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2

Part 1

New Entrepreneur Ideas

Extra Infromation

Companies that offshore

Many companies now look at offshoring for many defferent reasons. Multinational companies such as Dell, Xerox, Baxter International, and Hertz have offshored their call centers to Ireland (Jobs, Burris, and Butler, 2007). In 1999, 150 of the fortune 500 companies offshored to India (Soliman, 2003; Mateyaschuk, 1999). Companies like Disney co. Daimler-Chrysler, Nortal Networks, and General Electric offshored to Indian companies (Robb, 2000; Soliman, 2003). Shukla (2006) stated that some of the 50 plus companies such as American Tobacco, Hyundai Motors, Suzuli Motors, and Unilever have invested in offshoring to India. IBM, BT, Capgemini, LogicaCMG, Xansa, HSBC, and Atos Origin offshore also to India (Carmel and Tija, 2005; Knights and Jones, 2007). Adidas, Nike, and nestle all outsource to South East Asia (Knights and Jones, 2007).

Outsourcing What is outsourcing?

Outsourcing: subcontracting a process, such as product design or manufacturing, to a third-party company.

Outsourcing is the result of globalization, where organization’s borders and country borders disappear. Ghodeswar and Vaidyanathan (2008) defined outsourcing as a decision of making or buying a service or product that was developed with in the organization to be done by another organization, which was based on (Monezka et al, 2005). Another view of the definition of out sourcing was that it is when an organization contracts out to another company for the hope of achieving a more cost effective and efficient outcome that can not be achieved with in the organization (Knight and Jones, 2007). Soliman (2003) defined outsourcing on a global level as a contract from one company to a service provider for a task with the company wishes to be preformed.

Reasons for outsourcing There are many different reasons for outsourcing. Soliman (2003) believed in four main reasons for out souring based on his research of previews studies. First as a strategic decision, outsourcing allows organizations to focus on core competencies rather then other field that take up more time and are less important for competition (Quinn and Hilmer, 1994). Second, one of the most common of reasons was to reduce the cost with in the organization (Alpar and Saharia, 1995, McFarlan and Nolan, 1995). Another reason was the lack of abilities (Grover et al, 1994) its competitions pressure (Lacity et al, 1994), problems with in the politics with in the organization (Lacity and Hirschheim, 1993), problems within organizations environment such as the economy (Smith et al, 1998). The last was limited to the information system of an organization, to utilize the internet to make decisions in production cost advantage, transaction costs, asset specificity, internal expertise, maturity of technology, application service providers value chain, and application media fit (Chen and Soliman, 2002). Ghodeswar and Vaidyanathan (2008), state that it helps rapidly improves performance and lowers operation costs based on (Kakabadse and Kakabadse, 2003). They also believed that improving organizational focus, mitigate risk, reach competitive edge, explained its technology abilities, and have more resources for core competences (Bartell, 1998) The competition of multinational organizations over competitive edge also lead to outsourcing (Park, 2000)

Chapter 2

Benefits of outsourcing There are a large amount of benefits of outsourcing for both the outsourcing organization and the organization that the job is assigned to. Here we take a look of at the benefits of the outsourcing organization. Organizations that outsource application services would benefit from paying for only when the job is needed, constant improvement without large additional cost, and the ability to access the service from where and when ever they want (Beale and Lindqhist, 2000), which was mentioned by (Soliman, 2003). Soliman (2003) also stated that there is a reduction in support cost, and do not need large investments in new hardware and software, which he found in his research by (reed, 2000). Kashmeri (2003) supported this idea by saying that there is less cost because there was no need to buy licensing of software (Soliman, 2003). Because of outsourcing, organization have more time and resources to focus on core competences and also they become more flexible and dynamic making it easier to change and take advantage of opportunities (Ghodeswar and Vaidyanathan, 2008). Ghodeswar and Vaidyanathan (2008) also stated that manufacturers had their own benefits such as R&D, product design, operation design, logistics, and marketing mixes can be outsourced to organizations that have more experience and benefit form them while still working on the area that they are good at and have a competitive edge in. Other things shuch as the entering of larger markets and economies of scale as an investment in organizations in to the future (Knight and Jones. 2007)

Areas of outsourcing Organizations can outsource different areas and different fields. Common areas of outsourcing are information technology, human resource, manufacturing, and marketing. Organizations use service providers when they out source like printing, legal issues, accounting department, telecommunications, maintenance, security, and even recruitment of employees (Ghodeswar and Vaidyanathan, 2008).

