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What is Outsourcing - Outsourcing or Business Process Outsourcing is defined as the transmission of certain operational responsibilities and business activities of a company to either self-owned captive units or third parties in order for an organisation to achieve its goals and also to reduce operational cost of the company. The reliability of companies on external sources or other organisations for manufacturing components, providing services or other value-adding activities is known as Outsourcing (Lei & Hitt 1995, Vol. 21, No. 5, pp. 835 ' 859). There are number of outsourcing companies around the world and particularly in Asian countries, these numbers have grown to a great extent. Business Process Outsourcing started in India in the late 1990's and GENPACT (formerly known as GE Capital International Services) pioneered the outsourcing industry in India. Since then, this industry of outsourcing has grown to new heights and has contributed to a large extent to the success of many business organisations.
There are several business activities that are being outsourced by organisations and the most common examples of Business Process Outsourcing are the call centres of companies and payroll processing activities. In recent times, the outsourcing business has expanded to new horizons with the emergence of knowledge process outsourcing (KPO). KPO's deal in outsourcing of specialised services like consulting, banking, legal, etc to the clients and needs highly skilled workers to handle these critical activities (Doraiswamy n.d.).
Outsourcing of activities by an organisation is a highly strategic decision the company has to make since the decision of outsourcing can cause ripple effects throughout the entire organisation. However, organisations are increasingly looking at different options to outsource their business activities in an attempt to enhance their competitiveness by improving the performance of the company (Gilley & Rashid 2000, Vol. 26, No.4, pp. 763 ' 790).
This research aims to analyse how Outsourcing Company GENPACT helps companies to improve their performance and also helps business organisations in achieving their goals by outsourcing few or all of their responsibilities. In order for proper analysis, STEP analysis has been performed on outsourcing company GENPACT, which provided an insight on the various Social, Technological, Political and Economic factors that describe the framework for the outsourcing companies. Through the medium of this research, we will mainly focus on the Economic factors of outsourcing.
Company Background ' GENPACT is a global leader in managing business processes and technology management. The company has a huge employee base of more than 41,000 employees who constantly are focussed on improving the client processes and driving business impacts. The company was established in the year 1997 when it was an independent business unit of the General Electric Company (GE) with the objective to provide business process management capabilities that would improve efficiency levels among all GE businesses. In January 2005, the company became independent and started bringing process strength to companies outside of GE as well through its deep process knowledge and insights on managing business processes. The company is highly customer centric and believes in taking that extra step to ensure clients success (Genpact Website).
The immense growth of GENPACT since its establishment in 1997 till today encourages me to research on how the business process management services offered by the company help other companies in increasing their efficiency and performance. Also, my personal work experience with GENPACT also motivates me to research on how the services offered by the company help clients and how outsourcing of the business activities and processes to GENPACT improves the financial and non financial performance of the companies. The immense growth of the BPO industry in India since its debut in late 1990's till today also interests me to analyse the various advantages and disadvantages of outsourcing business.
' How organisations are benefitted by outsourcing business processed to GENPACT?
' How outsourcing of activities impacts firms performance and increases organisations efficiency?
' Pro's and Con's of outsourcing business activities?
The objectives of this research proposal are to:-
' Understand the concept of outsourcing by reviewing existing literature.
' Analysing the effects of outsourcing of firm's performance.
' Evaluate the advantages and disadvantages of outsourcing for business organisations.
Overview of Outsourcing - Outsourcing is one of the important methods that have lead to globalisation. It is a process where a company (outsourcer) interacts with another company to transfer some of their business activities which otherwise can be performed by in-house employees of the outsourcer. One of the major reasons of outsourcing is that it helps companies to reduce costs involved in their activities. Companies also outsource business to improve the service levels and also to create flexibility in their budget since outsourcing a business is usually less expensive than managing a particular business activity within the company (Carrasco 2008).
In today's world, companies outsource their business activities in order to add value to their company and the services offered by them and also with the motive to cut down on the operational costs. Therefore, in order to outsource business processes, a company should perform a cost benefit analysis through which they can evaluate the benefits that their company can derive by outsourcing and also the costs involved in outsourcing the business activity. Therefore, it is essential to perform a cost benefit analysis when outsourcing any activity. By the means of outsourcing, a company allows and assigns responsibilities to other companies who have the best tools available to focus on successful dealing of complex issues and thereby allowing outsourcers to focus on the heart of their core business (Goyal 2006).
The term Business Process Outsourcing refers to the outsourcing of one or more specific business processes, methodologies or functions to a third party vendors together with the IT infrastructure that supports the outsourced activities (Halvey and Melby 2007).
Previous studies and investigations that have been conducted on outsourcing are mainly theoretical in nature and these studies relied on undependable or untrustworthy evidence to support assertions. The findings of these studies also seem inconsistent and there have been many arguments offered both for and against outsourcing as a means of achieving sustainable competitive advantage. By allowing outside specialist organisations to work and concentrate on certain tasks, companies can increase their performance by focusing on their core activities (Quinn 1992). However, another statement argues that outsourcing of certain activities may reduce organizations innovation skills and may shift the knowledge to supplier organisation which may reduce the control over firm's activities (Bettis et al. 1992, Vol. 6, No. 1, pp. 7 - 22).
