Business Outsourcing

Outsourcing

Introduction

The word “outsourcing” is not a newly phenomenon. Today, all types of organizations outsource some aspects of their business. It is used to cut down the cost of any business. Through outsourcing, it helps to achieve organizational goals and objectives (www.streetdirectory.com). For example, a painter of a large company may outsource its paint cans who manufacture them, a billing activity may be outsourced by the mobile network, a chain of the hospital may outsource its disposal of medical wastage. a manufacturer of auto may outsource its servicing and services of janitorial may be outsourced by an IT company. Outsourcing enables experts for every organization to do best what they can and focusing their organizational core strengths. Nowadays, outsourcing of information technology (ITO) and outsourcing of business process (BPO) are the most popular forms of outsourcing (www.outsourcing-center.com).

Background

(Rocks, 2001) In the booming era of electronics sectors, technologies in networking equipment, personal computers and cellular phones are advancing day by day around the world. In 2001, some of companies such as Flextronics (FLEX), Solectron (SLR) and Celestica (CLS) faced hard time and explosively grown as the manufacturers of contract of this hardware.

But the analyst expected the growth rate is 25% in the electronics manufacturing services (EMS) that is almost $127 billion. (Rocks, 2001) But in reality, biggest EMS companies have established dozen of factories around the world and are able to make everything that can contribute the rate up to 35%, predicted by Technology Forecasters Inc.

(Rocks, 2001) The demand of this type of tech products may slow due to which pressure from the financial sector will increase on such these companies; Lucent (LU), Hewlett-Packard (HWP) and Motorola (MOT) for cutting down their costs. According to the Marks, the CEO of Flextronics International Limited, “getting rid of factories is a great way to do it”. On the other hand, it is expected that the year 2001 will be quiet and expected for losing the big contracts.

The momentum of outsourcing is still gaining according to analysts. Forecasters of Technology mention that companies from the electronics markets globally have outsourced 13% of $772 billion of goods which they sold in the year of 2000 (Rocks, 2001).

(Hechinger, 2003) As the demand of personal computers (PCs) and cell phones is getting shrink due to the enhanced and advanced technologies. As a result, the production can be shifted toward handheld devices or data-storage equipment through many contractors. (Rocks, 2001) The year of 2001 look like benefit for EMS companies.

There was an agreement in which International Business Machines Corporation take over entirely the operations of computer of Visteon Corporation who is the maker of auto-parts. (Hechinger, 2003) The value of this deal has become more than 2 billion over the 10 years. This deal is the largest deal for IBM that identified main and important driver for the growth of the company. While Mich, Dearborn and Visteon are spun off from the Ford Motor Co. in the year of 2000. Visteon has been engaged to diversify its business from making ...