slide1 n.
Skip this Video
Loading SlideShow in 5 Seconds..
Outsourcing and the Implications for National Competitiveness PowerPoint Presentation
Download Presentation
Outsourcing and the Implications for National Competitiveness

Loading in 2 Seconds...

play fullscreen
1 / 28

Outsourcing and the Implications for National Competitiveness - PowerPoint PPT Presentation

  • Uploaded on

Outsourcing and the Implications for National Competitiveness. Professor Ronan McIvor University of Ulster 2008. Conventional view of outsourcing driven by these headlines…. ‘… unions fear 450 Prudential and Lloyds jobs will be lost to India…’

I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
Download Presentation

PowerPoint Slideshow about 'Outsourcing and the Implications for National Competitiveness' - toby

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.

- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript

Outsourcing and the Implications for National Competitiveness

Professor Ronan McIvor

University of Ulster



Conventional view of outsourcing driven by these headlines….

  • ‘… unions fear 450 Prudential and Lloyds jobs will be lost to India…’
  • ‘… IT workers under threat as EDS moves jobs offshore…’
  • ‘… Aviva moving 1,000 positions offshore to India…’
  • ‘… Reuters have established a new centre in Bangalore to source financial news…’
  • Etc.


  • What is services outsourcing;
  • Drivers of services outsourcing;
  • How companies make the outsourcing decision;
  • Offshoring;
  • Case illustration: India versus Ireland; and
  • Benefits and risks of offshoring for developed economies.

What is business services outsourcing?

….. Services outsourcing involves organisations buying rather than

sourcing services in-house …. and involves greater specialisation as

services are increasingly sourced from external service providers….


Drivers of Services Outsourcing

  • Globalisation;
  • The shareholder value business model;
  • Consumers demanding more for less;
  • Business process view; and
  • Developments in information and communication technologies (ICTs).

The Impact of ICTs on Service Processes

  • Service processes have physical and information elements;
  • E.g. Mortgage application – visit branch in person (physical) and bank processes application (information);
  • ICTs facilitate the separation of physical from information elements;
  • Processes that are rich in information content can be performed anywhere; and
  • Many complex and knowledge intensive processes can also be performed anywhere….

Outsourcing Evaluation

  • Organisation capability;
  • Importance of activity to competitive advantage;
  • Supplier capability to provide activity;
  • Supply market risk;
  • Workforce reaction;
  • Organisational change.

McIvor, 2005


Outsourcing Management

  • Supplier selection;
  • Contract negotiation;
  • Transitioning of assets;
  • Relationship management.

McIvor, 2005


However, must consider the transaction costs….

Supplier opportunism potential increases under conditions of:

  • Dependency – difficult to switch processes and services;
  • Knowledge loss – supplier knows more about the transaction than the customer;
  • Performance measurement – difficulties with assessing and interpreting performance;
  • High uncertainty – supplier can charge a lot for changes; and
  • Small number of suppliers – suppliers have too much power;

McIvor, 2005


Additional Transactions Cost of Offshore Outsourcing

  • Cultural distance;
  • Time zone challenges;
  • Managing remote service provider teams;
  • Ineffective judicial system in offshore country;
  • Trade restrictions; and
  • Political instability in offshore country etc.

McIvor, 2006



“Off-shoring involves the transferring of organisational activities

carried out locally to product and service providers in other



The Evolution of Business Process Outsourcing (BPO)



B2B Alliances

Process Outsourcing


Shared Business Services


Entire IT Operations


Data Processing


Time Sharing



Drivers of Offshoring

  • Globalisation;
  • Developments in Information and Communication Technologies (ICTs);
  • Developing telecommunications infrastructures e.g. broadband;
  • Lower labour costs;
  • Highly skilled human resource base; and
  • Proactive nations enhancing their relative attractiveness and competitiveness.

McIvor, 2005


Approaches to Offshore Supplier Management

  • Supplementing staff;
  • Building turnkey projects or providing ongoing support;
  • Gaining assistance in building centres;
  • Building, operating and transferring facilities;
  • Providing specialised assets; and
  • Entering joint ventures.

Kumra and Sinha, 2003


Case Illustration: India – World Leader in BPO Services Market

  • 1st choice for US companies outsourcing IT services;
  • Large population of well educated and highly motivated people;
  • Widespread use of English;
  • Cost structure 20% less than Western nations;
  • Call centres attracting graduates;
  • Privatisation of Indian telecoms. sector; and
  • Power sector reforms.

Shalini and Rajshekar, 2004


Ireland vs. India - Strengths

  • Frontrunner in BPO & started much earlier than India;
  • Good brand equity in US;
  • Conducive regulatory framework;
  • Excellent quality standards;
  • Government aggressively pursued outsourcing market; and
  • Investments in telecoms. infrastructure.

Shalini and Rajshekar, 2004


Ireland vs. India - Weaknesses

  • Lack of large human resource base;
  • High relative labour costs;
  • Shortage of skilled programmers; and
  • Companies in Ireland have to outsource work to India!

Shalini and Rajshekar, 2004


Benefits of Offshoring for Western Economies

  • Lower resource costs;
  • Lower end-product and service costs;
  • Deploy capable international human resources; and
  • Focus on more innovative and areas that can deliver future success.

McIvor, 2005


Risks of Offshoring for Western Economies

  • Social costs;
  • Service levels e.g. Dell and customer support;
  • Loss of innovation potential; and
  • Loss of competitiveness e.g. South Korea and Taiwan world leaders in notebook PCs, wireless telephones, memory chips and digital displays.

McIvor, 2005