Cross Border Outsourcing

Abstract

This literature review summarizes four different concerning cross border outsourcing. The first article by Paulgod & Paulgod (2011) sheds some light on the trends that have impacted offshoring. The second article by Mella & Pelicelli (2012) explores the various organizational strategies concerning offshoring and outsourcing. The third article by Chang (2012) explores offshoring from an economics perspective. The fourth article Contractor et al (2010) makes an attempt at re-conceptualizing the modern firm due to the growing incidence of outsourcing and offshoring.

Table of Contents

ABSTRACTII

GLOBAL TRENDS IN OFFSHORING AND OUTSOURCING4

THE STRATEGIES OF OUTSOURCING AND OFFSHORING5

THE ECONOMICS OF OFFSHORING8

RECONCEPTUALIZING THE FIRM IN A WORLD OF OUTSOURCING AND OFFSHORING: THE ORGANIZATIONAL AND GEOGRAPHICAL RELOCATION OF HIGH-VALUE COMPANY FUNCTIONS10

REFERENCES12

Cross Border Outsourcing

Global Trends in Offshoring and Outsourcing

Paulgod & Paulgod (2011) made an attempt at tracing the basic trends and factors impacting offshoring and outsourcing since the inception of this phenomenon in the business world. The article highlights the fact that cross border outsourcing or offshoring has accelerated largely because of the digitization of the business processes and that is after the advent of information technology in the early 1990s. Furthermore, the liberalization of the trade regime by the advent of world trade organization also contributed significantly towards creating a favorable environment for offshoring or cross border outsourcing.

The initial phase of offshoring was during the 1995-2000 when the predominant service being outsourced was of information technology and the prime market for the same was India. Since 1990s, the market for offshoring has been expanding at a rapid pace. More importantly, even though the recessionary period of 2007-2010 did bring about a slowdown in the growth of offshoring, it did not decrease the aggregate offshoring market and the growth has been picking since the post 2010 period.

Over the years, the trend of offshoring has shifted from low value functions to higher value, high end, more skill demanding and knowledge requiring functions of business processes. As clients have realized the possibilities and potential for outsourcing, they have begun to outsource more and more business processes to other countries so that they could take advantage of the cost benefits and better utilize their resources to capitalize on the core processes and strategic issues (Hagel III & Brown, 2005; Levy, 2005).

The article highlights the fact that the developed countries such as United States, Canada and other European countries are home to the most clients that seek to offshore their business process. In fact, the businesses from US alone account for more than 60 percent of the offshore IT market of India. However, emerging markets such as Brazil, Mexico, Japan, China and Argentina are also joining the ranks of developed nations to offshore their business processes.

Furthermore, business process offshoring has traditionally been dominated by large buyers since it was pioneered by large companies as during the 1996-2006, 93 percent of the offshoring was done by companies with revenues of more than one billion US dollars. Since 2000, there has been a major boost in growth of intermediaries and ...