Outsourcing types Ghodeswar and Vaidyanathan (2008) stated different types of outsourcing.

Service outsourcing which is the outsourcing of nearly all services they need to free up time and resources so that its employees can focus on working on the organizations core functions. Another is Information technology outsourcing which is to outsource the functions of information technology department to a third party instead of working on networking and software development and upgrades which are vary costing. Business process outsourcing is when an organization outsources on of its business functions to another organization such as its accounting department to an accounting firm. Another type would be manufacturing outsourcing where an organization outsources its manufacturing to another firm that can manufacture because of less tax, cheaper land, lower wages, or many other reasons (Ghodeswar and Vaidyanathan, 2008).

Global Markets

3

4

Part One

New Entrepreneur Ideas

Outsourcing What is outsourcing?

Outsourcing is the result of globalization, where organization’s borders and country borders disappear. Ghodeswar and Vaidyanathan (2008) defined outsourcing as a decision of making or buying a service or product that was developed with in the organization to be done by another organization, which was based on (Monezka et al, 2005). Another view of the definition of out sourcing was that it is when an organization contracts out to another company for the hope of achieving a more cost effective and efficient outcome that can not be achieved with in the organization (Knight and Jones, 2007). Soliman (2003) defined outsourcing on a global level as a contract from one company to a service provider for a task with the company wishes to be preformed.

Reasons for outsourcing There are many different reasons for outsourcing. Soliman (2003) believed in four main reasons for out souring based on his research of previews studies. First as a strategic decision, outsourcing allows organizations to focus on core competencies rather then other field that take up more time and are less important for competition (Quinn and Hilmer, 1994). Second, one of the most common of reasons was to reduce the cost with in the organization (Alpar and Saharia, 1995, McFarlan and Nolan, 1995).

Another reason was the lack of abilities (Grover et al, 1994) its competitions pressure (Lacity et al, Global contracts 1994), problems with in the politics are formed through with in the organization (Lacity outsourcing to achieve advantages in cost, and Hirschheim, 1993), problems services, marketing, and within organizations environment many other things. such as the economy (Smith et al, 1998). The last was limited to the information system of an organization, to utilize the internet to make decisions in production cost advantage, transaction costs, asset specificity, internal expertise, maturity of technology, application service providers value chain, and application media fit (Chen and Soliman, 2002). Ghodeswar and Vaidyanathan (2008), state that it helps rapidly improves performance and lowers operation costs based on (Kakabadse and Kakabadse, 2003). They also believed that improving organizational focus, mitigate risk, reach competitive edge, explained its technology abilities, and have more resources for core competences (Bartell, 1998) The competition of multinational organizations over competitive edge also lead to Outsourcing: subcontracting a process, such as product design or manufacturing, to a third-party company.

Chapter 2

Global Markets

5

outsourcing (Park, 2000)

