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A PROJECT REPORT ON

OUTSOURCING

Submitted in partial fulfillment of the requirements


For
MASTERS OF COMMERCE BANKING AND FINANCE
(2015-2016)
BY
HUMERA KHAN
ROLL NO:49
Under the guidance of
Prof. Ravikant.S.

Affiliated to University of Mumbai


S.K.SOMAIYA COLLEGE OF ARTS, SCIENCE AND COMMERCE
AURBINDO, VIDYANAGAR
VIDYAVIHAR [EAST]. MUMBAI-400077

CERTIFICATE
OF
PROJECT WORK
This is to certify that,
Ms HUMERA KHAN Mcom Banking and Finance Part 1 Semester-1
Roll No:
49
has undertaken and completed the project titled
OUTSOURCING during the academic year 2015-2016 under the guidance
of Prof.RAVIKANT.S. submitted to this college in fulfillment of the
curriculum of
MASTERS OF COMMERCE BANKING AND FINANCE,
UNIVERSITY OF MUMBAI
This is a Bonafide project work & the information presented is true &
original to the best of our knowledge & belief.

_______________
______________________
PROJECT GUIDE
EXAMINER

_____________________
COURSE COORDINATOR

EXTERNAL

__________
PRINCIPAL

DECLARATION
I, HUMERA KHAN studying in Mcom Banking and Finance Part 1 course in
the academic year 2015-2016 at S.K.SOMAIYA College of Arts, Science and
Commerce and hereby declare that I have completed the project on
OUTSOURCING as a part of course requirements of MASTERS OF
COMMERCE in Banking and Finance of University of Mumbai.
I further declare that the information presented in this project is true
and original to the best of my knowledge.

Date:

Signature of Student
HUMERA KHAN

ACKNOWLEDGEMENT

I the undersigned, have great pleasure in giving my sincere thanks to


those who have contributed their valuable time in helping me to achieve the
success in my project work. I would like to thank Principal Dr. SANGEETA
KOHLI ,

S K SOMAIYA College of Arts, Science and Commerce for his

continued support. I would like to express my sincere thanks to Co-coordinator


for his constant encouragement, in completion of this project successfully.
I am indebted and thankful to my project Guide and Motivator Prof
RAVIKANT.S.for

his

valuable

and

timely

guidance,

co-operation

encouragement and time spent for this project work. I would like to thank our
Library Staff for providing me sufficient information, which helped me to
complete my project successfully. I would like to thank all the lecturers for their
support and guidance throughout the project.
I also thank my family members for their continued support in
completing this project work and last but not least, I wish to thank all my
friends and well wishers who are directly or indirectly linked with the success
of my project.

INTRODUCTION:
Outsourcing is an arrangement in which one company provides services for
another company that could also be or usually have been provided in-house.
Outsourcing is a trend that is becoming more common in information
technology and other industries for services that have usually been regarded as
intrinsic to managing a business. In some cases, the entire information
management of a company is outsourced, including planning and business
analysis as well as the installation, management, and servicing of the network
and workstations. Outsourcing can range from the large contract in which a
company like IBM manages IT services for a company like Xerox to the
practice of hiring contractors and temporary office workers on an individual
basis.

HISTORY:
Outsourcing, or sending off a job outside the company,may seem like more
recent phenomena which started after the internet boom in mid 1990s, but the
fact that outsourcings history is as old as America may surprise us. During
the early years of America, the manufacturing of clippers ships sails was sent
to Scotland, and the raw material came from India. India was also an
outsourcing destination for British textile industry during the 1800s, but
eventually the British become more efficient and outsourced job came back
to Britain.
In more recent times, during 1970s computer companies used to outsource
their payroll processing. The job was sent to company in another state or city,
not overseas. Unlike today offshore outsourcing was not common in those
days. Late 1980s saw emergence of offshore outsourcing when companies
started sending off their manufacturing jobs overseas. This trend got boost
from the increasing technical advancement and the 1986-94 Uruguay Round
of talks which lead to the creation of WTO. Kodak and American standard
were among the first companies to outsource.

