1. MGT704 Global Business
Management
1.5 Offshoring/BPO
Dr Jane Craig

2. Recall our focus:
Creating value in a world of global
competition
Introduction
to the course

3. Growing and internationalising
a business
Complex international
diversification
Emerging markets / Emerging
giants
Introduction
to the course in course outline

4. Module 1: Growing and internationalising a
business
• Drivers of globalisation
• Internationalising the entrepreneurial firm
• Entering foreign markets
• Offshoring/BPO
Module 2: Complex international diversification
• Structures for complexity
• Managing global competitive dynamics
• Local firm responses to MNCs
Module 3: Emerging markets / Emerging giants
• Borrowing and leveraging resources (I)
• Borrowing and leveraging resources (II)
• National competitive advantage
• MNCs from developed economies
• Emerging giants from fast-growing emerging
economies
Introduction
to the course in course outline

5. BPO as ambidextrous global strategy
India and IT outsourcing
Building capabilities in software
services
Infosys
Agenda

6. Some terminology
Captive
sourcing
(FDI)
Onshoring
Domestic in-
house
Offshoring
Locationofactivity
Mode of activity
In-house
Foreign
Domestic
Outsourcing
Source: Peng, Fig 3.4, p70

7. Definition
• Gartner identify four segments of BPO:
– Customer management (sales, marketing and customer
care)
– Enterprise services (HR, finance and accounting [F&A],
operations and payment services)
– Vertical services (vertical-industry-focused processes, such
as mortgage services and credit card services for the
banking sector, claims processing for insurance, and billing
services for telecommunications)
– Supply management services (logistics, procurement and
warehousing
http://search.proquest.com.ezproxy.usc.edu.au:2048/docview/1076409525/1
3FF9B7209019EB598F/13?accountid=28745

8. Opportunities for both players
• Outsourcing benefits for client firms
• Opportunity to develop capabilities and
“move up the value chain” for service
providers

9. Main reason for offshoring
• Strong supply of skilled and qualified professionals at
lower labour cost than in the client company’s home
country
• Often India
• BPO is any outsourcing of knowledge-intensive
processes (often IT)
http://articles.economictimes.indiatimes.com/2012-04-28/news/31453472_1_outsourcing-
industry-bpo-spending-indian-it-bpo

10. Reasons have evolved to include
innovation
In recent years, the number of companies that outsource critical
business processes to outside suppliers has grown significantly
worldwide. The business-process outsourcing (BPO) market has
been estimated to be worth $309 billion in 2012, including activities
such as finance and accounting, human resource management,
procurement and legal services, and the overall volume is estimated
to be growing at a rate of around 25% annually. Many organizations
initiated BPO as part of an operational effort (for example, to reduce
costs or access skills), but it has evolved into much more.
Lacity, Mary C; Willcocks, Leslie P (2013) Outsourcing Business Processes for Innovation
MIT Sloan Management Review 54 (3) 63-69.

11. Global sourcing a key trend
• core component of F500 companies’
corporate strategy
• scope expanding beyond traditional IT or
transaction processing
– using global sourcing as a way to position for long-
term capability building (skills and capacity)
• a competitive necessity
• challenge: integrate process and IT operations
to improve effectiveness and efficiency

12. Outsourcing trend
“The board of directors of virtually
every big company are now
insisting on very articulated
outsourcing strategy” –
Businessweek, 2006
This isn’t about labor
cost…the issue is that if you
don’t do it you won’t survive –
MD of Deutsche Bank Global
Business, Jan 2006

13. Offshore addressable market is increasing
• Leading role of Global 500
and Fortune 1000 IT
spending
• sets trend for rest of business
world
• combined IT spend represents
40% of global IT spending
• IT budget constitutes 2.3% of
$20 trillion combined revenues

14. Rapid growth in outsourcing
• business drivers
• reduce costs
• build competencies
• increase revenue
• key segment: Indian IT services
Indian IT services exports : Growth Trends
Source: NASSCOM