Amity Business School Amity University Assignment

Submitted to:
Hargovind Kakkar Lecturer Amity Business School

Submitted by:
Shalini Bahadur Enr no.-A0102309050 Sec- D,Roll-30

Organizations outsource their business process due to:• • • • • Lack of expert-labor in some portions of the business process Availability of cheaper labor.Outsourcing 1. customer service. However prior to outsourcing any component of business to a third-party vendor. time-consuming task within a department. training administration. Additionally some processes are temporary and the organization does not intend to hire in-house professionals to perform the tasks. Total outsourcing may involve dismantling entire departments or divisions and transferring the employees. Some common examples of outsourcing include manufacturing of components. selective outsourcing may target a single. whilst not comprising on the quality of output Ability and feasibility to concentrate on the other crucial business process Expertise in communication capabilities For technical expertise Outsourcing can be undertaken to varying degrees.Introduction Outsourcing can be defined as an allocation of specific business processes to a specialist external service provider. ranging from total outsourcing to selective outsourcing. equipment. computer programming services. Most of the times an organization cannot handle all aspects of a business process internally. it is essential to understand the advantages and disadvantages of outsourcing. facilities. that can be handled more efficiently by an outside specialist . such as preparing the payroll or manufacturing a minor component. Once the task is assigned to the service provider. he will take the responsibility of carrying out the tasks and maintaining the organization’s assets. it could also pose difficulties if not outsourced to the right service provider. Although outsourcing presents a variety of benefits to your organization. tax compliance and other accounting functions. and complete responsibility for a product or function to an outside vendor. . In contrast.

A relatively new trend in outsourcing is employee leasing. Indonesia. accounting and HR. Global Outsourcing Market According to McKinsey. in which specialized vendors recruit.Vietnam . vendors concentrate on providing selected services for multiple clients . Pakistan . . 10-12 travel/hospitality.Chile .Nowadays there is also a wide range of pricing models and options available i.US$154 billion. of which: 35-40 retail banking. payroll.Singapore . 8 pharma. South Africa . Main outsourcing destinations Top outsourcing countries includes Brazil. hire. there is a seemingly endless combination of service. train.transportation of products. and pay their clients' employees. 8-10 telecoms. on the other hand. Under the ASP model. the global "addressable" Business Procurement Outsourcing or BPO market is worth US$122 . Vendors providing outsourcing services are generally grouped into two models: Business Process Outsourcing (BPO) and Application Service Provider (ASP). Mexico. providing a solution for most situations. Philippines . Bulgaria .e. Malaysia. China. • Content Development • Web Design and Maintenance • Recruitment • IT Maintenance • Logistics • Manufacturing • Technical/Customer Support.etc. major resources and assets are transferred from the company to the vendor. India. as well as arrange health care coverage and other benefits. benefits and compensation planning.Thailand . and delivery. 10-12 auto. 25-35 insurance. The most commonly outsourced streams of business include. 10-15 others and 20-25 is finance. pricing. and other human resource functions. In the BPO model.

The outsourced vendors also have specific equipment and technical expertise. Since the third-party vendor will only be concentrating on one specific task. • Risk-sharing: one of the most crucial factors determining the outcome of a campaign is risk-analysis. they plan your risk-mitigating factors better. • Concentrating on core process rather than the supporting ones: Outsourcing the supporting processes gives the organization more time to strengthen their core business process. Doing so typically saves them more money because they end up paying a much lower wage than would be necessary in their home country. and other taxes. the people who complete the outsourced projects. actual production time can be greatly increased. The company may pay lower taxes because independent contractors. This can add up to substantial savings . • Swiftness and Expertise: Most of the times tasks are outsourced to vendors who specialize in their field. located in another part of the world. Since the outsourced vendor is a specialist. instead of numerous office duties. • Outsourcing speeds up production time. hence recruitment and operational costs can be minimized to a great extent. pay their own withholding. social security. By outsourcing job duties to non employees. most of the times better than the ones at the outsourcing organization. This is one of the prime advantages of offshore outsourcing. Outsourcing certain components of your business process helps the organization to shift certain responsibilities to the outsourced vendor. a business does not have to pay consistent wages or offer additional employee benefits. • Lower personnel costs: Some businesses choose to take their outsourcing one step further by choosing a vendor. Effectively the tasks can be completed faster and with better quality output.Advantages of Outsourcing: Following are the advantages of outsourcing :• Reduced Operational and Recruitment costs: Outsourcing eludes the need to hire individuals in-house. .