The Reasons To Outsource

Outsourcing is the process of delegating a company's business process to third


parties or external agencies, leveraging benefits ranging from low cost labor,
improved quality to product and service innovation. When outsourcing
transgresses national boundaries and is managed by companies located in other
countries, outsourcing takes the form of offshoring.
A hotly debated topic with pros and cons, both outsourcing as well as offshoring
have a direct impact on a company's top and bottom line and have become key
components of defining how successful enterprises are run. Given below, as
reflected by companies, are the top 10 reasons to outsource:
1. Lower operational and labor costs are among the primary reasons why
companies choose to outsource. When properly executed it has a defining
impact on a company's revenue recognition and can deliver significant
savings
2. Companies also choose to outsource or offshore so that they may
continue focusing on their core business processes while delegating
mundane time consuming processes to external agencies
3. Outsourcing and offshoring also enable companies to tap in to and
leverage a global knowledge base, having access to world class
capabilities
4. Freeing up internal resources that could be put in to effective use for
other purposes is also one of the primary benefits realized when
companies outsource or offshore
5. Many times stranded with internal resource crunches, many world class
enterprises outsource to gain access to resources not available internally

6. Outsourcing, many a time is undertaken to save costs and provide a


buffer capital fund to companies that could be leveraged in a manner that
best profits the company
7. By delegating responsibilities to external agencies companies can wash
their hands off functions that are difficult to manage and control while
still realizing their benefits
8. Outsourcing and especially offshoring helps companies mitigate risk and
is also among the primary reasons embarked upon
9. Outsourcing also enables companies to realize the benefits of reengineering
10.Some companies also outsource to help them expand and gain access to
new market areas, by taking the point of production or service delivery
closer to their end users
To summarize among the reasons to outsource, companies undertake
outsourcing and offshoring for a variety of reasons depending upon their vision
and purpose of the exercise. While this may vary from company to company,
the fruits of labor are visible among some of the leading enterprises world wide,
where in outsourcing and offshoring have become a core component of day to
day business strategies.

TYPES OF OUTSOURCING:
Outsourcing can be divided into two broad categories. They are BPO and KPO.
Let us examine how each differs.
BPO
In BPO (Business Process Outsourcing), a particular process task is outsourced.
An example would be payroll. BPO work could be either back office related or
front office work. By front office functions we mean customer oriented work
like marketing, answering calls, technical support and so on, whereas internal
work like billing and purchase come in the back office category.
Multimedia/ animation, book keeping, business consultancy, CAD/ CAM, call
center, DTP, data entry, proof reading and editing, typesetting, handwriting
services, marketing, medical billing and transcription, web design and
development etc are all services that could be put under the BPO category.
KPO
As is evident from the description, BPO activities involve carrying out
standardized processes for the client. KPO or Knowledge Process Outsourcing
typically calls for work that needs higher levels of involvement from the
worker. The worker has to employ advanced levels of research, analytical and
technical skills and has to make decisions of a higher order than BPO work.
Examples are pharmaceutical research and development, patent/ intellectual
property research, animation and simulation. Data research and analysis, legal
services, content writing and development and database development services.
KPO industry is less older and mature than the BPO sector.
Professional Outsourcing
Professional Outsourcing includes accounting, legal, purchasing, information
technology (IT), IT or administrative support and other specialized services.
This is the most common area for these specific types of Outsourcing services,
as there is a potentially high cost savings associated with this type of
arrangement. The company pays only for services actually provided while
having access to high quality resources, which significantly reduces overhead
costs.

Multisourcing
Multisourcing is another important term and provision of IT outsourcing worth
exploring more. Multisourcing is a term that can apply to any business area, but
is most commonly used when referring to IT outsourcing and IT services, as it is
the blending of business and IT services from the main set of internal and
external providers in the pursuit of business goals. It was first introduced by a
market technology research firm in 2005 and is most frequently used by large
enterprises, where IT operations and technology infrastructure are contracted to
multiple vendors. This specific type of Outsourcing has recently become
popular as multi-sourcing leverages several "best-of-breed" specialist teams that
are expert in and focus on a single IT management function. Multisourcing is
also known to be outcome-focused, well integrated and operates in a "partner"
relationship manner, which gives it better visibility into real project status
information as well as little to no conflict of interests between functions.
However, multisourcing requires you to have a strategy, a network of
relationships and governance as well as requires creating measurements that
matter.
Manufacturer Outsourcing