Benefits of outsourcing There are a large amount of benefits of outsourcing for both the outsourcing organization and the organization that the job is assigned to. Here we take a look of at the benefits of the outsourcing organization. Organizations that outsource application services would benefit from paying for only when the job is needed, constant improvement without large additional cost, and the ability to access the service from where and when ever they want (Beale and Lindqhist, 2000), which was mentioned by (Soliman, 2003). Soliman (2003) also stated that there is a reduction in support cost, and do not need large investments in new hardware and software, which he found in his research by (reed, 2000). Kashmeri (2003) supported this idea by saying that there is less cost because there was no need to buy licensing of software (Soliman, 2003). Because of outsourcing, organization have more time and resources to focus on core competences and also they become more flexible and dynamic making it easier to change and take advantage of opportunities (Ghodeswar and Vaidyanathan, 2008). Ghodeswar and Vaidyanathan (2008) also stated that manufacturers had their own benefits such as R&D, product design, operation design, logistics, and marketing mixes can be outsourced to organizations that have more experience and benefit form them while still working on the area that they are good at and have a competitive edge in. Other things shuch as the entering of larger markets and economies of scale as an investment in organizations in to the future (Knight and Jones. 2007)

Areas of outsourcing Organizations can outsource different areas and different fields. Common areas of outsourcing are information technology, human resource, manufacturing, and marketing. Organizations use service providers when they out source like printing, legal issues, accounting department, telecommunications, maintenance, security, and even recruitment of employees (Ghodeswar and Vaidyanathan, 2008).

Outsourcing types Ghodeswar and Vaidyanathan (2008) stated different types of outsourcing.

Service outsourcing which is the outsourcing of nearly all services they need to free up time and resources so that its employees can focus on working on the organizations core functions. Another is Information technology outsourcing which is to outsource the functions of information technology department to a third party instead of working on networking and software development and upgrades which are vary costing. Business process outsourcing is when an organization outsources on of its business functions to another organization such as its accounting department to an accounting firm. Another type would be manufacturing outsourcing where an organization outsources its manufacturing to another firm that can manufacture because of less tax, cheaper land, lower wages, or many other reasons (Ghodeswar and Vaidyanathan, 2008).

Extra Information

Many companies now look at offshoring for many defferent reasons. Multinational companies such as Dell, Xerox, Baxter International, and Hertz have offshored their call centers to Ireland (Jobs, Burris, and Butler, 2007). In 1999, 150 of the fortune 500 companies offshored to India (Soliman, 2003; Mateyaschuk, 1999). Companies like Disney co. DaimlerChrysler, Nortal Networks, and General Electric offshored to Indian companies (Robb, 2000; Soliman, 2003). Shukla (2006) stated that some of the 50 plus companies such as American Tobacco, Hyundai Motors, Suzuli Motors, and Unilever have invested in offshoring to India. IBM, BT, Capgemini, LogicaCMG, Xansa, HSBC, and Atos Origin offshore also to India (Carmel and Tija, 2005; Knights and Jones, 2007). Adidas, Nike, and nestle all outsource to South East Asia (Knights and Jones, 2007).

6

Outsourcing Outsourcing:

Subcontracting A Process, Such As Product Design Or Manufacturing, To A ThirdParty Company.

Reasons for outsourcing

Benefits of outsourcing

Part I

New Entrepreneur Ideas

What is outsourcing? Outsourcing is the result of glo-

balization, where organization’s borders and country borders disappear.

Ghodeswar and Vaidyanathan (2008) defined outsourcing as a decision of making or buying a service or product that was developed with in the organization to be done by another organization, which was based on (Monezka et al, 2005). Another view of the definition of out sourcing was that it is when an organization contracts out to another company for the hope of achieving a more cost effective and efficient outcome that can not be achieved with in the organization (Knight and Jones, 2007). Soliman (2003) defined outsourcing on a global level as a contract from one company to a service provider for a task with the company wishes to be preformed.

