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BusinessWeek Case in the News
OUTSOURCING HEADS TO THE OUTSKIRTS
GROUP F MEMBERS
Adrianne ROBERT MORRIS UNIVERSITY
MGMT3100-A1: Management Theory and Practice: FA08 (147348)ESSENTIALS OF CONTEMPORARY MANAGEMENT
Chapter Five: Decision Making, Learning, Creativity, and Entrepreneurship
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What is the definition of outsourcing?
GLOBAL BUSINESS PLANNINGREFERENCE
Essentials of Contemporary Management PAGES 17 AND 18
Outsourcing is contracting with another company, usually abroad, to have it perform an activity the organization previously performed itself.
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What is the definition of outsourcing?
Wikipedia http://en.wikipedia.org/wiki/Outsourcing
Outsourcing is subcontracting a process, such as product design or manufacturing, to a third-party company. The decision to outsource is often made in the interest of lowering firm or making better use of time and energy costs, redirecting or conserving energy directed at the competencies of a particular business, or to make more efficient use of land, labor, capital, (information) technology and resources. Outsourcing became part of the business lexicon during the 1980s.
REFERENCE
Essentials of Contemporary Management PAGES 390-391-392
HUMAN RESOURCE PLANNING
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PROCESSES OF OUTSOURCING
DECISIONS FORREFERENCE
Essentials of Contemporary Management PAGES 17 AND 18
• Deciding To Outsource • Supplier Proposals • Supplier Competition • Negotiations • Transition • Transformation • Ongoing Service
Delivery • Termination Or
Renewal
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ADVANTAGES OF OUTSOURCING
REASONS FOR REFERENCE
Essentials of Contemporary Management PAGES 390
• Cost Savings• Cost Restructuring. • Improve Quality• Knowledge• Contract• Operational Expertise• Staffing Issues• Capacity Management• Catalyst For Change• Reduce Time To Market• Commoditization• Risk Management
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DISADVANTAGES OF OUTSOURCING
REASONS AGAINSTAND CRITICISMS
• Public Opinion • Failure To Realize Business
Value and Relationships• Language Skills • Social Responsibility • Quality Of Service • Staff Turnover • Company Knowledge • Qualifications Of Outsourcers • Work And Labor Issues • Economy • Security • Fraud and Accountability
REFERENCE
Essentials of Contemporary Management PAGES 390
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OUTSOURCING AFFECTS ECONOMYUNITED STATES OF
AMERICA ETHICS OF
Labor Movements Productivity
Standpoint Of Labor
Work, Labor, & EconomyREFERENCE
Essentials of Contemporary Management PAGE 78
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COURSES OF ACTIONEVALUATING OUTSOURCING
ALTERNATIVES1. LEGALITY
ACTION IS LEGAL AND WILL NOT VIOLATE ANY DOMESTIC AND INTERNATIONAL LAWS OR GOVERNMENT REGULATIONS
2. ETHICALNESSETHICAL AND WILL NOT UNNECESSARILY HARM ANY STAKEHOLDER GROUP AND HARM OTHERS –POTENTIAL EFFECTS
3. ECONOMIC FEASIBILITYACCOMPLISH GIVEN ORGANIZATIONAL PERFORMANCE GOAL –COST-BENEFIT ANALYSIS
4. PRACTICALITYCAPABILITIES AND RESOURCES REQUIRED TO IMPLEMENT ALTERNATIVE; NOT THREATEN ATTAINMENT OF OTHER ORGANIZATIONAL PROJECTS OR GOALSREFERENCE: Essentials of Contemporary Management, Page 163
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EXPECTED GROWTH OF OUTSOURCING
• The growth of outsourcing was 38% in 2005.
• Roughly 400,000 people are employed in this industry.
• Global BPO is estimated to be worth 120-150 million dollars.
• India has 5-6% share of the total industry, approximately 63% of the off-shore component.REFERENCE: http://en.wikipedia.org/wiki/Business_process_outsourcing_in_India
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ORGANIZATIONS USING OUTSOURCING
• One half (50%) to two thirds (67%) of all Fortune 500 Companies are already outsourcing to India according to Forrester Research.
