During the last decade or so the feedback provided by major companies that outsource business processes and IT services have improved according to the latest statistics. Dibbern et al (2009) explains those companies profit by cutting huge costs in difficult times and reveals it is a part of globalisation and thinking ahead is necessary as modern organisations focusing for success.
Evidence of success
Apple, the tech giant has outsourced hundreds of thousands of manufacturing jobs to countries like Mongolia, China, Korea and Taiwan (Entrepreneur,2013).
Infosys an Indian firm has won a 100 million USD multi-year IT outsourcing contract from Microsoft and will provide infrastructure and application support, desk-side services and manage its internal IT services (Times of India, 2014)
British Airways as a leading airline in the UK has signed a multi-million pound application support and testing deal with NIIT Technologies in India, as part of ongoing attempts to improve it’s efficiency and cut costs. The intention was to cut expenditure on technology in the face of the rising cost of fuel and the credit crunch threatens to hurt ticket sales (King, 2008).
Royal and Sun Alliance as a financial firm has off-shored more than 1100 IT and services jobs to India and has it’s business process offshore (BPO) contract with Accenture, which has it’s delivery centre in Bangalore, India (Finextra,2007). Another insurer Aviva transferred 2,350 jobs from Britain to India in October 2003, and doubled the jobs exported to 7000 in October 2004. Aviva’s deals with company called 24/7 is based on the build, operate transfer (BOT) model and offers Aviva the option to acquire the operation, including staff of 24/7 (The Economic Times, 2011).
HSBC as expected launched it’s offshore outsourcing operations in India with a new BPO facility in Kolkata and a software development centre in Hyderabad. HSBC already has one whole owned BPO subsidiary – HSBC Electronic Data Centre – in Kokata, which has 2000 employees working on back-office operations. HSBC set up an another BPO centre in Colombo, Sri Lanka to provide data processing and customer service facilities for the bank’s global operations (Rajanala, 2004).
Country wise benefits
Economic theory suggests that despite the inevitable job losses, an increase in the trade in business services will have benefits such as:
- Increased productivity – the workers are freed up to follow activities that create more value for the firm;
- Lower prices – companies are able to pass on cost savings to the shareholders and employees;
- Greater demand – can easily market cheaper and quality products in different countries and would drive demand for goods and services;
- Improved welfare – the effect on the organisation and the country’s economy will be beneficial;
- Increased flexibility – flexible labour laws allow employees in developing countries to work several shits or work round the clock shifts to the economy.
To obtain these benefits the investor as well as the vendor must continuously introduce new products and process to create new jobs, promote innovation and investments (Abramovsky, Griffith and Sako, 2002).
Reasons for missteps
Willcocks and Laticy (2001) says that there are mainly few reasons for any breakdown in outsourcing business as any other affairs. They are:
- Treating the business process or IT as an unidentified commodity to be outsourced;
- Contractual incompleteness;
- Lack of active management on contract and relationships;
- Failure to retain specialised in-house capabilities and skills;
- Power imbalance;
- Difficulties in making and adapting deals against speedy business and technical change;
- Lack of maturity and experience of contracting and managing total outsourcing arrangements;
- Outsourcing for short term financial benefits rather than long-term advantages;
- Unrealistic expectations with multiple objectives.
The contractual quality brings advantages to the outcome of offshoring efforts as it helps to protect the client from the potential advantageous vendor. The hard side of business process and IT offshore management refers to the development and application of a good contract. And the soft side of contract is associated with trust. Trust provide partners achieve superior outcomes and trust leads to achieve both economical and sociological milestones (Barthelemy, 2003).
Satisfaction of services can be measured in software provider and vendor point of views in offshore BPO market. It can be measured overall satisfaction on cost, quality, responsiveness and reliability. In this business, both firms can create values due to the cost of production is low and vendors can take advantages by offering similar services to number of different customers at the same time from the same locations (Koh, Ang and Yeo, 2007).
For organisations, translating customer experience into customer satisfaction is likely to result in higher customer retention. Thus, strategic customer service and customer relationship management (CRM) integrated with the business process is the key factor for success. As such, it is more of a business philosophy than a technical solution to assist in dealing with customers effectively (BusinessLink, 2010). Excellent CRM practices would bring benefits for the contractor and vendor alike and it is possible to measure in five dimensions of service quality.
- Tangibles – appearance of physical facilities, equipment and staff;
- Reliability – ability to provide dependable and accurate service;
- Responsiveness – willingness to help customer;
- Assurance – ability to inspire confidence and trust;
- Empathy – extent of caring and individualised service (Aaker, 2011)
It is obvious that customer satisfaction is highly dependent upon the employees performance. Thus, in order to offer a satisfied service organisations must determine what elements of services are important to the customers by analyzing customer complaints, listening to feedback from staff and gathering customer satisfaction data from customer surveys. Morgan (2009) explains that all these arguments arise because of people are involved in business process top to bottom. Therefore, it is an understandable fact that there are issues on culture, language, legal and ethical differences that increase the complexities of relationship with stakeholders and staff and it is advisable both parties to participate at all stages in offshore process.
Publications: Morgan, S. (2009),The human side of outsourcing, Kingston Business School.