The term "Outsourcing" became popular in the U.S. near the turn of the 21st
century and was widely adopted and forged in the manufacturing industries.
This mainly involved the transferring of blue collar jobs to a third party for
various reasons such as expertise, human capital, time to market and cost
factors. Outsourcing since has evolved to include white collar jobs for many of
the same reasons the manufacturing industries outsourced their blue collar jobs.
Zooming back in on the main sectors of Outsourcing, manufacturer Outsourcing
is another common Outsourcing service today that companies involving the
production of goods should understand when asking What is outsourcing, what

are the types and why outsource these services anyway? Manufacturer
Outsourcing services are usually quite industry-specific. An automobile
manufacturer for example, can have an Outsourcing arrangement for building
and installing windows in all their models. Such outsourcing arrangements can
result in significant cost savings and reduced assembly time. The only primary
risk of this type of Outsourcing would be quality issues and perhaps interruption
of the production line. Many believe manufacturer Outsourcing is also essential
for small and mid-size to survive today's non-stop competitive market. Without
this type of Outsourcing, companies simply lack the economies of scale that
able them to compete with larger competitors, as not many companies have the
ability to actually invest in and continuously upgrade equipment, personnel and
process technology necessary in order to compete in a market where product
lifecycles are shrinking.
Process-Specific Outsourcing
Other Outsourcing services can be specific to a process or internal procedure,
which is commonly referred to as process-specific Outsourcing. Today, it is very
common to outsource specific operation-related aspects to other companies or
units that specialize in that specific service. For example, a bakery can
outsource the delivery of a packaged cake to a courier company like UPS or
FedEx. Such an Outsourcing contract would then involve details on delivery
timelines, customer contacts and costs, which then allows each company to
focus on its strength and improve customer service all while reducing costs and
time. Process Outsourcing is also used to describe the practice of handing over
control of public sector services such as (fire, police, armed forces, etc.) to forprofit corporations.
Project Outsourcing
Sometimes companies have trouble managing one of their projects or even just
completing a portion of a specific project. In such a case, companies can project
outsource. There are individuals and specialized units that specialize in project
management that companies can outsource to. These Outsourcing services can
be contracted to either manage entire projects or complete portions of projects.
There may be a number of reasons why companies would want to outsource
such a function, especially because there are many benefits of outsourcing parts
of projects, but project outsourcing most often occurs because companies
simply do not have enough available people in house or enough skills, or funds

to do it on their own. It's a more appealing choice than taking the time and
money to contract someone in house and long term or even to train someone,
especially if it is on a function that is commonly dealt with by IT outsourcing.
Companies need to understand these benefits of outsourcing when learning
What is outsourcing exactly and what are all the benefits of outsourcing, as it
thus saves time and money.
Offshore Outsourcing
In the 19th and early 20th century, it was normally unheard of to outsource to a
specialized unit, individual or specialized company outside of that country.
Today however, the notion of Outsourcing (and especially IT outsourcing)
outside country lines is highly common and even encouraged as a smart
business strategy. Such business practices are referred to as offshoring,
nearshoring and also reshoring depending on the location. It is important to
understand the differences between each. he practice of offshoring means
having the outsourced business functions done in another country. This type of
Outsourcing grew in popularity before nearshoring and reshoring did. Work is
often offshored in order to reduce labor expenses. Sometimes outsourcing is
used as a strategic way to enter new markets and tap talent unavailable
domestically or as an attempt to overcome current regulations within the home
country that prohibit certain activities. India, Indonesia and China have emerged
as dominant countries for Outsourcing offshore. A major reason why offshoring
became possible and quite appealing to U.S. industries was due to the global
ubiquity of the Internet and massive telecommunications capacity in the 90s and
on.
Nearshoring
A recent and rapidly growing Outsourcing trend is the process of nearshoring.
Rather than reshore services back to the US, companies have begun to move
business functions to a country geographically closer with a closer time zone or
economic structure to the company's home country. This is a means of cutting
costs and improving services. Basically, nearshoring combines the benefits of
outsourcing offshore and the benefits of reshoring to create a strategy that cuts
costs and improves services (only two of the many benefits of outsourcing, as
stated). Latin American countries are proving to be dominant players in this
type of Outsourcing for US companies. Specifically, the up-in-comers are Costa
Rica, Columbia, and Chile. Nearshoring to this area is also only becoming more

appealing to US companies as Latin America's time zone and proximity to the


US offers opportunities including lower costs, greater speed-to-market, and ease
of doing business like shorter travel times and no early or late work hours.
However, many are curious of the future of nearshore Outsourcing and believe
it is very much in the hands of Mexico, Brazil and Argentina (which are wellestablished nations in the Outsourcing market) in that they must address the
political, economic and social risks, which could threaten nearshoring business.
As market trends, the economy, technology, cost of oil, and labour practices
continue to change, businesses will continue to tweak their Outsourcing
business strategies accordingly, as they have done since the 18th century.