There are many different reasons for outsourcing. Soliman (2003) believed in four main reasons for out souring based on his research of previews studies. First as a strategic decision, outsourcing allows organizations to focus on core competencies rather then other field that take up more time and are less important for competition (Quinn and Hilmer, 1994). Second, one of the most common of reasons was to reduce the cost with in the organization (Alpar and Saharia, 1995, McFarlan and Nolan, 1995). Another reason was the lack of abilities (Grover et al, 1994) its competitions pressure (Lacity et al, 1994), problems with in the politics with in the organization (Lacity and Hirschheim, 1993), problems within organizations environment such as the economy (Smith et al, 1998). The last was limited to the information system of an organization, to utilize the internet to make decisions in production cost advantage, transaction costs, asset specificity, internal expertise, maturity of technology, application service providers value chain, and application media fit (Chen and Soliman, 2002). Ghodeswar and Vaidyanathan (2008), state that it helps rapidly improves performance and lowers operation costs based on (Kakabadse and Kakabadse, 2003). They also believed that improving organizational focus, mitigate risk, reach competitive edge, explained its technology abilities, and have more resources for core competences (Bartell, 1998) The competition of multinational organizations over competitive edge also lead to outsourcing (Park, 2000) There are a large amount of benefits of outsourcing for both the outsourcing organization and the organization that the job is assigned to. Here we take a look of at the benefits of the outsourcing organization. Organizations that outsource application services would benefit from paying for only when the job is needed, constant improvement without large additional cost, and

Extra Infromation

Companies that offshore

Many companies now look at offshoring for many defferent reasons. Multinational companies such as Dell, Xerox, Baxter International, and Hertz have offshored their call centers to Ireland (Jobs, Burris, and Butler, 2007). In 1999, 150 of the fortune 500 companies offshored to India (Soliman, 2003; Mateyaschuk, 1999). Companies like Disney co. Daimler-Chrysler, Nortal Networks, and General Electric offshored to Indian companies (Robb, 2000; Soliman, 2003).

Shukla (2006) stated that some of the 50 plus companies such as American Tobacco, Hyundai Motors, Suzuli Motors, and Unilever have invested in offshoring to India. IBM, BT, Capgemini, LogicaCMG, Xansa, HSBC, and Atos Origin offshore also to India (Carmel and Tija, 2005; Knights and Jones, 2007). Adidas, Nike, and nestle all outsource to South East Asia (Knights and Jones, 2007).

Chapter 2

Global Markets

7

the ability to access the service from where and when ever they want (Beale and Lindqhist, 2000), which was mentioned by (Soliman, 2003). Soliman (2003) also stated that there is a reduction in support cost, and do not need large investments in new hardware and software, which he found in his research by (reed, 2000).

Kashmeri (2003) supported this idea by saying that there is less cost because there was no need to buy licensing of software (Soliman, 2003).

Because of outsourcing, Global contracts are formed through organization have more time outsourcing to achieve advantages in cost, services, marketing, and many other things. and resources to focus on core competences and also they become more flexible and dynamic making it easier to change and take advantage of opportunities (Ghodeswar and Vaidyanathan, 2008). Ghodeswar and Vaidyanathan (2008) also stated that manufacturers had their own benefits such as R&D, product design, operation design, logistics, and marketing mixes can be outsourced to organizations that have more experience and benefit form them while still working on the area that they are good at and have a competitive edge in. Other things shuch as the entering of larger markets and economies of scale as an investment in organizations in to the future (Knight and Jones. 2007) Organizations can outsource different areas and different fields.

Areas of Common areas of outsourcing are information technology, human resource, manufacturing, and marketing. Organizations use service providers outsourcing when they out source like printing, legal issues, accounting department, telecommunications, maintenance, security, and even recruitment of employees (Ghodeswar and Vaidyanathan, 2008).

Ghodeswar and Vaidyanathan (2008) stated different types of Outsourcing types outsourcing. Service outsourcing which is the outsourcing of nearly all services they need to free up time and resources so that its employees can focus on working on the organizations core functions. Another is Information technology outsourcing which is to outsource the functions of information technology department to a third party instead of working on networking and software development and upgrades which are vary costing. Business process outsourcing is when an organization outsources on of its business functions to another organization such as its accounting department to an accounting firm.

Another type would be manufacturing outsourcing where an organization outsources its manufacturing to another firm that can manufacture because of less tax, cheaper land, lower wages, or many other reasons (Ghodeswar and Vaidyanathan, 2008).

