Outsourcing Case

Outsourcing: Definition, History and Scholarships.

1. Introduction.

In recent years, as a result of globalization, financial crisis, increase of the demand and the pressure that companies suffer every day, in order to survive in an environment where business and product life cycles tend to be short and time to market also and competition is more aggressive, firms and managers are implementing a variety of different techniques, management processes and development strategies.

If traditionally the goal of a company was to fulfill the customer requirements using the limited set of resources available in the walls of the organization, today organizations are forced for the reasons mentioned before to actively seek new options for reducing cost and simultaneously seeking to be more competitive and effectively in the markets (Varajao, 2001; Varajao, 2002).

To solve the problem of lack of resources the company's searches for cooperation with other companies buying components, creating strategic alliances or joint-­-venture associations and outsourcing (Gunasekaran and Ngai, 2007;Chiou, 2011).

So outsourcing nowadays had become not only as a process to obtain more resources and cost reduction reasons if not also for the reason that if the company outsource a product or a service the companies can focus in the main core of their business. This strategy allows keeping control on their internal core competences, while gaining benefits from the use of resources and expertise of its suppliers. But outsourcing is not an easy task as it seems and it not only gives benefits because there are a lot of risks that can finally conclude with a failure process.

2. Definition.

There are many definitions of outsourcing and researchers have not yet agreed upon a unique definition for outsourcing.

Outsourcing is an important issue that the father of modern management, Peter Drucker, used to say, "Do what you do best and outsource the rest".

The fifth edition of Oxford dictionary of business and management defines outsourcing as "The buying of components, sub-­-assemblies, finished products or services from outside supplier rather than by supplying them internally". While The Outsourcing Journal and The Black Book Of Outsourcing both define it in a simply way as: "The act of obtaining services from an external firm". A service in this context is taken to mean both non-­-tangible services as well as physical products.

What seems consistent and shared among different available definitions is that outsourcing is a process in which a function that used to be held in-­-house is contracted out to be done by external parties.

There are three broad kinds of outsourcing:

1. Domestic outsourcing or onshore outsourcing, where the client organization outsources work to a vendor organization located in the same country. As an example of onshore or domestic outsourcing we can use business outsourced from China ́s Beijing to rural areas to reduce cost by using less demanding workers.

2. Near shore outsourcing refers to a situation in which a company outsources some of its activities to another company situated in a nearby country. In this case, US firms outsourcing some of their activities and functions to Mexico or Canada could be a good example.

3. Global outsourcing or offshore outsourcing, where the client organization outsources work to a vendor organization located in a different country. Offshoring is simply the sending of organizational work to another country, and can be classified into: offshore-­-outsourcing and offshore-­- insourcing, where offshore-­-insourcing involves the setting up of a captive center or subsidiary in the other country from where work is the insourced. In another words, work is "outsourced to vendors" and "offshored to another country". And as an example of offshore outsourcing we can consider Microsoft, IBM, Cisco, and Oracle outsourcing their call centers to India.

It may be broadly classified into Information Technology (IT), Human Resource, Customer service business, Engineering, knowledge services, legal, R&D, Telemarketing, Logistics, Computer hardware, Software, IT services, Finance and Accounting, Medical transportation, etc.

Outsourcing is becoming an essential component for most of the companies today, and the globalization of business environment had been a factor that helps a faster expansion of the outsourcing activities.

The use of outsourcing continues to grow in all sectors of economy but especially in the service area of information technology (IT) and the information system (IS). IS Outsourcing is defined as the process of turning over part or all organization's IS functions to an external provider(s).

The two aspects of global economy that influence the growth of IT outsourcing are: tendency to relocate productive processes where are less expensive and the growing acceptance of Internet and various modern communication technologies such as emailing, teleconferencing, videoconferencing and instant messaging. This tools help to enable collaborative work among global virtual teams in spite of the barriers due to geographic distances.

Outsourcing is not only an activity limited to India or China. Ireland, Canada, India, Philippines and Israel are already among the greatest outsources. Brazil,

China, Malaysia, Russia, South Africa and Mexico are among the greatest up-­-and-­- comers in the world.

3. History.

The history of outsourcing goes back a lot longer than people realize. Outsourcing is not a new phenomenon, as many of us believe.

Outsourcing started thousand of years ago when societies began to form and individuals began to develop specialized skills. Certain tasks were given to those individuals and thus outsourcing was born. In that time the concept did not have the name of outsourcing but the process done was the same that we always know as outsourcing. Our ancestors had understood the need for outsourcing.

Ancient cultures delegated a lot of tasks to outsiders. Most of these tasks were related to farming, construction, craft making.. Many ancient people asked other groups to tend to their farms and built irrigation canals.

The Egyptians, also, had nearby civilizations assist them in the construction of irrigation canals so that their farms would get water. In return, these groups were given a share at the harvest.

Another example could be the Han Chinese, because was known to delegate jewelry making to artisans from other tribes. Jade carving, silver and gold smiths came