If you were Bharti, what major concerns would you have about entering an outsourcing agreement with IBM? With Ericson, Nokia or Siemens?
Bharti Airtel started as a very small company with only $900 capital. Who would have imagined it would have become India biggest Telecom Company. Today, Airtel is the largest provider of mobile telephony and second largest provider of fixed telephony in India, and is also a provider of broadband and subscription television services. It offers its telecom services under the "Airtel" brand, and is headed by Sunil Bharti Mittal. It also acts as a carrier for national and international long distance communication services.
Concerns with IBM, Nokia, Ericson and Siemens
When Bharti was going through
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The vendors are much bigger, and they are worldwide companies” (pp. 382). Along with that the company board of directors though that by outsourcing it would put the company in a positions where they are fully depend on the vendors. Excessive dependency would harm their company internally as well as externally.
On the other hand, vendors had their concerns they thought “they were concerned with the risk and the need to get “buy-in” from the top levels in their organization” (Applegate, Austin & Soule, 2009). One of the major concerns what Bharti looking at was “if the vendors turned down this business now, making it look as if they were unwilling to take risk in India, they might later be locked out of lucrative deals not only with Bharti, but perhaps with other operators as well” (Applegate, Austin & Soule, 2009).
Looking at the future “Bharti Airtel Ltd, which is currently re-negotiating its 10-year information technology (IT) outsourcing contract with International Business Machines Corp. ( IBM ), is set to hand out more business to other technology services vendors led by Tech Mahindra Ltd and reduce IBM’s share of the contract in what will be the biggest overhaul of the landmark outsourcing deal.
The latest developments will also set the agenda in the way IBM’s other large telecom contracts in India with Vodafone India Ltd and Idea Cellular Ltd are negotiated when they come up for renewal in a few years’ time. IBM has a five-year contract
After analyzing all these risks and criteria Id like to present some points to demonstrate why we should go for outsourcing:
Because many businesses in the US have more often began outsourcing different business products instead of doing them in-house, it is important to understand why outsourcing may be the best option. Although many tie outsourcing to foreign markets, outsourcing can include both foreign and domestic markets. By entering into a contractual agreement, outsourcing allows organizations to pay for services they need. This gives the option for a business to get professionals to perform services for them that the business may not have the staff for. Outsourcing provides a cost saving-strategy that is usually more affordable. Ultimately,
In general, the outsourcing is hiring the foreign workers/company to do a particular task, as opposed to hiring domestic workers/company. Besides the outsourcing, the international purchase is an essential activity of companies. In the trend of a booming global economy, a company only focuses on its core value and hire suppliers to supply the necessary product and service. The relationship between companies are complicated and interdependent.
The company should analyze whether to model their software outsourcing business after the Indian software firm, Wipro. Many of the customers of Wipro, such as HP, already do business with Inventec and they could capitalize on their existing relationships. Greater software margins would increase their overall profit margins.
Outsourcing has become an integral part of many organizations today. Outsourcing has its advantages and disadvantages that organizations will have to weigh to decide whether or not outsourcing is the best possible solution to their current problems and business operations. Outsourcing refers to the process of hiring external provider to operate on a business or organization function (Venture Outsource, 2012). In this case, two organizations or businesses enter a contract where there will be an exchange of services and payments. This paper will discuss the possible risks an organization may encounter in outsourcing in relation to the use of an external service
(Pearlson,2001). Cost is the most important factor when the enterprise make a decision of insourcing or outsourcing. If the company produce the products or service on its own, there are costs more than producing, which can include investments of researching, training, and equipment.The investment of insourcing can be a lot more than the outsourcing because of economies of scale.Outsourcing providers can gain significant savings from economies of scale, which client companies usually can’t get on its own(Pearlson,2001). This benefit could be magnified in IT outsourcing.In the case of Project Harmony, as a food company, Campbell soup was a lack of sufficient scale within their own IS departments and IT technical expertise, so the saving between outsourcing and insourcing was significant.To conclude, cost reducing is the first of core benefits of outsourcing due to economies of
“It (outsourcing) is not a our father’s traditional foreign trade. Goods are not being traded. Offshore production is not a case of US making good X and trading it (to another country) for good Y. It is a case of the US ceasing to make X in the US and making it (in another country) instead” (“Outsourcing champs say India critical to their success”). This quote leads to the differences between outsourcing and trade. Trade is a matter that had threatened the unskilled people in the labor force, which encouraged many of them to learn some sort of skill. Unlike trade, however, outsourcing is a threat to skilled workers. It is true that outsourcing had been around for many years and that it is no new matter.