8

Part I

New Entrepreneur Ideas

Outsourcing

What is outsourcing?

Outsourcing: subcontracting a process, such as product design or manufacturing, to a third-party company.

Outsourcing is the result of globalization, where organization’s borders and country borders disappear. Ghodeswar and Vaidyanathan (2008) defined outsourcing as a decision of making or buying a service or product that was developed with in the organization to be done by another organization, which was based on (Monezka et al, 2005). Another view of the definition of out sourcing was that it is when an organization contracts out to another company for the hope of achieving a more cost effective and efficient outcome that can not be achieved with in the organization (Knight and Jones, 2007). Soliman (2003) defined outsourcing on a global level as a contract from one company to a service provider for a task with the company wishes to be preformed.

Reasons for outsourcing There are many different reasons for outsourcing. Soliman (2003) believed in four main reasons for out souring based on his research of previews studies. First as a strategic decision, outsourcing allows organizations to focus on core competencies rather then other field that take up more time and are less important for competition (Quinn and Hilmer, 1994).

Second, one of the most common of reasons was to reduce the cost with in the organization (Alpar and Saharia, 1995, McFarlan and Nolan, 1995). Another reason was the lack of abilities (Grover et al, 1994) its competitions pressure (Lacity et al, 1994), problems with in the politics with in the organization (Lacity and Hirschheim, 1993), problems within organizations environment such as the economy (Smith et al, 1998). The last was limited to the information system of an organization, to utilize the internet to make decisions in production cost advantage, transaction costs, asset specificity, internal expertise, maturity of technology, application service providers value chain, and application media fit (Chen and Soliman, 2002). Ghodeswar and Vaidyanathan Global contracts are formed (2008), state that it helps rapidly improves performance and through outsourcing to achieve lowers operation costs based on (Kakabadse and Kakabadse, advantages in cost, services, 2003). They also believed that improving organizational focus, marketing, and many other mitigate risk, reach competitive edge, explained its technology things. abilities, and have more resources for core competences (Bartell, 1998) The competition of multinational organizations over competitive edge also lead to outsourcing (Park, 2000)

Benefits of outsourcing There are a large amount of benefits of outsourcing for both the outsourcing organization and the organization that the job is assigned to. Here we take a look of at the benefits of the outsourcing organization.

Organizations that outsource application services would benefit from paying for only when the job is needed, constant improvement without large additional cost, and the ability to access the service from where and when ever they want (Beale and Lindqhist, 2000), which was mentioned by (Soliman, 2003). Soliman (2003) also stated that there is a reduction in support cost, and do not need large investments in new hardware and

Chapter 2 Global Markets 9 software, which he found in his research by (reed, 2000). Kashmeri (2003) supported this idea by saying that there is less cost because there was no need to buy licensing of software (Soliman, 2003). Because of outsourcing, organization have more time and resources to focus on core competences and also they become more flexible and dynamic making it easier to change and take advantage of opportunities (Ghodeswar and Vaidyanathan, 2008).

Ghodeswar and Vaidyanathan (2008) also stated that manufacturers had their own benefits such as R&D, product design, operation design, logistics, and marketing mixes can be outsourced to organizations that have more experience and benefit form them while still working on the area that they are good at and have a competitive edge in. Other things shuch as the entering of larger markets and economies of scale as an investment in organizations in to the future (Knight and Jones. 2007)

Areas of outsourcing Organizations can outsource different areas and different fields.

Common areas of outsourcing are information technology, human resource, manufacturing, and marketing. Organizations use service providers when they out source like printing, legal issues, accounting department, telecommunications, maintenance, security, and even recruitment of employees (Ghodeswar and Vaidyanathan, 2008).