• General Motors• IBM• AT&T• HP• Dell
REFERENCE: Essentials of Contemporary Management, Page 18
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MANAGERIAL DECISION MAKING
Whether or not OUTSOURCING is the preferable choice?The process by which
managers respond to opportunities and threats by analyzing options and making determinations about specific organizational goals and course of action.REFERENCE: Essentials of Contemporary Management, Page 153
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MANAGERIAL DECISION MAKING
PROGRAMMEDRoutine, virtually automatic decision making that follows established rules or guidelines —virtually automatic process.
performed numerous times in the past —long established
developed rules or guidelines need not make new judgments
repeatedly about what should be done –routine in nature
day-to-day running of an organization
REFERENCE: Essentials of Contemporary Management, Page 154-55
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MANAGERIAL DECISION MAKING
NONPROGRAMMEDNonroutine decision making that occurs in response to unusual, unpredictable opportunities and threats—not at all certain that a course of action will lead to a desired outcome or not really clear about achievement results.
uncertain event nonroutine decisions unusual or novel opportunities and threats no ready made decision rules –rules do not exist managers lack the information required to develop
rules to cover it investing in a new kind of technology develop a new kind of product launch a new promotional campaign enter a new market expand internationally start a new business
REFERENCE: Essentials of Contemporary Management, Page 154-55
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MANAGERIAL DECISION MAKING -- NONPROGRAMMED
INTUITION AND REASONED JUDGEMENTINTUITION
Feelings, beliefs, and hunches that come readily to mind, require little effort and information gathering, and result in on-the-spot decisions.
REASONED JUDGEMENTA decision that takes time and effort to make and results from careful information gathering, generation of alternatives, and evaluation of alternatives.
EXERCISING ONE’S JUDGEMENT is a more rational process than GOING WITH ONE’S INTUITION.
Both are often flawed and can result in poor decision making efforts that cause the most problems and are inherently challenging.
The likelihood of error is great and the risks are higher. Can result in effective or ineffective decision making. Avoid overconfidence—failure to evaluate and rethink the wisdom
of the decisions one makes and to learn from mistakes.
REFERENCE: Essentials of Contemporary Management, Page 155
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GramIT // Outsourcing Company INDIA
Andhra Pradesh StateVillage of Ethakota
TYPE OF BUSINESS16 month old non-profit organization
MISSIONseeking to transplant India’s tech services boom to some of the country’s 600,000 villages to transform rural economy
FUNDED BYByrraju Foundation
MEANING OF NAMEGRAM IS THE Sanskrit word for “village”
GOALS & FUTURE INITIATIVESSet up new business process outsourcing units in seven (7) villages and employ approximately 700 villagers.
REFERENCE:
Essentials of Contemporary Management, Page 177-78
:
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Satyam Computer Services, Ltd.Organizational Structure TOP
PERSONNELRamalinga Raju
Chairman of Tech Services
Provider and Founder
of the Byrraju Foundation EXPECTED REVENUE OF 1 BILLION THIS FISCAL YEAR
MASTER’S DEGREE FROM OHIO UNIVERSITYESTIMATED WORTH OF 670 MILLION DOLLARS
Sury GadirajuVice-President
for Technical Development E-Support Operation
REFERENCE: Essentials of Contemporary Management, Page 177-78
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Satyam Computer Services, Ltd.Organizational EMPLOYEES
BUSINESS WEEK STORY AND U.S. DEPARTMENT OF STATE REALITY REPORTS
• Employees have at least a 3-year college degree
• 5% annual turnover• Earn $800 per year --many trapped in
debt bondage• Speak little more than basic English• Vulnerable group of foreign labor• Low-caste laborers• Social discrimination and lack of
employment opportunities• Cycle of generational exploitation• Caste-based slavery that cripples the
development of communities –villages• Exploitation of minors
REFERENCE: Essentials of Contemporary Management, Page 177-78http://www.state.gov/
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BPO // Business Process Outsourcing
PERSONAL COMPUTERS
CONNECTED TO THE INTERNET VIA A LONG-DISTANCE
RADIO LINE
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Satyam Computer Services, Ltd.Organization Goals &
Accomplishments• Moving service jobs to rural areas• Providing work for unemployed• Unemployment in three (3) villages
had decreased• Employees are unconcerned with
salary• Employees are more concerned
about staying in their own village• Turnover is low in these villages
compared to India’s bigger cities• Slowing migration to crowded cities
REFERENCE: Essentials of Contemporary Management, Page 177-78
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RISK AND UNCERTAINTYRISK
The degree of probability that the possible outcomes of a particular course of action will occur.