Reasons for Outsourcing
Since its introduction of this industry, the outsourcing business has grown tremendously and Companies around the world outsource their business functions mainly because of the following reasons:-
1. Outsourcing business functions or activities ensures cost-effectiveness in companies those
Outsource their business processes as compared to organizations where all processes are managed and handled within the company itself (Bettis et al. 1992, Vol. 6, No. 1, pp. 7 - 22).
2. It helps companies to reduce on the costs involved in manufacturing or infrastructural development which reduces the fixed costs and leads to a lower breakeven point of an organisation (Bettis et al. 1992, Vol. 6, No. 1, pp. 7 - 22).
3. Outsourcing enables organisations to switch suppliers of services or manufacturing goods whenever new and more cost effective technologies become available. Whereas, if the same activity was carried out in-house by the company, it would have increased the organizational commitment to a specific type of technology which may constrain organisations flexibility in the long run (Harrigan 1985, Vol. 9, No. 4, pp. 638 - 652).
4. Outsourcing enables organisations to respond quickly to changes in the environment, thereby helping organisation to achieve long-run advantages compared to firms who rely on internal production of goods or services (Dess et al. 1995, Vol. 9, No. 3, pp. 7 ' 20).
5. Outsourcing of noncore activities allows organisation to focus more closely on their core business and competencies. It enables increased managerial attention and increased resource allocation to the tasks that are carried out within the organisation (Dess et al. 1995, Vol. 9, No. 3, pp. 7 ' 20).
6. Companies outsource business in order to enhance and improve their business methodologies and also to be benefited from the industry knowledge (Halvey and Melby 2007).
7. Outsourcing also helps companies to deliver the projects and tasks on a timely basis. It helps organisations to be more flexible in handling business related uncertainties (Halvey and Melby 2007).
This research will be exploratory in nature and will provide insights on reasons for outsourcing since prior studies conducted on outsourcing do not provide consistent and accurate information as to why organisations choose to outsource their business than handling the same within the company. Once the research has been conducted, the conclusions derived will aim to provide clear information on the various advantages and disadvantages of outsourcing and will also clarify how outsourcing impacts companies and improve their performance and efficiency.
In order to analyse the benefits and impacts of outsourcing business processes on organizations, primary data collection methods will be used since it will enable us to contact the clients and will provide us with a clear view on the various reasons due to which companies outsource their business. We will contact the top executives of top 50 clients of GENPACT to gather their thoughts on outsourcing and how they believe outsourcing of certain business processed to GENPACT has enabled them to focus on their core business and increase efficiency.
We will be contacting the top executives by sending them letter which will ask them to fill up a survey form or return the letter specifying the date and time they can be available for a telephone interview lasting for not more than 15 minutes. The survey that will be sent with the letter will be structured and will have specific set of questions to collect the information required. These structured interviews will help us in collecting information from different companies dealing in different industries and trades and will also provide us with data on specific topics which we can use to the analyse the main reasons of outsourcing and provide recommendations on any deficiency in the outsourcing methods followed by companies. After a week of sending the first letter requesting to fill up the survey, a letter to thank the executives will be sent out to acknowledge their valuable responses and a reminder letter will be sent to those whose response is still pending.
We will conduct interviews over the phone with the clients who have responded to letter with the date and time for conducting a telephonic interview and intent to ask specific questions relating to their business which motivated them to choose to outsource their work. We also will ask questions to gather their thoughts on how they think there company's performance has been impacted due to outsourcing.
We also plan to schedule one to one interviews sessions with financial heads of 10 clients of GENPACT so that we can evaluate how outsourcing has impacted their company in financial terms. These interviews will follow unstructured interviewing formats to gather their thoughts on financial side of outsourcing business activities
The above methods of data collection will help us in the analysing the reasons to outsource business processes by companies and how outsourcing has impacted the performance of the company. It will also help us in evaluating the financial and non financial benefits of outsourcing.
The data collected using the primary methods of data collection will be analysed using qualitative method of data analysis since the purpose of our research is to highlight the various impacts of outsourcing on companies. This method of data analysis will allow us to present our finding from the research in a report format rather than showing numbers or graphs. The findings can be used for further investigations and studies to be carried out on the topic as well. Using this method, we will be analysing the various reasons as to why companies wanted to outsource their business and how does outsourcing help them to achieve their goals. We will try to examine the various positive and negative effects of outsourcing and recommend ways to prevent the negativities of the same based on our research.
Outsourcing has different meanings and viewpoints to different organisations. The outcome of the research will be probabilistic and the research conclusions will be generalised to all companies irrespective of their business field. This research will aim to have to focus on the common reasons why companies wish to outsource their business activities than handling them within the organisation.
We intend to complete this research and analyse the data collected from different companies in 2 months time. The first month will be used to prepare and sending out surveys to executives of the companies. We aim to get the surveys filled and interviews conducted by the end of the first month. The second month will be used to deeply study the information we have collected through our data collection methods and draw specific conclusions and recommendations on the business process outsourcing techniques.