• Synchronizing the deliverables: In case you do not choose a right partner for outsourcing. This is especially true when a company hires a third-party vendor to mass produce a product. • Hidden costs: Although outsourcing most of the times is cost-effective at times the hidden costs involved in signing a contract while signing a contract across international boundaries may pose a serious threat. because they are not screening individuals. • Lack of customer focus: An outsourced vendor may be catering to the expertiseneeds of multiple organizations at a time. • Undesirable results :One of the biggest disadvantages of outsourcing is undesirable results. it involves a risk if exposing confidential company information to a third-party. Not only is this a waste of time and materials. In such situations vendors may lack complete focus on your organization’s tasks. The disadvantages of outsourcing : Some of the major disadvantages to outsourcing include poor quality control.Following are the important disadvantages of outsourcing : • Risk of exposing confidential data: When an organization outsources HR. sub-standard quality output and inappropriate categorization of responsibilities. At times it is easier to regulate these factors inside an organization rather than with an outsourced partner. This process is not as time-consuming as the normal employee hiring process. a lengthy bid process.etc . the manufacturing process must be repeated by a different vendor. they are considering established companies with proven track records. In the event that the finished products do not meet quality standards. some of the common problem areas include stretched delivery timeframes. decreased company loyalty. and a loss of strategic alignment . it can also be very costly for the company who outsourced the project. Payroll and Recruitment services.• Outsourcing gives a business the flexibility to change third-party vendors whenever necessary. They are essentially paying twice for the same job. In addition .

including labor costs and political. 2. all of which have been reinforced by a series of IMF programs. well-developed agricultural.Content and context Description of Brazil as an outsourcing destination : Brazil is today South America’s leading economic power and a regional leader. as a way to voice their disdain. Many times work is outsourced simply as a means to save money. client organizations need to scrutinize a comprehensive set of indicators. Outsourcing to a foreign country typically saves a company a great deal in wages. among others. an inflation-targeting regime and a tight fiscal policy. the choice is made to reduce their local workforce. • Unemployment :Another disadvantage of outsourcing is a loss of jobs. The country has large. Its economy outweighs that of all other South American countries and Brazil is expanding its presence in world markets. This happens when local consumers make the decision to shop elsewhere.In turn. For Brazil to stand out as the "right decision. Highly unequal income distribution remains a pressing problem. Three areas of its economic program include a floating exchange rate. at the expense of the laid-off employees. manufacturing and service sectors. during this same period because of the lack of available product. it can cause community uproar and even a decrease in business and profits. So." following are the important points:- . When searching for a suitable offshore location. mining. economic and social risks.there is always the possibility that the company may lose sales.

Political : There is a major divide between the rich and the poor. Social inequality. . Brazil is the largest and most populous country in South America. Government in Brazil is showing his eagerness to attract foreign investors. gun crime and drug dealing are sad realities on the streets of the big centers like Rio de Janeiro and Sao Paulo.Geographical Proximity: • • Brazil's proximity to the US makes it distinctly more accessible than more distant Asian locations. • • • • Difficult climate. and should show up in the risk management assessments of any offshore program. instability within its political system. The government is keen to contribute to the development of Brazilian off shoring . Government is unusually supportive in developing IT outsourcing however results of it remain to be seen. Security is a major issue in Brazil. Qualifies as a "nearshore" location for the US market. good national IT policy in place.

