
Presented by

2. CONTENTS
• Introduction to Outsourcing
• Offshoring and Evolution
• Models of Offshoring
• Evolution and Causes of Offshoring
• Types of IT offshoring, Evaluation Criteria, and Jobs Impacted
• Economic Impact
• Advantages and Benefits of Offshoring

3. Introduction - Outsourcing
“Outsourcing can be defined as designating the use of goods and services produced outside the enterprise. “
Outsourcing can occur within the country where the enterprise is located (domestic outsourcing) or abroad
(outsourcing abroad/Offshoring)” (OECD, 2007).
Outsourcing is assigning work to a third party for the production of goods or rendering services.
Types of Outsourcing:
 Domestic In-house
 Domestic Outsourcing
 Offshore In-house
 Offshore Outsourcing

4. KNOW Offshoring
 Offshoring is defined as the transfer of worker’s productivity to abroad as part of outsourcing or as part of an
in-house transfer of work.
WHY OFFSHORING?
Offshoring allows US companies to capture economic values by creating markets, jobs, and production of goods
in other countries.
OFFSHORING ARENA
Major jobs offshored are in the fields of information technology, financial services, human resources,
purchasing and manufacturing.
TYPES OF OFFSHORING
 Production Offshoring
 IT Enabled Offshoring
 Innovation Offshoring

5. Models of Offshoring
 Global Shared Services - Mass insourcing, something like captive centres, this is followed primarily to
combine internal operations to large centers.
 Hybrid Model- Known as “Dual Shore” - 30% work onsite( requirement gathering, client interaction) and 70%
offshore ( coding, testing and fixes).
 Multi-sourcing model- Having multiple off-shores to get wide range solutions or “best-of-breed” strategy.
 Global Delivery model - also termed as blended outsourcing, this model has advantage of backup delivery
locations in case of failures. Eg: TCS, CTS, Accenture etc.
 Build-Operate-Transfer Model (BOT) - company can create a shared services or development center in
offshore and manage it for a limited period of time by signing a contract with an offshoring corporation. This
ensures quick time to achieve stability in the project progress.

6. Evolution and Cause of Offshoring
Evolution
 Initially offshoring started with blue collar jobs in early 70’s.
 By 80’s white collared jobs also started moving to other countries.
 Development of Internet accelerated R&D and manufacturing offshoring.
Reasons
 Competitive Pressure
 Access to skilled personnel
 Long term Benefits
 Lack of skilled labor
 Decrease in Work Age population
 Cost Cutting

7. Types of IT Offshoring
 Off-site/Offshore Outsourcing Model
 Onsite/offshoring Model
 Global Delivery Model
Offshoring Vendor Evaluation Criteria
 Relevant Work Experience
 Availability, Size and Education of Workforce
 Language capabilities (Multilinguality and fluency)
Jobs Impacted
 Low skilled and repetitive jobs
 Call centers
 Complex IT jobs and product design
 Manufacturing and R&D jobs
IT OFFSHORING

8. Economic Impact
 Skilled labor at cheap price will boost the economy in developed country.
 Creation of new wealth and jobs in developing country.
 With the theory of comparative advantage, both countries can enjoy greater total consumption and well
being in aggregate by trading with each other.
 Offshoring firms to lower costs and save scarce resources.
 Capture domestic market and generate revenues.
 What goes around comes around - Developing countries look back at US for more complex work.
 Total exports from US companies to India / China have grown manifold.
 Economic benefits are also linked to improved political relations.

9. Why INDIA and CHINA for Offshoring?

10. How effective is offshoring?

11. Value adds from offshoring
TIME ZONE ADVANTAGE
 Enables 24*7 operation.
 Provides business opportunities to local economy.
 Reduced downtime (maintenance during client off work hours).
 Timesaving.
SKILLED AND LOW COST LABOR
 Education system focussed on IT skills from early age.
 Catalyzed by evolving industry, refined speciality in the area of work.
 Production of Quality Product from long time, i.e. trust is built.
 Low wages and salary.

12. QUALITY MAINTENANCE
 Quality and Waiting Penalty Group (QWP)
 Capability Maturity Model Integration (CMMI)
 Six Sigma
 International Organization for Standardization (ISO Levels)
SECURITY ISSUES
 Intellectual and Proprietary Rights
 Offshore Development Centers
 Network Security Planning
 Regular Audits
 Recovery Planning

13. OTHER MAJOR BENEFITS:
 Focus on core activities (Innovation,Research and Development).
 Reduced Waiting Time.
 Accelerated Process Cycles.
 Fragmentation of supply chain enables side by side development.
 Elimination of recruitment costs, liabilities of employees.
 Flexibility - Eliminating hiring and termination costs.
 Increased GDP for both countries.
 Better Technology and Infrastructure.
 Benefits from Profits.

14. Offshoring is Proportional to
Growth

15. THANK YOU