Worldwide companies are using outsourcing as a strategic tool to improve their ability to concentrate on the core competencies. Outsourcing is not sub-contracting or fixing business processes. It is a strategic decision about creating value. It is about reengineering and being able to provide customers a greater value faster, at a lower cost and higher quality. By outsourcing non-core functions, companies are able to concentrate on improving core competencies and look at the broader business issues. It has helped companies gain competitive advantage by allocating resources to develop new tools, technologies, methodologies and procedures. Outsourcing as an industry has moved beyond the IT infrastructure in scope and complexity. It has grown to about $150 Billion worldwide and is estimated to grow to $240 billion by the end of 1999. In addition to the information technology, today outsourcing covers administration, customer service, finance, HR, real state, sales and marketing, distribution and transportation. Within information technology, outsourcing includes maintenance and repair, training, R&D, applications development, consulting and reengineering, data management, network management, etc. For a company, proper preparation for outsourcing would use benchmarking and competitive analysis tools and methodologies to examine its strengths and weaknesses to develop outsourcing goals. The three main steps in outsourcing would be goal development, supplier selection and implementation of the business relationship.  Success of the long term relationship depends upon taking care in defining the goals, responsibilities, expectations and schedule, and yet be able to have flexibility in the business relationship agreement to accommodate an environment of rapidly changing markets and technologies. 

Several semiconductor manufacturing companies, such as Motorola, IBM, Intel, TI and equipment supplier companies, such as Applied Materials, KLA, Lam Research have either outsourced or formed strategic alliances with software development companies in India, Ireland, Hungary, etc. In the back-end assembly and packaging manufacturing industry, there are several areas, such as components and materials distribution, inventory control, materials handling, package design and test, manufacturing automation, factory design, and package and factory modeling and cost analysis that can benefit by the outsourcing services provided by software companies. Ever increasing role of software products would help these companies better manage the factories, inventories, supplies, design and development, rapid learning, manufacturing costs, and improve productivity, yields, cost and customer satisfaction. Well-planned outsourcing software development project could offer the desired competitive advantage. 

India has been recognized in a World Bank study as the second most favored country for providing IT services. Indian software companies have demonstrated their capability to deliver large projects, on time and at lower cost, utilizing state of the art technologies and global quality standards. Software industry in India is $3.9 billion strong and has grown at the rate of 54%. The software export revenue for 1998-99 has been $2.65 Billion and has grown at 57.4. Over 203 Fortune 1000 companies worldwide are outsourcing software development in India. The success of outsourcing projects by global corporations in USA, Japan, Europe and Asia in India has been due to its investment friendly and free market oriented business environment in India, along with its supportive Government policies. The supporting infrastructure of the Indian software industry includes its second largest in world supplier base of English speaking professionals, universities and institutes producing 115 Thousand engineering graduates and 55 Thousand software professionals every year, companies with SEI established highest CMM quality level, Government supported software technology parks of India under the STP scheme, and high speed satellite data links and services.  

PREVIOUS:  An Overview: Outsourcing                                                                                                        NEXT:  Course Outline: Workshop on Outsourcing  

BCA International: Ph/Fax: 1-512-292-8351, E-mail: BCAInternational@BCAInternational.net                   
Back Home BCA International Benchmarking Outsourcing Infrastructure- Software Industry Dr. Kewal K. Verma