Outsourcing types Ghodeswar and Vaidyanathan (2008) stated different types of outsourcing. Service outsourcing which is the outsourcing of nearly all services they need to free up time and resources so that its employees can focus on working on the organizations core functions. Another is Information technology outsourcing which is to outsource the functions of information technology department to a third party instead of working on networking and software development and upgrades which are vary costing. Business process outsourcing is when an organization outsources on of its business functions to another organization such as its accounting department to an accounting firm. Another type would be manufacturing outsourcing where an organization outsources its manufacturing to another firm that can manufacture because of less tax, cheaper land, lower wages, or many other reasons (Ghodeswar and Vaidyanathan, 2008).

Extra Infromation: Companies that offshore

Many companies now look at offshoring for many defferent reasons. Multinational companies such as Dell, Xerox, Baxter International, and Hertz have offshored their call centers to Ireland (Jobs, Burris, and Butler, 2007). In 1999, 150 of the fortune 500 companies offshored to India (Soliman, 2003; Mateyaschuk, 1999). Companies like Disney co. Daimler-Chrysler, Nortal Networks, and General Electric offshored to Indian companies (Robb, 2000; Soliman, 2003).

Shukla (2006) stated that some of the 50 plus companies such as American Tobacco, Hyundai Motors, Suzuli Motors, and Unilever have invested in offshoring to India. IBM, BT, Capgemini, LogicaCMG, Xansa, HSBC, and Atos Origin offshore also to India (Carmel and Tija, 2005; Knights and Jones, 2007). Adidas, Nike, and nestle all outsource to South East Asia (Knights and Jones, 2007).

10

Part 1

› New Entrepreneur Ideas ‹

››› Outsourcing What is outsourcing?

Outsourcing is the result of globalization, where organization’s borders and country borders disappear. Ghodeswar and Vaidyanathan (2008) defined outsourcing as a decision of making or buying a service or product that was developed with in the organization to be done by another organization, which was based on (Monezka et al, 2005). Another view of the definition of out sourcing was that it is when an organization contracts out to another company for the hope of achieving a more cost effective and efficient outcome that can not be achieved with in the organization (Knight and Jones, 2007). Soliman (2003) defined outsourcing on a global level as a contract from one company to a service provider for a task with the company wishes to be preformed.

Reasons for outsourcing There are many different reasons for outsourcing. Soliman (2003) believed in four main reasons for out souring based on his research of previews studies. First as a strategic decision, outsourcing allows organizations to focus on core competencies rather then other field that take up more time and are less important for competition (Quinn and Hilmer, 1994). Second, one of the most common of reasons was to reduce the cost with in the organization (Alpar and Saharia, 1995, McFarlan and Nolan, 1995). Another reason was the lack of abilities (Grover et al, 1994) its competitions pressure (Lacity et al, 1994), problems with in the politics with in the organization (Lacity and Hirschheim, 1993), problems within organizations environment such as the economy (Smith et al, 1998). The last was limited to the information system of an organization, to utilize the internet to make decisions in production cost advantage, transaction costs, asset specificity, internal expertise, maturity of technology, application service providers value chain, and application media fit (Chen and Soliman, 2002). Ghodeswar and Vaidyanathan (2008), state that it helps rapidly improves performance and lowers operation costs based on (Kakabadse and Kakabadse, 2003). They also believed that improving organizational focus, mitigate risk, reach competitive edge, explained its technology abilities, and have more resources for core competences (Bartell, 1998) The competition of multinational organizations over competitive edge also lead to outsourcing (Park, 2000)

Benefits of outsourcing There are a large amount of benefits of outsourcing for both the outsourcing organization and the organization that the job is assigned to. Here we take a look of at the benefits of the outsourcing organization. Organizations that outsource application services would benefit from paying for only when the job is needed, constant improvement without large additional cost, and the ability to access the service from where and when ever they want (Beale and Lindqhist, 2000), which was mentioned by (Soliman, 2003). Soliman (2003) also stated that there is a reduction in support cost, and do not need large investments in new hardware and software, which he found in his research by (reed, 2000). Kashmeri (2003) supported this idea by saying that there is less cost because there was no need to buy licensing of software (Soliman, 2003). Because of outsourcing, organization have more time and resources to focus on core competences and also they become more flexible and dynamic making it easier to change and take advantage of opportunities (Ghodeswar and Vaidyanathan, 2008). Ghodeswar and Vaidyanathan (2008) also