UNCERTAINTYThe probabilities of alternative outcomes cannot be determined and future outcomes are unknown.
AMBIGUOUS INFORMATIONThe meaning is not clear—can be interpreted in multiple and conflicting ways.
TIME CONSTRAINT & COSTSNeither the time or the money to search for all possible alternative solutions and evaluate all the potential consequences.
REFERENCE: Essentials of Contemporary Management, Page 158-160
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INTERNATIONAL
STANDARDS• SERVICE• SCALE OF OPERATIONS• SKEPTICISM ABOUT ABILITIES
AND QUALITY• COMPLIANCE WITH LAWS AND
TRADE/LABOR REGULATIONS• CUSTOMS AND VALUES• CONFLICTS OF INTEREST• OBLIGATIONS, VIOLATIONS, AND
ACCOUNTABILITY
REFERENCE: Essentials of Contemporary Management, Page 158-59
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QUESTION #1 FOR DISCUSSION“OUTSOURCING HEADS TO THE OUTSKIRTS”
1. Was GramIT’s decision to operate outsourcing activities in Indian villages a programmed or nonprogrammed decision?
QUESTION #2 FOR DISCUSSION“OUTSOURCING HEADS TO THE OUTSKIRTS”
2. To what extent were risk and uncertainty involved in this decision?
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QUESTION #3 FOR DISCUSSION“OUTSOURCING HEADS TO THE OUTSKIRTS”
3. What criteria did decision makers at GramIT likely utilize in making this decision?
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QUESTION #4 FOR DISCUSSION“OUTSOURCING HEADS TO THE OUTSKIRTS”
4. Was Satyam’s decision to sign on with GramIT a programmed or nonprogrammed decision, to what extent were risk and uncertainty involved in this decision, and what criteria did decision makers at Satyam like utilize in making this decision?
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CARTOON SECTION
“OUTSOURCING BUSINESS HUMOR”
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REFERENCEhttp://images.search.yahoo.com/search/images?_adv_prop=image&fr=vz-portal&va=outsourcing+jobs+cartoon&sz=all
CARTOON SECTION
“OUTSOURCING POLITICAL HUMOR”
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White House Issues Revised Jobs Forecast for 2004WASHINGTON (IWR News Parody) — President Bush Wednesday issued a correction to White House prediction that the economy will add 2.6 million jobs this year. "What we forgot to mention when we said that 2.6 million jobs would be created, was that these jobs would be created overseas due to outsourcing," said a permanently surprised President Bush.
REFERENCEhttp://internetweekly.org/iwr/parody_archive_outsourcing.html
CARTOON SECTION
“OUTSOURCING POLITICAL HUMOR”
Monkey Pants Wants to Outsource Your Job Overseas
Inspiration:
Bush Endorses U.S. Jobs Moving OverseasREFERENCEhttp://images.search.yahoo.com/search/images?
_adv_prop=image&fr=vz-portal&va=outsourcing+jobs+cartoon&sz=all
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CARTOON SECTION
“OUTSOURCING HOLIDAY HUMOR”
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REFERENCEhttp://www.cylive.com/content/1104/Outsourcing_Blues
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REFERENCES
ESSENTIALS OF CONTEMPORARY MANAGEMENT
THIRD EDITION –Chapter 5 Decision Making, Learning, Creativity, and Entrepreneurship
Gareth R. Jones; Jennifer M. George
McGraw-Hill Irwin
Business Process Outsourcing In India
From Wikipedia
http://en.wikipedia.org/wiki/Business_process_outsourcing_in_India
Outsourcing
From Wikipedia
http://en.wikipedia.org/wiki/Outsourcing
U.S. Department of State http://www.state.gov/
Internationally-Recognized Core Labor Standards in India—Report for World Trade Organization General Council Review of the Trade Policies of India
International Confederation of Free Trade Unions (ICFU Website)
http://www.icftu.org/
