Outsourcing & Offshoring Industry
India has emerged a leader in recent years in Outsourcing and offshoring industry and this has been possible due to globalization, economic and technological advancement across countries. The primary reason to outsource is the cost factor and the need to focus on the core business or competence.
Outsourcing vs Offshoring vs Offshore Insourcing :
The transfer of certain value contributing process, activity or services which is transferred to an external party who has the competence to deliver successfully. This decision to buy or make from another organization that was previously done inhouse is the best way to describe outsourcing.
Offshoring is the relocation of a business process from one country to another—typically an operational process, such as manufacturing, or supporting processes, such as accounting. Offshoring is when a company sends in-house jobs to be performed in another country. An example of offshoring is for a United States based company to produce their goods in Mexico. Offshoring is the relocation of a business process from one country to another—typically an operational process, such as manufacturing, or supporting processes, such as accounting.
Offshore insourcing (also referred to as captive supplier) refers to contracting with a wholly owned subsidiary located in a foreign country to provide business functions which the organization might otherwise have performed inhouse. It may provide services solely to its owner or may also provide services to other customers. An alternative to offshore outsourcing that is gaining popularity is offshore insourcing or "do-it-yourself." An increasing number of U.S. companies are creating their own subsidiary or entity offshore to get the benefits of the offshore model.
Challenges in the outsourcing industry :
- The biggest challenge is the infrastructure in India which has remained the same though the industry is growing rapidly.
- Companies are moving to tier 2 cities due to the rising labor costs in metros.
- Competition from South Asian countries like Vietnam, Singapore, Thailand and Philippines is increasing rapidly.
- Political unrest in USA and UK might affect India as these countries may put a restriction on outsourcing.
Challenges in Offshoring :
- Higher cost when compared to outsourcing.
- Slower response to change.
- Lack of motivation to improve processes.
- Initial overtime cost savings become the new "legacy," and the next level of cost savings can only be achieved through the introduction of improved technology/processes or the transition to a multiclient shared service center.
- Risks of transferring inherent inefficiencies to the insourced center.
- Commitment to manage remotely located delivery center is intense
Opportunities for India in terms of outsourcing are :
- India is the 2nd largest English-speaking country which makes it attractive for services which need advanced English like KPO, content and medicine, NASSCOM predicts that India will emerge as a global hub for Knowledge services.
- With a large population of English-speaking lawyers, LPO or Legal Process outsourcing will an attractive industry.
- Infrastructure management services presents a great potential for India with service like IT infrastructure, application operations, IT security and maintenance.
- India is set to be a major player in engineering R & D which expected to be around $1.4 trillion by 2020.
India, no doubt is currently on the Global map as the 1st preference of choice for outsourcing and offshoring. But, to retain the number 1 position there are many challenges which needs to be addressed which we have discussed in the above paragraphs.
Since its inception, Multi Recruit has worked with many companies in the offshoring and outsourcing industry. With a team capable of understanding the latest technologies and identifying top talent across geographies, Multi Recruit is a consultant of choice for many companies across the globe.