› Global Markets ‚

Chapter 2

11

Extra Infromation: Companies that offshore

Many companies now look at offshoring for many defferent reasons. Multinational companies such as Dell, Xerox, Baxter International, and Hertz have offshored their call centers to Ireland (Jobs, Burris, and Butler, 2007). In 1999, 150 of the fortune 500 companies offshored to India (Soliman, 2003; Mateyaschuk, 1999). Companies like Disney co. Daimler-Chrysler, Nortal Networks, and General Electric offshored to Indian companies (Robb, 2000; Soliman, 2003). Shukla (2006) stated that some of the 50 plus companies such as American Tobacco, Hyundai Motors, Suzuli Motors, and Unilever have invested in offshoring to India. IBM, BT, Capgemini, LogicaCMG, Xansa, HSBC, and Atos Origin offshore also to India (Carmel and Tija, 2005; Knights and Jones, 2007). Adidas, Nike, and nestle all outsource to South East Asia (Knights and Jones, 2007). stated that manufacturers had their own benefits such as R&D, product design, operation design, logistics, and marketing mixes can be outsourced to organizations that have more experience and benefit form them while still working on the area that they are good at and have a competitive edge in. Other things shuch as the entering of larger markets and economies of scale as an investment in organizations in to the future (Knight and Jones. 2007)

Areas of outsourcing Organizations can outsource different areas and different fields. Common areas of outsourcing are information technology, human resource, manufacturing, and marketing. Organizations use service providers when they out source like printing, legal issues, accounting department, telecommunications, maintenance, security, and even recruitment of employees (Ghodeswar and Vaidyanathan, 2008).

Outsourcing types Ghodeswar andVaidyanathan (2008) stated different types of outsourcing. Service outsourcing which is the outsourcing of nearly all services they need to free up time and resources so that its employees can focus on working on the organizations core functions. Another is Information technology outsourcing which is to outsource the functions of information technology department to a third party instead of working on networking and software development and upgrades which are vary costing. Business process outsourcing is when an organization outsources on of its business functions to another organization such as its accounting department to an accounting firm. Another type would be manufacturing outsourcing where an organization outsources its manufacturing to another firm that can manufacture because of less tax, cheaper land, lower wages, or many other reasons (Ghodeswar and Vaidyanathan, 2008).

| Image 2.3|

Global contracts are formed through outsourcing to achieve advantages in cost, services, marketing, and many other things.

12

Part I

New Entrepreneur Ideas

Outsourcing What is outsourcing?

Outsourcing: subcontracting a process, such as product design or manufacturing, to a third-party company.

Outsourcing is the result of globalization, where organization’s borders and country borders disappear. Ghodeswar and Vaidyanathan (2008) defined outsourcing as a decision of making or buying a service or product that was developed with in the organization to be done by another organization, which was based on (Monezka et al, 2005). Another view of the definition of out sourcing was that it is when an organization contracts out to another company for the hope of achieving a more cost effective and efficient outcome that can not be achieved with in the organization (Knight and Jones, 2007). Soliman (2003) defined outsourcing on a global level as a contract from one company to a service provider for a task with the company wishes to be preformed.

Reasons for outsourcing There are many different reasons for outsourcing. Soliman (2003) believed in four main reasons for out souring based on his research of previews studies.

First as a strategic decision, outsourcing allows organizations to focus on core competencies rather then other field that take up more time and are less important for competition (Quinn and Hilmer, 1994). Second, one of the most common of reasons was to reduce the cost with in the organization (Alpar and Saharia, 1995, McFarlan and Nolan, 1995). Another reason was the lack of abilities (Grover et al, 1994) its competitions pressure (Lacity et al, 1994), problems with in the politics with in the organization (Lacity and Hirschheim, 1993), problems within organizations environment such as the economy (Smith et al, 1998). The last was limited to the information system of an organization, to utilize the internet to make decisions in production cost advantage, transaction costs, asset specificity, internal expertise, maturity of technology, application service providers value

Global contracts are formed through outsourcing to achieve advantages in cost, services, marketing, and many other things.