is compatible with modern Western democracies. • • • • IPR is a big issue in Brazil. Global and Legal factors: • The legal system is complex and overburdened. Most cases of piracy in the world. the country has made important forward strides in the past two years. Germany. nongovernment organizations and IT-sector constituencies have become more proactive and aggressive to get the government to enact change — and the results are beginning to be meaningful. • Business practices are influenced by American and European multinationals. Government laws are fair. Conclusion :Brazil's legal system. Japan. An increasingly broader portfolio of trading partners opens the country to global practices. and the continuity of commercial contracts is respected. outdated labor laws and a slow-moving official bureaucracy continue to reduce the agility and flexibility of businesses. largest losses by copyright industry Inadequate enforcement. • Conversely. Brazil was ranked very low by the World Bank for ease of doing business (122 out of 178). Regulatory changes in the economy are minimal Cultural issues: • Originally a Portuguese colony. . and although currently under debate. This will continue to be a challenge. Additionally. Brazil has been challenged to make changes and compete at the incredibly rapid pace of offshore growth. mature fast. the Middle East and other Latin America countries. the country is increasingly open to global issues. the country has been the destination of several waves of immigration from different areas. while slow and complex. they are not expected to change significantly in the short term. several multinational shared services and development centers are established in the country. However. most notably Italy. Conclusion: Outdated labor laws are still a sizable hurdle.• Despite the newly launched efforts. and global concerns like the environment.

9 percent).8 percent). The Brazilian economy has been predicted to become one of the five largest economies in the world in the decades to come. Development of top innovation parks. EU (23. G20. Brazil is one of the fastest-growing major economies in the world with an average annual GDP growth rate of over 5 percent. and business practices in particular.0 percent).220 (2009) (nominal. its GDP was estimated at R$ 3.S.6% (2010) $11. Brazil's main trade partners in 2008 were: Mercosul and Latin America (25. GDP $2. with 60 percent of exports mostly of manufactured or semimanufactured goods. and English proficiency on the whole is poor.182 trillion (PPP) GDP growth GDP per capita 7. WTO. Brazil has moderately free markets and an inward-oriented economy. and English proficiency on the whole is poor. the United States (14. and the Cairns Group. and Western European practices. Unasul.S. are influenced by U. Close physically and timewise to the U. G8+5.• • • • Language is a major barrier. Its trade partners number in the hundreds. and others (17.Brazil is a member of diverse economic organizations. Its economy is the largest in Latin American nations and the second largest in the western hemisphere.514 (2009) (PPP. 75th) . Economic /cost advantage: The economy of Brazil is the world's eighth largest by nominal GDP and ninth largest by purchasing power parity.023 trillion (nominal) $2. such as Mercosul. In Brazilian reais. The culture in general. Immigration has resulted in cultural diversity. Asia (18. Conclusion: Brazil is well-connected to the world.143 trillion in 2009. 60th) $11.9 percent of trade).4 percent). Modest English skills Very innovative society. Language is a major barrier.

excellent technical and management experience highly skilled IT workers and growing sophistication of expertise in software and new technologies Application development and maintenance is the specialty of Brazilian IT programmers very good BPO: Excellent System Writing Project R&D: Average Human capital factors: . This is partly due to government efforts to enhance accessibility and a recently launched government-sponsored program to provide low-cost computers to public school students. Internet user penetration is above 25% (12 million connections and 45 million unique addresses). manufacturing and service sectors . and the market is forecast to grow at a compound annual rate of 12%.GDP by sector Inflation (CPI) agriculture: 5. Goodyear and Xerox. • • Internet users: 14 million Major companies.44% (Aug 2010) Highly unequal income distribution remains a pressing problem .7% services: 65. well-developed agricultural.5% industry: 28.Brazil’s economy is expanding its presence in world market partially due to outsourcing. mining.8% 4. IT Competency risk: • • • • • Good project management.Its economy outweighs that of all other South American countries . Infrastructure risk: • • Brazil is South America's largest telecommunications market. have partnered with Brazilian outsourcing companies. including GE. It has more than 40 million installed fixed lines and more than 150 million mobile subscribers. The challenge is to maintain economic growth over a period of time to generate employment and make the government debt burden more managable.The country has large.Brazil is expanding its presence in world markets .

