In Outsourcing,

A Company hires regular service from Outside countries

instead of taking service internally from within the company or from within the country.

Example

AMEX (American Express) earlier had its call center in USA

It now outsourced it to India and hired Indian Employees

This has led to increase in savings for AMEX

Outsourcing - Meaning and Examples - Teachoo.JPG

 

What had led to increase in Outsourcing?

Outsourcing is the outcome of Globalisation

This Outsourcing has increased due to growth of IT (information technology)

What has led to Increase in Outsourcing to India - Teachoo.JPG

Which Country Is Suitable for Outsourcing - Teachoo.JPG

Which Services are normally Outsourced

Voice Based Business Process (BOP or Call Center)

Book keeping (Accounting)

Banking Service

Teaching

Medical Transcriptionist

Different Types of Services Outsourced - Teachoo.JPG

 

What are Benefit of Outsoucing?

Outsourcing is beneficial to both parties

1 Business Outsourcing Work

2 Foreign Companies do outsourcing to get reasonable skill at a cheaper cost

These companies save cost due to outsourcing

Example-

If they had to hire a call center employee in USA, they have to pay approx 400 Dollar per month

as his salary in India, they get similar employee at a salary of Rs 15000 (200 Dollar)

 

Country providing Service

These are getting work from outside India and earning profit

Indian Labour are also getting employment oppurtunities

Benefits of Outsourcing - Teachoo.JPG

 

Why is India chosen as preferred destination for outsourcing?

India has English speaking population\

India has very advanced IT

India's labour rate less

Good quality labour is available in India at a cheap rate

Which Country Is Suitable for Outsourcing - Teachoo.JPG

 

NCERT Questions

Q10

Do you think outsourcing is good for India?

Why are developed countries opposing it?

View Answer

 

Q11

India has certain advantages which makes it a favourite outsourcing destination.

What are these advantages?

View Answer

MCQ Other Books

Q1

In the following questions, select the correct answers

1 Outsourcing is good for India because:

A It provides employment to large number of unemployed

B It provides excellence in a particular field

C Both A and B

D Neither A nor B

View Answer


2 It refers to contracting out some of its activities to a 3rd party which were earlier performed by the organisation

A Outsourcing

B Globalisation

C Privatisation

D Liberalisation

View Answer

 

  1. Class 12 NCERT
  2. Indian Economic Development

Transcript

Outsourcing - Meaning and Examples Example A US Company AMERICAN EXPRESS wants to open Call Center It has 2 Options Option 1 Set up a Call Center in USA Salary to Call Center Worker 3000 Dollars per Month This is called Taking Service from Internal Source Problems More Expensive Problem of Managing Employees Option 2 Hire Indian Call Center Charges per Employee Rs 15000 (200 Dollars) This is called Outsourcing What is Outsourcing? It means taking regular service from Outside countries instead of taking service internally from within the company or from within the country Benefits of Outsourcing Outsourcing is beneficial to all 3 parties Company Outsourcing Company Getting Business Employees of Company getting business Example Outsourcing Charges $300 Salary $200 (Rs 15000) AMEX Indian Call Center Indian Employees They are Saving Costs Cost in USA = $ 3000 Cost in India = $ 300 Savings = $ 2700 No Problem of Managing Employees They are getting Business and earning Profit (300 - 200 = $100) They are getting Jobs (Employment Opportunities) What has led to Increase in Outsourcing to India Earlier Till 1990 Indian Economy Closed to Outside World Foreign Companies Not Allowed in India No IT Infrastructure Manual Work without Computers, Internet Now From 1991 Onwards Globalisation (Indian Economy Opened) Foreign Companies Welcomed into India Advancement of IT Use of Computers and Internet Became widespread Which Country Is Suitable for Outsourcing? Things Required for Outsourcing English Speaking Skills Cheap Labour Good IT infrastructure Why India is Chosen for Outsourcing? India has English speaking population India has very advanced IT infrastructure India's labour rate less Also, India's labour is skilled and hardworking Different Types of Services Outsourced Voice Based Business Process Call Center Teaching Medical Transcriptionist Accounting/Bookkeeping Banking Software Development

About the Author

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CA Maninder Singh
CA Maninder Singh is a Chartered Accountant for the past 10 years. He also provides Accounts Tax GST Training in Delhi and Pune.