Chapter 2 Global Markets chain, and application media fit (Chen and Soliman, 2002). Ghodeswar and Vaidyanathan (2008), state that it helps rapidly improves performance and lowers operation costs based on (Kakabadse and Kakabadse, 2003). They also believed that improving organizational focus, mitigate risk, reach competitive edge, explained its technology abilities, and have more resources for core competences (Bartell, 1998) The competition of multinational organizations over competitive edge also lead to outsourcing (Park, 2000)

Benefits of outsourcing There are a large amount of benefits of outsourcing for both the outsourcing organization and the organization that the job is assigned to. Here we take a look of at the benefits of the outsourcing organization. Organizations that outsource application services would benefit from paying for only when the job is needed, constant improvement without large additional cost, and the ability to access the service from where and when ever they want (Beale and Lindqhist, 2000), which was mentioned by (Soliman, 2003). Soliman (2003) also stated that there is a reduction in support cost, and do not need large investments in new hardware and software, which he found in his research by (reed, 2000). Kashmeri (2003) supported this idea by saying that there is less cost because there was no need to buy licensing of software (Soliman, 2003). Because of outsourcing, organization have more time and resources to focus on core competences and also they become more flexible and dynamic making it easier to change and take advantage of opportunities (Ghodeswar and Vaidyanathan, 2008). Ghodeswar and Vaidyanathan (2008) also stated that manufacturers had their own benefits such as R&D, product design, operation design, logistics, and marketing mixes can be outsourced to organizations that have more experience and benefit form them while still working on the area that they are good at and have a competitive edge in. Other things shuch as the entering of larger markets and economies of scale as an investment in organizations in to the future (Knight and Jones.

2007)

Areas of outsourcing Organizations can outsource different areas and different fields. Common areas of outsourcing are information technology, human resource, manufacturing, and marketing. Organizations use service providers when they out source like printing, legal issues, accounting department, telecommunications, maintenance, security, and even recruitment of employees (Ghodeswar and Vaidyanathan, 2008).

Outsourcing types Ghodeswar and Vaidyanathan (2008) stated different types of outsourcing.

Service outsourcing which is the outsourcing of nearly all services they need to free up time and resources so that its employees can focus on working on the organizations core functions. Another is Information technology outsourcing which is to outsource the functions of information technology department to a third party instead of working on networking and software development and upgrades which are vary costing. Business process outsourcing is when an organization outsources on of its business functions to another organization such as its accounting department to an accounting firm. Another type would be manufacturing outsourcing where an organization outsources its manufacturing to another firm that can manufacture because of less tax, cheaper land, lower wages, or many other reasons (Ghodeswar and Vaidyanathan, 2008).

13

Extra Infromation: Companies that offshore

Many companies now look at offshoring for many defferent reasons.

Multinational companies such as Dell, Xerox, Baxter International, and Hertz have offshored their call centers to Ireland (Jobs, Burris, and Butler, 2007). In 1999, 150 of the fortune 500 companies offshored to India (Soliman, 2003; Mateyaschuk, 1999).

Companies like Disney co. Daimler-Chrysler, Nortal Networks, and General Electric offshored to Indian companies (Robb, 2000; Soliman, 2003). Shukla (2006) stated that some of the 50 plus companies such as American Tobacco, Hyundai Motors, Suzuli Motors, and Unilever have invested in offshoring to India.

IBM, BT, Capgemini, LogicaCMG, Xansa, HSBC, and Atos Origin offshore also to India (Carmel and Tija, 2005; Knights and Jones, 2007). Adidas, Nike, and nestle all outsource to South East Asia (Knights and Jones, 2007).