Offshore Outsourcing

TABLE OF CONTENTS

CHAPTER 1: THE PROBLEM DEFINED ................................................. 6

Background Statement ................................................................ 6

Purpose of the Study....................................................................8

Research Questions ...................................................................9

Definition of Terms .....................................................................9

Limitations of Study ....................................................................10

CHAPTER 2: LITERATURE REVIEW......................................................11

Introduction ..............................................................................11

Why India? ..............................................................................14

Identification of Functions to Outsource .........................................14

Economic Impact ......................................................................18

Advantages and Disadvantages ...................................................19

Current Off-shoring Political Climate ..............................................20

CHAPTER 3: METHODOLOGY ........................................................... 23

Data Collection Method ............................................................. 23

Data Analysis Method ................................................................24

CHAPTER 4: DATA ANALYSIS ........................................................... 25

Introduction.............................................................................25

Opportunity Identification Process .............................................. 27

Financial Impact ......................................................................39

CHAPTER 5: SUMMARY, CONCLUSIONS, AND RECOMMENDATIONS ...42

Summary ...............................................................................42

Conclusions ...........................................................................44

Recommendations ..................................................................45

REFERENCES ................................................................................47

LIST OF FIGURES

Figure Page

1 Guidelines For Answering Filter Questions .................... 28

2 Opportunity Identification Decision Tree ........................ 29

LIST OF TABLES

Table

1 Outsource/Off-shore Filter 1 Questions and Ranking ...... 30

2 Outsource/Off-shore Filter 2 Questions and Ranking ...... 31

3 Outsource/Off-shore Other Questions and Ranking ........ 31

4 Summary Good/Strong Candidate Composite Score ...... 38

5 Annual Financial Impact Per Functional Transfer Equivalent (FTE) and Per 100 FTE's .......................... 39

CHAPTER 1: DEFINITION OF PROBLEM

Background Statement

The Business Process Outsourcing (BPO) market is relatively young and growing at a rapid pace. Forrester Research estimates that 3.3 million U.S. jobs and $136 billion in wages could be moved to countries such as India, China and Russia (Agrawal, Farrell, 2003). In addition, the Meta Group predicts that offshore outsourcing will grow by more than 20% annually, pushing it from a $7 billion market in 2003 to a $10 billion market by 2005. Further, Deloitte Consulting estimates that 2 million jobs will move from the United States and Europe to cheaper locations in the financial services sector alone. The economic benefit of Business Process Outsourcing/Off-shoring can be staggering. A National Association of Software and Service Companies (NASSCOM) study estimates that the information technology and enterprise solutions market in India is likely to reach $142 billion in 2009. These same services would cost approximately $532 billion if provided in the U.S. (Kalakota, Robinson, 2004). With the magnitude of these statistics it is no wonder why domestic automobile manufacturers are looking for opportunities and solutions in this area.

Domestic automobile manufacturers are struggling to keep pace with foreign competitors in market share, cost and quality. As a result, extensive reviews of every process and operation are taking place. While much has been accomplished in narrowing the gap from a cost and quality perspective, there continues to be an ongoing need to show more improvement. As domestic automobile manufacturers seek to close the competitive cost gap, an area that is getting particular attention is the possibility of having information technology work done in low-cost, high-quality environments.

This often equates to outsourcing/off-shoring work. Unlike products such as automobiles and televisions, information can be moved halfway across the world quickly and cheaply. This serves as a catalyst for the outsourcing/off-shoring of information technology work. In addition, telecommunications advances have allowed companies to move information processing abroad without any deterioration in performance to its customers.