The vendors are investing in their employees by various training programs on different technologies. This gives a chance for the vendor to provide the outsourcing services to a company with the help of the well trained employees who are ready to work on the projects. Before outsourcing some of its products and services to a third part vendor, the company has to analyze all the factors that might result from the outsourcing decision, the advantages and disadvantages of the company both in short term and long term due to outsourcing. According to Aubuchon, outsourcing some of its products can be a good thing for a company and the judgment to outsource the services must not only based on the cost factor, but the company has to take all other significant factors into consideration (Aubuchon, 2014).
By the 1990’s, the scope of the services being outsourced widened to include any service. In the Semiconductor Industry, the actual fabrication of devices moved overseas to countries such as Taiwan. This shift gave more control to the external company and these service suppliers became closer to their business partners, becoming part of the supply chain for the primary company. The use of outsourcing by companies is progressing to where the external company is actually bringing the product to market, including engineering and management services. The outsourcing company is only developing the innovation. In this case the primary company’s business is completely dependent on the external company.
Outsourcing would allow the OSI to focus only on its core business and would be more cost effective for it to reduce capital infrastructure costs. Also improving employee satisfaction with higher value addition jobs and making the best use of competitive resources available worldwide. Using an outsourced company (TIS) would give it the same standard hardware and software platform. And should be high speed and have a lower cost of Telecommunications.
“Today, Indian outsourcing is one of the best ways for CIOs to cut application development and maintenance costs, and deal effectively with the peaks and valleys of software demands.” (Yeo). Outsourcing to India is still focused primarily on highly technological aspects, but is not limited there. They are known for creative development in the pharmaceutical field, and have recently developed an unsurpassed medication for adult ADHD. Their superior IT assistance is not limited to companies, they offer many websites for individuals seeking help with programming. In mid 2007, U.S. outsourcing to India reached $4.9 billion. Although technologically advanced, they still lag in economic prosperity and therefore still don’t expect the type of compensation that Americans do. “They
This case addresses many issues that affect insourcing/outsourcing decisions. A complex and important topic facing businesses today is whether to produce a component, assembly, or service internally (insourcing), or whether to purchase that same component, assembly, or service from an external supplier (outsourcing).
Outsourcing should only be implemented when a company’s core competitive advantages are not affected and then when
There are challenges that come with IT outsourcing in India and the biggest one being there are competitive revivals that exists due to low switching costs. The biggest competitor currently to India is China. China has been investing a lot of money into its country to grow this industry since it has seen the positive impacts on India. One of the ways China is attracting companies to move to China is that its government is offering significant tax incentives (KPMG, 2016). Some of the other countries that are competing with India are Ireland, The Philippines, Poland and Malaysia. There are improvements that India needs to focus on and two of these improvements are making sure they have good infrastructure; and keeping costs low for companies who are looking to move to China where it might be cheaper to have established their business processing. Though there are challenges and competitors for India, the future for India looks strong as well as room for growth. One of the areas that India is focusing on is domestic growth and making it a priority to increase the
The global economic downturn has impacted jobs outsourcing in the BPO industry as it has helped to be one of the largest job creators in India. Due to this, many companies had to increase their operations output and therefore employ more and more people to keep up with the expanding trend. One of the major impacts, being growth and maturity, had an effect on the BPO industry and contributed to the outsourcing companies and continued growth of the industry. The IT and BPO outsourcing boom created a huge impact in the Indian