On-demand outsourcing

HSBC GLT PUNE

For instance, HSBC Holdings has succeeded in acquiring other companies and integrating their customers. Originally, HSBC made the decision on outsourcing mainly because the bank started to find it difficult to update its technology and services at the same pace with the rapidly changing financial and digital world. Besides their core financial business, they also started to consider improvements on their banking services part, where their reputation could be maintained and developed.

"Moreover, we wanted to be able to turn the tap on and off whenever we wanted," says Rumi Contractor, HSBC's chief information officer for Europe, who helped build the company's outsourcing center.[4] This indicates that HSBC also seeks to put more people to work according to their different talents and skills, as the larger workforce could increase the working efficiency.

Nowadays, HSBC has over 9,500 offices in 80 countries worldwide, a huge increase from the original size of 30 people working on HSBC software maintenance in India in 2002. The "back office" mainly provides call centre and bank process services for HSBC.[5]

IBM entered into a $5 billion manufacturing outsourcing arrangement with the Sanmina-SCI Corporation in 1992. During this outsourcing process, the expanded operations of Sammina-SCI passed the $1 billion mark.[6] This case was the only one of the successes that IBM and their outsourcing services providers achieved from the information technology outsourcing in the early 1990s. IBM has also signed a ten-year outsourcing service plan with Bharti Airtel Ltd in Bangalore, India. In 2013, IBM prepared to renew this IT contract in India to compete with intense multinational and local Indian rivals that they had never faced before. The BPO outsourcing contract for managing software application and computer networks for Airtel is now estimated to be worth over $2.5 billion.[7]

The two present good examples of on-demand outsourcing. Both business organizations benefited by acquiring the necessary equipment and labour from the partner company.

In the past, the purpose of outsourcing was narrow and related to business acquisition. Today, the purpose has transformed into a strategic competitive advantage. Strategic operations and on-demand outsourcing has increased business activities, creating a transformative approach that has allowed businesses to expand their operations. In addition, on-demand outsourcing has reduced unnecessary expenditures and the quality of goods and services has been excellent. One of the leading social benefits of this strategy is globalization. When this strategy is incorporated with the Internet, it facilitates e-commerce that has succeeded in building inter-business corporations. The formation of strong business relationships between partnering entrepreneurs has been immense. The social drive has been leading business managers to meet and discuss the future of their cooperation partnership jointly, thus enhancing each of their respective operations. Today, the concept of the globalization of business activities and e-commerce is no longer a . In fact, this form of outsourcing has enabled trust-building among partners, and a positive environment of building business has been created.[8]

The economic impact has been immense; India has grown it on-demand outsourcing services to over 38% as per 2010. Over 400,000 people are now employed in outsourcing services in India according to the Pricewaterhouse Coopers Survey 2012. In addition, the growth in Europe has led to increasers employment opportunities and overall growth in GDP.[9] Analysts believe that India is an ideal country that has undergone tremendous market revolution through a diverse on-demand outsourcing. Information Technology today commands 43% of on-demand outsourcing while finance, communication and manufacturing industries have significantly embraced this form of outsourcing as significant in achieving quality of services and reduction of costs of production.[10]

However, the expansion of outsourcing services brought up the issue of the loss of employees in the host country. For instance, the New York Post reported that IBM employed more workers in their outsourced service provider places, such as India, than in the U.S.[11] Also, outsourcing may be making a big comeback, as word leaked that IBM would cut about 5,000 jobs in the U.S. and move the work to India. This may be the beginning of a new wave of exporting of American jobs to developing countries, which have large pools of well-educated workers.[12]

India is said to be the dominant country in providing outsourcing services in Asia, as India offers more integrated services across the offshoring spectrum, while countries such as China and Malaysia have limitations in the form of their smaller labour pools and lower-end technology in their outsourcing services.[13]

The rapidly growing, integrated outsourcing service in India also attracts some of the Fortune Global 500 companies set their outsource operation in India, such as IBM.[14] IBM's architects department started their outsourcing contract with the fast-growing mobile telecom firm Bharti Airtel—Jai Menon, Bharti's former CIO, both IBM and the mobile telecom firm gained great benefits from this ten-year deal. India has become one of IBM's biggest platforms, and this resulted in the fact that IBM has more employees in India than in its U.S headquarters.[15]

The annual revenue in India was growing at two-digit rate from 2005, 55% in 2005, 37% in 2006, and stayed over 30% in 2007.[16] Apart from ITO outsourcing to India, the biggest UK flag carrier airline, British Airways, began their business process outsourcing in India in 1996. Outsourcing services started to include the British Airways customer services, also known as the World Network Services.[17] There have been some predictions that there will be a recession in the Indian on-demand outsourcing industry in the early years. The analysis reported that India was still the world's backoffice, whereas it put too much attention to 'servicing' information technology to other countries such as the United States. As a result, India has not yet developed its own technology.[18]

It seems that India has overcome these difficulties. However, there will still emerge new challenges that India will have to face in such a rapid-growing, competitive environment, such as they should consider recruiting the workforce based on quality and not quantity. They also need to consider further investments on training highly skilled individuals in order to fulfill the demand for a skilled workforce.[19]

Based on an increase on-demand outsourcing concept in business platform, there has been a paradigm shift in the European market. The business outsourcing strategies now depend on five key factors, including current sourcing strategies in European markets, trends in the market, transition of services, contract laws and risks involved in outsourcing. According to a survey conducted among eight countries in Europe, Finland had 19% of its total goods and services using on-demand outsourcing while the United Kingdom and Spain were at 17%. Germany, the Netherlands and Norway had outsourced 15%, 13% and 10% of all services respectively. Notably, Sweden and Denmark had 9% of their service industries employing on-demand outsourcing. In addition, the survey revealed that the fundamental reasons for adopting this strategy was informed by three key issues.[20]

1. The strategy proved to be cost effective in larger-scale firms. Any leading business organizations aims to achieve operational and logistic activities that are cost effective. As an advantage, the process of on-demand outsourcing creates a confluence of activities integrated into one overall function, since this specific outsourcing strategy encourages limitation of activities, and encourages cutting down the operational and excess costs.
2. The strategy is efficient because it allows division of labour and duties of all process to the service provider. At the service provider point, there are a series of departments that specifically deals with the delegated responsibilities to achieve quality and efficiency.[21]
3. There is marked quality improvement due to use of an external service provider. The primary goal of on-demand outsourcing is the desire of quality goods and standardized services.[22]