S. in particular. The cost differences between Tier 1 and Tier 2 cities can reach 50% in the three biggest cost areas for IT services — salaries. Overall education needs to be improved. make Brazilian resources attractive in the IT services market. dollar.1% per year. The IT services industry growth is driving global and local providers alike to look for additional resources in second-tier cities.• • • • • • • • Big country with high turnout of graduates. huge labor availability. • The Brazilian currency has been steadily appreciating and now floats around 1. Conclusion: With the largest labor pool in Latin America. Brazil still shows availability of labor resources at reasonable costs. The availability of educated workers is very high labor force of 83 million. A larger percentage of workers have good business acumen and knowledge of business practices. The total workforce is estimated to be around 80 million. facilities and telecommunications — demanding extensive due diligence from providers and clients alike.8 per U. These qualities. IT services in particular and for innovation). To counter that effect. ." Characteristics of flexibility. insurance and communications verticals). Brazil has an estimated educated workforce of 83 million. Labor Pool with a population of 182 million growing at 1. the government presents a portfolio of different export incentives and tax breaks (for exports in general. which represents a 25% increase in two years in costs for American buyers of Brazilian services. The country clearly has a substantial labor pool. potentially a major strength when many offshore locations are rapidly "overheating. creativity and client empathy. are leveraged by local service providers to create differentiation. Labor Costs: • • Brazil has relatively competitive salary rates among the various countries in Latin America. in addition to specific domain skills (especially in the financial.

Direct flights connect us to the major foreign airports. Brazil offers competitive billing rates. coupled with strong business acumen. Faster and more responsive: Working hours are quite similar. • Proven capacity: the Press.2 Reals. • . Brazil is conveniently located in a time zone between North America and Europe. the country still offers competitive service costs.S.S. making contact between Paradigma’s staff and its clients much faster and more flexible. dollar. with Indian locations benefiting for an additional 30% cost advantage. This geographical proximity translates into easier access. making frequent meetings less costly and improving project flow. With minor shifts. with a 30% salary advantage cost over the US. usually with no need for connections. Brazil offers many advantages including a lower turnover rate.Brazil is cheaper than almost all other South American or European countries. Brazil is very competitive among Latin America countries and against many African. dollar to 2. solid infrastructure and high international business exchange structure. research institutes. a "Western" business culture and synchronized business hours.Conclusion: Despite the steady appreciation of the Brazilian real against the U.S. highlights Brazil's overall attractiveness . Brazil is just one overnight flight from the U. Middle Eastern and Asian destinations. • Distance facilities: Unlike most outsourcing locations. Brazil is one of the largest IT industries with $18 billion and has a large and experienced work force. Advantages to outsourcing to Brazil : Brazil is worth considering as an alternative outsourcing site. we can maximize the number of hours in which both our teams and our clients' are at work. The U. However it is not the cheapest option. Airfare to and from Brazil is moderately priced.. and consulting firms have been publishing very positive reviews on Brazil and its outsourcing advantages. Relatively competitive costs. dollar is very strong versus the Brazilian Reals with a current Exchange Rate of approximately 1 U. Following are the advantages of outsourcing to Brazil:• Time zone: Our development center is located just one time zone east of New York. better communication and lower costs.S.

Disadvantages of outsourcing to Brazil : Cost :Cost is perhaps one of the major concerns for companies when choosing between Brazil and other outsourcing countries. Brazil remains a strong contender to be the next IT outsourcing “power house”. More training programs have been created to help Brazilian professionals improve English skills. Crime :Crime remains an issue in Brazil. • Low risk: Brazil is a country that is historically untouched by natural disasters or terrorist attacks (read U. Language :Although Brazilians share similar culture values like the Americans. Brazilian IT professionals are highly trained.• Cultural similarities: Westernized Brazilian business culture and values are very similar to the American way of doing business. political and economic safety. lowering the risk of cultural issues and improving team integration.. and are easy to work with on a personal level.S. Due to social inequality triggered by widespread poverty. The Brazilian government apparently realizes the problem.English is the second most spoken language in the country.S. speak fluent English. however. it is still relatively more expensive. Energy stability. it still lags in the amount of IT professionals that are English proficient and that can actually talk. they don’t share the same language . According to one survey which rates the 25 most dangerous cities for offshore outsourcing. • Superior infrastructure: Brazil has an underlying infrastructure that is clearly superior to that of most developing countries. gun crime. economy at risk). and reliable network connections provide excellent conditions for a technology company. Outlook :Despite some of the issues. While the cost of hiring a Brazilian programmer is about half the cost of hiring one from the U. The Brazilian government led by President Luiz has been . drug dealing are common in favelas and big cities.

