THE OUTSOURCING WAR:

LET ECONOMICS TRIUMPH OVER POLITICS

<<Previous

Advancement in the technology can give a further push to the off-shoring activity. The inflexible architecture of the current technologies is acting as a hindrance in off-shoring, says Simon Heap of Bain & Co, a consultancy firm. The advancement in software and hardware would enable the companies to off-shore even small activities. Firms would be able to off-shore the activities of the entire department, say billing of customers.

However, not everyone seems to agree with the supporters of outsourcing. Stephen Roach, the chief economist at Morgan Stanley, says that it is only the wage difference that is encouraging companies to outsource work to India or any other developing country. He further says that joblessness is taking away the charm of recovery in the US.

Many analysts also feel that companies should take some concrete steps to minimize the affects of outsourcing. Companies should make the process of job transfers to offshore destinations more smooth. British Telecom exhibited a process of outsourcing that can be used as a model by other companies.

In 2003, when BT announced that it is planning to open two call centers in India, with a capacity of 2200 people, it was criticized from all corners. It was said that BT was not acting in a socially responsible manner. Realizing the gravity of the situation, BT approached Sustainability, an international consultancy, specializing in business strategy and sustainable development. The consultancy firm was asked to find whether or not outsourcing and corporate social responsibility (CSR) co-exist.

Sustainability noted that the immediate impact of outsourcing would be job loss for the employees, and the resulting affect on the society. The consultancy firm was of the opinion that before outsourcing, companies should address the negative impact of outsourcing. In order to check the negative impact of off-shoring, firms should consult with employees, trade unions, communities and other key stakeholders. Employees should be involved in the process of any such decision making. Sustainability also suggested that firms should be transparent and make the employees know the services that are being outsourced.

Firms should also make an attempt to redeploy the employees in some other departments. This would minimize layoffs. An attempt should be made to retrain the redundant workers. A part of the savings from off-shoring should be invested for this purpose. As per the suggestion made by McKinsey Global Institute, 4-5% of the resulting savings from off-shoring should be used for insurance policy for employees to cover the lost wages.

More >>

2005, ICMR Case Studies and Management Resources. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means - electronic or mechanical, without permission.