We all will agree to the fact that the original driver for outsourcing was labor arbitrage, delivering as much as 40 percent savings compared to the UK. Outsourcing made sense at that point of time. Specialized companies provided their services to many client companies at lower prices than the client companies could do the work in-house. Both companies, the service provider and the client, profited from the arrangement. Unfortunately, outsourcing got carried to extremes. Companies began outsourcing work to the lowest bidder and lost sight of the effect it had on the company except for finances. There are also non-financial costs to businesses from outsourcing, including lowered public perception and reduced morale/productivity from remaining staff.
One of the biggest advantages of offshoring to India is cost savings. Barclays Bank PLC has been able to save about 30 to 40 percent for most services by offshoring processes to India. Cost savings in India can be accounted for by savings in the following three heads:
1. Labor: Indian professionals work at wages much lower than that in the UK.
2. Capital: Infrastructure costs in India are lower thus saving significantly on capital.
3. Labor management: The number of employees required during a project is not same throughout the course of the project. Hence, when a business process is carried out inhouse, companies have to pay the employees and maintain office space for them, even if these employees are not working on any project. Offshoring enables companies to do-away with the expenditure on bench labor.
Outsourcing is when you send work to companies outside of your corporation that may or may not be in the same country. The worldwide economic recession has forced companies to explore all options to increase efficiencies and cut costs. Companies are getting increasingly comfortable outsourcing larger parts of their businesses as they realize they are not core. Outsourcing is a cost savings exercise over a period of time. There is a lot of overhead involved with outsourcing due to language barriers, cultural barriers, and time zone challenges.
The world of banking has assumed a new dimension at the dawn of the 21st century with the advent of tech banking, thereby lending the industry a stamp of universality. Barclays Bank PLC is a major British multinational financial services firm. As of 2010, it is the world’s 10th-largest banking and financial services group and the world’s 21st-largest company according to a composite measure by Forbes magazine.