Introduction
What is Outsourcing?
The word outsourcing has various connotations in different situations. In general, it is used to denote the contracting of a specific process to an external company in exchange for the benefit of reduced labor costs or other economic benefit. Outsourcing applies to many different sectors and can be broadly divided into:
Production or Manufacturing Outsourcing
The manufacturing units and factories in China are emblematic of this type of outsourcing. The incentive is, as with all types outsourcing, purely monetary and mainly involves the migration of the physical production line to a country with cheaper labor or power and other subsidies. Though the physical goods are produced in another country (see offshoring) the actual designs of the product are routinely made in the original country, which later outsources its production. The fundamental difficulty in outsourcing the design work arises from the fact that it requires highly skilled employees with prior experience, which may be hard to come by in a region with an abundance of unskilled workers.
Services Outsourcing
Services outsourcing generally refers to the call centers and IT services which have moved offshore to places like India, the Philippines and South Africa. The quality of these intangibles is often very difficult to measure as opposed to the set predetermined quality standards that are applied to product outsourcing. The main criteria essential for services outsourcing is the availability of cheap communication to Western countries so that the relocation of the process does not hinder the ability of the end user to interact effectively with the company providing the service. (A history of the communication revolution in India is provided here) India serves as an ideal location for outsourcing call centers since it has a large educated English speaking population and has a number of technically skilled engineers. In India, the majority of call centers are staffed by young workers in their early to mid-20s who largely view the job as a means of additional income while attending college.
A number of high-tech companies are seeking to capitalize on India’s technologically capable population including, most notably, companies such as Intel, Google and Microsoft. Dell stands out as one of the first and largest companies to relocate its customer service operations to India and has been subject to both criticism and praise for this decision. Besides the customer service operations, Indian outsourcing firms have sought to ramp up their businesses and diversify into different sectors including medical transcription and accounting.
R&D (Information Outsourcing)
The second stage of outsourcing, once US companies are sufficiently satisfied by the services work provided in India, has been to build new Research and Design centers. These centers serve as bastions of innovation and are commonly led and maintained by employees who have a practical understanding and working knowledge of the software development life cycle based on prior experience of having worked in the US. More so than simple services relocation, information outsourcing requires extensive collaboration between offices in different parts of the world, which is particularly difficult in light of the time zone variations. To overcome this obstacle and streamline the process, some companies have begun to employ asynchronous online meeting spaces, which is an interesting trend.