Case Study:
XYZ.Inc Outsourcing to India
Background:
The country of India is the seventh largest country by land and the second largest country by population in the world. India is located in South Asia bordering Bangladesh, Bhutan, Burma, China, Nepal, and Pakistan. Approximately 1.2 billion people inhabit India. The country covers over 1,269,219 square miles (The World Bank Group, 2013). India is governed by the Constitution of India, which claims the country is a "constitutional republic" and a "representative democracy". Powers are distributed between both the federal government and the states. Like the United States, India has a series of checks and balances to make sure that the two government bodies are not over-powering one another.
Also like the United States, India's federal government consists of three branches: executive, legislative, and judicial. India's current President, Pranab Mukherjee, is part of the "Congress" political party in India. Although India's President is a powerful man, he is not as powerful as Prime Minister Manmohan Singh and the cabinet members of the executive branch. The Prime Minister and his cabinet members are the main decision makers for the country of India. Because India was ruled by the United Kingdom for many centuries, many of the countries basic laws, statutes, and practices are similar to the British Law System (Darlington, 2010).
By nominal GDP, India's economy is the tenth largest economy in the world. By purchasing power, India is the third-largest economy in the world. To be competitive in the world market, India adopted liberal and free-market principles in 1991. This liberalized the country's economy and enabled a great amount of international trade. The GNI per capita is $1,530 and the GDP is $1.842 trillion. The main natural resources of India are iron ore, bauxite, and copper ore. The "Rupee" is the official currency of India and is freely exchanged. The Rupee is currently worth $0.016 of the U.S. dollar (The World Bank Group, 2013). India mainly exports items to many countries in Asia, Europe, and North America. Their key exports are petroleum products, gems, jewelry, pharmaceutical products, transport equipment, machinery, and garments. India mainly receives imports from China, Switzerland, and Saudi Arabia. The main imports are crude petroleum, gold, silver, and pearls. As members of the World Trade Organization, imports and exports are increasingly more important for India (Guardian News, 2013).
Business Proposition:
To be successful in today's business world, a company not only has to be competitive in its own country and market, it also needs to be competitive at the world market level. One way to achieve this high level of competitiveness, especially as a company in the U.S. such as the IT services firm XYZ.Inc, is to outsource. According to Joern Kleinert and Nico Zorell of the European Central Bank, this business activity allows for cost efficiency, cheap labor, and boosts overall trade capabilities. This is especially true if the country has many resources and a large, experienced work force; like India for example (European Central Bank, 2012). United States firms such as Atlanta-based XYZ, Inc. should strongly consider outsourcing call center services and technological services to the country of India. Outsourcing to India would allow for United States firms to take advantage of
[1] the extensive pool of educated individuals who want to work,
[2] lower wage expenses, and
[3] significant outsourcing expertise.
Evidence 1:
According to Virnda Gupta of Watson Wyatt Worldwide, India is globally recognized as an attractive destination for outsourcing due to its large and highly talented workforce (Gupta, 2007). According to Outsource Professional Services, "The universities of India enjoy an excellent reputation and produce, year after year, a large pool of highly educated graduates among which 75,000 IT graduates" (Outsource Processional Service, 2013). The Institute of Technology in India is a clear leader in technology education and produces top of the line, highly skilled employees.
Not only is the Indian workforce becoming more educated and readily available, the country has recently become the largest English speaking population in the world. Because many Indian people can speak English, this solidifies strong and clear communication between the employees, customers, vendors, etc. when the work is outsourced to India (Gupta, 2007). Because India's work force is and will continue to become such an asset to American companies, the choice to outsource is an obvious advantage. Hiring individuals who are educated, willing and wanting to work, and who can communicate effectively with one another is crucial to the business success of XYZ.Inc. India's workforce definitely fits the credentials of a successful business's employees.
Evidence 2:
Another reason why XYZ.Inc should engage in outsourcing to India is because of India's labor cost advantage. Although salaries of Indian workers have risen in the past few years, they still remain highly competitive compared to the average American salary. The average salary for a college graduate in India is approximately $12,000 (Outsource Processional Service, 2013). The average salary for a United States college graduate is $45,000 (U.S. Department of Education, 2011). Saving 73% by outsourcing jobs to India would provide the company with huge salary expense reductions. In the United States, there are many talented individuals in the workforce but they do not come cheap. Educated individuals in the U.S. automatically expect high salaries and a company that will fit their needs. Like the U.S., the Indian market is becoming more educated and hungrier for work. Although there has been immense industrial and technological growth in India, there are still not enough jobs for the workforce (Tutorial-Reports, 2013). This provides a great opportunity for a United States company who is looking for a much less expensive, but talented worker.
Evidence 3:
Along with India's talented workforce and the cost benefit of outsourcing to India, this country would be an excellent choice for XYZ.Inc to outsource is because of Indian firms' expertise in the area. "Indian companies have continuously delivered high quality outsourcing services for European and US clients" (Outsource Processional Service, 2013). Outsourcing call center services and technological services to India have been improving companies and their operations for over 20 years (Outsource Processional Service, 2013). Currently, Indian companies also provide a wide range of services but have specialized call center and IT services. This offers a great benefit to both the U.S. firms outsourcing their work to the Indian firm, and the Indian firm itself. "Compared to India, Chinese service providers are only capable of offering a narrow portfolio of services which is often limited to simple administrative tasks or simple software development. Even in the Philippines, the portfolio of outsourcing services provided is largely limited to call center services and accounting" (Outsource Processional Service, 2013). Due to India's extensive experience in outsourcing services, India is a clear leader in the industry. According to James O. Nelson Director of Enterprise Technology Solutions at Worldspan, the expert IT talent is very attractive for any firm looking to outsource. Although Nelson was concerned about various risks with this type of business activity, India's specialization in these outsourced activities make them the ideal country to do business with (Nelson, 2002). United States firms need to take advantage of this expertise and use the Indian companies' skills to their full potential.
Conclusion:
Because of the extensive pool of educated individuals who want to work, lower wage expenses, and a great amount of outsourcing expertise, XYZ.Inc, and other similar U.S. companies should engage in outsourcing to India. With all the benefits that come along with outsourcing to this country, it is a strategic move for any company looking to reduce costs and expand their horizons and operations. India's extensive experience with outsourcing also outperforms other competing countries such as China and the Philippines. To be competitive in today's evolving market, outsourcing to India is a smart decision.
Please review the file enclosed here:
Attachment:- Project.rar