and infrastructure capable of supporting double-digit growth-is at the heart of the IT services supply chain in the Southern Hemisphere.That's on top of the $19 billion that local companies will spend on IT consulting services. 2. Big players in IT services such as CPMBraxis. 5. managers need to spend the time to create “rules of engagement” before jumping ship to an outsourcing partner in a foreign country. Key Findings 1.Brazil software and service exports are estimated to grow at a CAGR of 35. Opportunities for outsourcing in Brazil :Brazil "one of the most sought-after destinations" for outsourcing and recommended the country be considered for "a wide range of services. Thoughts : Selecting the right country may just be as important as selecting the right outsourcing partner. 4. Since every country has its own advantages and disadvantages in outsourcing. .72% from 2007 to 2010.Low cost outsourcing services and qualified talent pool are driving the industry. 23.265 IT firms across the country. Itautec and Politec have joined forces and formed BRASSCOM."Brazil's effectiveness as an offshoring home rated the country "very good" for infrastructure and cultural compatibility.5 The future of IT outsourcing in Brazil looks bright and promising.93% from 2004-2006. enormous opportunities emerge in the ICT industry and education service market for the global as well as domestic players.000 annual IT graduates.Brazil has enough capacity for growth in IT sector.The burgeoning IT industry provides opportunities to consultancy firms. R&D centres and ICT industry. 3.Hardware industry in Brazil climbed up at a CAGR of 18.With the development of IT outsourcing industry. DBA.putting in effort to attract foreign investments into Brazil and create social programs to combat social inequality. Brazil-with its 250.000 IT professionals. Datasul. which promotes the export of IT services among 3.

fastgrowing emerging nations. Brazil has a mix of capabilities that.S. the big national players in the IT service industry in Brazil (CPM. most major U. The Brazilian Association of Software and Services Export is a clear attempt to emulate the Indian success story (though. but by the time of the next World Cup in 2010. Motorola. has plans to create a new global development center in the state of Sao Paulo. located in Brazil. in 2009. players including HP. Market opportunity: Population growth: 1. In June. Politec and Stefanini) created BRASSCOM with the main objective of promoting the export of IT services among its current roster of 3. HP. in addition to an existing center in Brasilia. In addition. if the organization's Web site is any indication. Unisys. It appears unlikely they'll ever displace the current market leader. It also has the beginnings of a track record in ITO and BPO. EDS. Accenture. the largest of the India offshore players. Datasul. DBA. Deloitte.265 IT firms.In fact.11% Global Competitiveness: Average Comparison of Brazil with other countries : . As the offshore market continues to evolve. which has been largely unaffected by the recent global economic slump. TCS. Aware of the opportunities of tapping into offshore demand. Brazil appears to be well placed to compete. The global outsourcing service providers and software firms have a strong presence in Brazil and many are already serving their global client bases. position it to provide nearshore services to the US. Companies such as IBM. Brazil may well be one of the leading runners up. Accenture and Unisys have an escalating presence in Brazil. India. as part of its strategy to sell technology and services to large. IBM announced plans for its first South American research center. It won't provide the lowest prices. the effort is an anemic one). in particular. Intel and Nokia all have offshore centers in Brazil. Itautec. Brazil has been showing signs of becoming a serious contender in recent years.

cost.referenceforbusiness. good player in offshore outsourcing in South America.html#ixzz1AVkJa wJk . good people skills and availability. Brazil has a huge labor pool. industry.Conclusion : Brazil will become a major outsourcing center for U. quality human capital. References : 1. Advantages of outsourcing.advantage. especially with the further integration of North and South America. Steps in successful outsourcing http://www.html#ixzz1AVkjvVYL 2.com/small/OpQu/Outsourcing.com/management-articles/outsourcing-the-advantagesand-disadvantages-of-outsourcing-536182. Disadvantages of outsourcing. http://www. benefits.articlesbase. Brazil has a larger IT-capable labor pool with a growing consumer markets. disadvantages. Outsourcing . the country must focus on controlling its overall economy.S.