This involves the assessment of fixed and variable costs, direct and indirect costs, and current and future costs. Outsourcing may help convert fixed costs into variable costs allowing the flexibility to adjust with fluctuating market conditions. For example, by outsourcing logistics and shipping, firms may reduce the fixed costs involved in the internal operations of the process. However, outsourcing involves certain hidden costs, such as managing the vendor contract and contingency planning as well as future costs, such as costs involved in terminating the contract if things go wrong. Financial assessment will determine whether the BPO contract is going to specify a fixed cost or a flexible fee-for-service or pay-as-you-use basis.
With explosive growth in off-shoring of BPO to countries such as India, new problems are emerging. Even though India produces millions of new graduates every year, many of them do not have the right skills, and those who have them change jobs too frequently pushing employee turnover to unacceptably high levels. Their wages are also going up which may in the long run upset the cost advantages. With the major offshore BPO providers increasingly setting up operations onshore and near shore, outsourcing is becoming more and more global. This may blunt the criticism often leveled against outsourcing that it leads to job losses in developed countries.
How does outsourcing effect the U.S..
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Haugen, D.M., Musser, S., & Lovelace, K. (2009). Outsourcing. Detroit: Greenhaven Press.
Johnson, M., & Institute of Management (Great Britain) (1997). Outsourcing. Oxford: Butterworth-Heinemann.
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working on a documentary for the Discovery Times channel about outsourcing. In short order, I interviewed Indian entrepreneurs who wanted to prepare my taxes from Bangalore, read my X-rays from Bangalore, trace my lost luggage from Bangalore and write my new software from Bangalore. The longer I was there, the more upset I became -- upset at the realization that while I had been off covering the 9/11 wars, globalization had entered a whole new phase, and I had missed it. I guess the eureka moment came on a visit to the campus of Infosys Technologies, one of the crown jewels of the Indian outsourcing and software industry. Nandan Nilekani, the Infosys C.E.O., was showing me his global video-conference room, pointing with pride to a wall-size flat-screen TV, which he said was the biggest in Asia. Infosys, he explained, could hold a virtual meeting of the key players from its entire global supply chain for any project at any time on that supersize screen. So its American designers could be on the screen speaking with their Indian software writers and their Asian manufacturers all at once. That's what globalization is all about today, Nilekani said. Above the screen there were eight clocks that pretty well summed up the Infosys workday: 24/7/365. The clocks were labeled U.S. West, U.S. East, G.M.T., India, Singapore, Hong Kong, Japan, Australia.