Beruflich Dokumente
Kultur Dokumente
Activity
Group 1
Presenters
Bedanta Choudhury
Roll no.10
Changing Role of Procurement
Preetika Anand
Roll no. 28
Offshoring
Offshoring – An overview
Offshoring’ – the process of relocating business processes to
lower-cost overseas destinations – is a growing activity.
11 percent of the 1.46 billion jobs worldwide have the
potential to be performed remotely.
By 2008, total offshore employment will grow to approximately
4.1 million.
Experts predict that growth in the offshore marketplace will
continue at the rate of over 30% per annum.
India continues to lead the global sourcing picture.
However, many new countries such as Canada, China, Czech
Republic, Hungary, Ireland,Philippines and South Africa are
entering the market
Favorite offshore country is India
Comparison
$B % (CAGR)
30 Total Market Size ($ B) 28.24 90%
25
2002 17.6 75%
2005 29.9
20 2008 51.8 60%
15 45%
12.2
27% 29%
10 25% 25% 30%
14%
13% 5.13
5 3.27 15%
1.85
0.32 0.79 11%
0 0%
Mexico Philippines China Eastern Others Canada India
Europe
2002 2005 2008 CAGR
Services being offshored
Application
Testing, App Dev, maintenance, production
services support
$ Billion
800 70
Total Offshore IT Services Revenue
700 60 Total Offshore BPO Services
Revenue
600
50
500
40
400 India Offshore IT Services Revenue
30
300 India Offshore BPO Revenue
20
200
100 10
0 0
2004 2005 2006 2007 2008 2009
United States
• It is estimated that 70% of offshoring comes from the US.
• Outsourcing market is expected to grow by average of over 9% over 2005-
10.
• A key driver will be increased adoption of BPO as companies prioritize the
outsourcing of key business processes.
Europe
• UK is the second largest ‘client’ country for offshoring services
• UK remains the biggest market for BPO deals and, generally across
Europe, demand for outsourcing is growing.
Geographic Trends
Asia
• Sourcing market is supply-side driven.
• Japan, remains the enigma of the sourcing market. According
to a recent survey it is estimated that, 14.8% of Japanese
corporations have used IT outsourcing for more than 3 years;
19.8% have considered IT outsourcing but decided against it;
but a startling 50.9% of Japanese corporations are not
currently considering the use of IT outsourcing.
Global Sourcing – Backsourcing
Satish Menon
Roll no.43
BACKSOURCING
I P Bharti – Roll no 16
M C Bhardwaj – Roll no 20
Global Sourcing – Cost Factors
- Multiple Vendors
- Source directly from OEMs
- Bulk Purchase ( Economy of Scale, Savings on ordering
costs)
However care need to be taken as
a) It adds to inventory cost
b) Storage facility limitations
c) Risk of theft and damage
d) Risk of obsolescence
Global Sourcing – Cost Factors
USD / FTE / Year Value Share Value Share On US Cost Transaction Processing 25%-40%
base
Accounting / Contact Center 30%-40%
Personnel Costs 42,927 73.3% 6,348 48.4% 85% Services
IT/ Telecom 2,400 3,770 IT Services 25%-50%
Costs 4.1% 28.7% -57%
Finance / Insurance 40%-60%
Office Facility 3,700 1,991
Costs 6.3% 15.2% 46% Digital Content 30%-50%
Source: GECIS, FT Outsourcing to India Conference – November 2004
Source: NASSCOM, Evalueserve Analysis
Otherrate
Blended G&A 9,571 operations
for voice and non-voice 1012.5 Software/ ERP / Analytics 40%-60%
Expenses 16.3% 7.7% 89%
The above figures are indicative and the actual costs – savings could vary by process; further the cost advantage may be partially offset by travel, transitioning and
non-process
Total Costcommunication costs
58,598 100% 13,121 100% 78%
Global Sourcing Cost Factors
Material Cost
Transportation Cost
• Price Creep
• Efficiency Costs
• Management Costs
• Attrition Cost
• Currency Hedging
Global Sourcing Cost Factors
Price Creep
- The cost of price creep is a tangible cost but may come as a surprise.
- Several vendors provide the lowest, most basic figures during the bidding
process and systematically add in costs after the contract begins.
- Price creep can throw budgeting, ROI and cost calculations awry.
- To control price creep, define final deliverables and terms before the
bidding process.
Global Sourcing Cost Factors
Efficiency Costs
- This essentially means that you may be paying a higher rate, even when
the cost of production has dropped.
Global Sourcing Cost Factors
Management Costs
- As processes move offshore, organizations often neglect to capture
management costs associated with effectively running the co- sourced process.
- It is difficult to estimate these costs since the time required depends on the
complexity of problems and is often spread out.
- For example, many companies many not know, how do they calculate the
additional management time for late night or early morning conference calls?
- When supervising onsite staff, the time involved is often smaller since all
processes are in one physical location. But with global sourcing, management costs
are higher. Since top management usually devotes a lot of time in the initial stages of
co-sourcing, costs are high.
Global Sourcing Cost Factors
Attrition Cost
- Attrition costs are hidden costs.
Currency Hedging
- Since costs are delivered from globally scattered locations, vendors may
incur costs related to fluctuating local currencies.
- This cost is tangible but hidden and to keep these costs down it is best
to keep these open and known to both the parties and settled in the best
interest to both to keep the costs down in future.
Global Sourcing – Value Proposition
R K Datta
Roll no 37
What is Value Proposition?
Every Industry is now driving down costs and
developing products and services faster to meet new
challenges.
• The need to provide more value to customers (higher level of
products and service and reduced costs) can be achieved thru
Global Sourcing.
How Global Sourcing creates value
Sunil Kini
Roll no 47
WTO Compliance
Important Factors
• Pace and scope of globalization
• Shifting economic and trade policies
• Global sourcing as a means to control costs
The WTO is the only international organization dealing with
global rules of trade between nations.
After 2005, all quota limitations have been lifted, changing the
face of global sourcing dramatically.
Sourcing from any region covered by trade agreements
formulated by WTO comes with potential significant
advantages.
While one should not expect an immediate improvement in
operating margins, full commitment will be essential to the
global sourcing plan’s success.
Trade Agreements (1/4)
Influencing Negotiations
Vandana Ray
Roll no 49
Data Privacy and Secrecy
Around the world, governments are reacting in different ways to
the issues posed by cross-border data transfers and data
security breaches.
Failures in data security in a sourcing transaction will likely lead
to some combination of fines, loss of customers, and potential
litigation.
The real cost can be damaged reputation: it is neither adequate
nor acceptable to say: "sorry, it was our outsourcing vendor’s
fault that your account details got released".
More attention than ever before to strategies to anticipate and
prevent data security breaches.
Going well beyond merely complying with the various laws on
data privacy and protection of the laws of the outsourced
country.
Road Ahead