Benefits:
Outsourcing can provide some significant benefits for companies. Advantages
of outsourcing include:
Lower labor costs. Companies typically outsource to businesses in
developing countries where the cost of labor is significantly cheaper.
Lower labor costs will improve the company's bottom line.
Less regulations. Developing countries often have a low level of
regulatory restrictions, which can also reduce the cost of operations and
increase productivity. For example, there may not be limits on overtime
or on work health and safety issues.
Focus on core competencies. Companies that outsource lower-level
work, or work the business is not optimized to perform, can then focus on
the work activities at which they excel. This will increase productivity,
efficiency and effectiveness. For example, a tech company in Silicon
Valley may be better off outsourcing its manufacturing operations to a
company in China so it can focus on research and development.
Reduced overhead. Outsourcing can also reduce a company's overhead
costs because the outsourcing company uses its own facilities, equipment
and personnel to perform the work. In fact, it's theoretically possible to
engage in massive manufacturing ventures out of a room in your house if
you outsource all the manufacturing to a factory overseas.
Flexibility. Outsourcing means that you can stay lean and mean, which
makes it easier to adapt to change. For example, you don't have to invest
a bunch of money and resources into new plant and equipment that may
become obsolete quickly. Instead, you can pass that risk off to the
outsourcing firms.
In the end, all of these advantages tend to lead to the possibility of a very
efficient and streamlined firm that focuses on doing what it does best and
outsourcing activities that others do better. This results in lower costs, greater
productivity and increases in profits.

DISADVANTAGES OF OUTSOURCING:
1. Loss Of Managerial Control
Whether you sign a contract to have another company perform the function of
an entire department or single task, you are turning the management and control
of that function over to another company. True, you will have a contract, but the
managerial control will belong to another company. Your outsourcing company
will not be driven by the same standards and mission that drives your company.
They will be driven to make a profit from the services that they are providing to
you and other businesses like yours.

2. Hidden Costs
You will sign a contract with the outsourcing company that will cover the
details of the service that they will be providing. Any thing not covered in the
contract will be the basis for you to pay additional charges. Additionally, you
will experience legal fees to retain a lawyer to review the contacts you will sign.
Remember, this is the outsourcing company's business. They have done this
before and they are the ones that write the contract. Therefore, you will be at a
disadvantage when negotiations start.
3. Threat to Security and Confidentiality
The life-blood of any business is the information that keeps it running. If you
have payroll, medical records or any other confidential information that will be
transmitted to the outsourcing company, there is a risk that the confidentiality
may be compromised. If the outsourced function involves sharing proprietary
company data or knowledge (e.g. product drawings, formulas, etc.), this must be
taken into account. Evaluate the outsourcing company carefully to make sure
your data is protected and the contract has a penalty clause if an incident occurs.
4. Quality Problems
The outsourcing company will be motivated by profit. Since the contract will
fix the price, the only way for them to increase profit will be to decrease
expenses. As long as they meet the conditions of the contract, you will pay. In
addition, you will lose the ability to rapidly respond to changes in the business

environment. The contract will be very specific and you will pay extra for
changes.
5. Tied to the Financial Well-Being of Another Company
Since you will be turning over part of the operations of your business to another
company, you will now be tied to the financial well-being of that company. It
wouldn't be the first time that an outsourcing company could go bankrupt and
leave you holding-the-bag.
6. Bad Publicity and Ill-Will
The word "outsourcing" brings to mind different things to different people. If
you live in a community that has an outsourcing company and they employ your
friends and neighbors, outsourcing is good. If your friends and neighbors lost
their jobs because they were shipped across the state, across the country or
across the world, outsourcing will bring bad publicity. If you outsource part of
your operations, morale may suffer in the remaining work force.

Issues to consider before outsourcing:


Outsourcing is not a one stop solution for all the troubles a company is
facing.It does not gurantee profit or increased market reach.Therefore Before
a company decides to offshore its work, it has to conduct a detailed survey of
its operations to find out whether off shoring is the best solution. Many time
companies fail to recignize the real issues troubling their operations, and
decide to outsource for wrong reasons.
After identifying the issues faced by the company and how outsourcing might
benefit,the company needs to set a clear objective for off shoring and its
goals, and make sure that it is discussed with the off shoring partner. Many
time companies have experienced that there is a communication gap between
them which make it harder to understand the deliverables. Cultural difference
plays a key role in this communication gap.Outsourcing destinations like
China or India,have an implicit culture. More is understood without spelling
it out explicitly.American companies have to keep that in mind so that
communication gap does not go beyond.
Selecting an off shoring partner is also an important decision.Before that, the
company has to first decide whether it wants to have it branch office in the
off shoring location or to send its work to an existing offshore company.
Working with an existing company is beneficial if the work being off shored
is small or intermittent in nature. While it is a good idea if the company has
large volume of work to be off shored which is of critical importance to the
company to have its own branch.
If the company decides to work with an outside company in the offshore
location, selecting the partner has to be based on the past performance,
references and also compatibility with the company.The compatibility factor
is important because as partners both companies have to understand ecah
other;s business and be able to take advantage of each other'e expertise.If the
companies have totally differnt way of working and area of business it is
difficult to work as partners.
While selecting an offshore location, a company has to keep in mind that the
location should have the technical infrastructure to support the project, also
political stability and cultural issues have to be considered. It is better to have
a location which is stable and in culturally aligned to the home base.In recent
days companies have faced criticism over the standard of customer service

provided by the offshored call centers.Difference in accent, cultural


misunderstandings have manily contributed to the complaints rather than the
catual level of service.A company has to keep this in mind.
Since there is going to be jobs shipped to another country, employees in the
company are bound to feel some kind of anger or resentment against the
company and employees abroad. The company has to make special effort to
address the fears and anxiety employees have and explain to them the reason
for outsourcing. Also show to them that they are valuable to the company.
A company which takes care of all the above issues with special priority to
the employee relationship will most likely have a smooth offshoring
experience.

Legal issues surrounding outsourcing


Off shoring involves two companies in two different countries, so it takes a
good management strategy and preparation to deal with two sets of laws and
regulations.
There are international laws to govern trade among two nations but most of
the time it is a long process to resolve any dispute. So for a company it is
always a good idea to employ the local laws. United States has fairly explicit
laws and regulations for wide range of issues but the there are countries
where religious laws govern even trade and business practices , for example
in Islamic nations you cannot charge interest in money lent or the regulations
regarding prayer schedule and religious observations. Then there are nations
who do not have a working legal system designed to keep up with the
changing demands of the global trade.
To have a smooth operation in the offshore destination, a company should
keep its team aware about the difference in legal system and devise a
management plan to deal with it. Having an in house legal team, with local
attorneys is also a good way to go. Talking about the difference in legal
system, in Nepal the copyright law was enacted in the 1965 and has not been
updated since 1997. It lacks provisions on various new technologies such as
the web content, e-book publishing, CD rights etc. A US company seeking to
do business in Nepal has to have a plan to protect its intellectual property,
keeping the outdated law in mind.
Some of the major legal issues faced by a company are
Contract: The Company has to be aware of the contract laws of the host
nation, clauses for claiming damages and remedies available. While drafting
a contract with a company is off-shore destination, it is a good idea consult a
local lawyer specializing in business law, so that proper provisions are made
in the contract to prevent any future problems.
Copyright and patent: In many parts of the world copyright and patent are
still very new concepts and many dont have any regulation to protect them.
Before entering to any long term relationship a company has to make sure
that the host country has laws to protect its copyright and patent. It is
interesting to note here that until 1992-93, China did not protect chemical or
pharmaceutical inventions, believing inventors should freely share such
inventions.
Labor Law: Labor laws are very important if the company is going to hire
local people. It has to be aware about the working hours, minimum payment,
and laws against discrimination. For example, in Saudi Arabia the law states
that in the month of Ramadan(Islamic holy month of prayer and fasting) the

actual working hours shall not exceed six hours a day or thirty-six hours a
week, exclusive of the intervals reserved for prayer, rest, and meals.
Bribes, gifts and undue influence: In some parts of the world, especially in
Asia gift giving is part of common courtesy, and some places bribes are the
only means to get through the red tape. A company has to make sure that their
action does not cross the legal boundaries because even in place where bribe
is socially accepted they have laws against it.

Social Impact of outsourcing


Outsourcing of jobs, looking from American perspective, has brought along
many social changes and raised many issues. From job security, health care
cost, social security to long-term effect on the economy. Social effects of
outsourcing is being seen even in the host countries, for example in India
young graduates are earning in one year what their fathers took 5 years to
earn, women are getting more opportunities and cities are getting
international exposure.
Looking at its effects in American society, two issues are most important.
One is the question of job security and the other is its effect on social
structure. Americans are now so worried about their jobs being shipped off
that the issue had prominent place in the last Presidential election and is
featured in local political debates too. The media has added to the public fear
by picturing emerging nations like China and India, as job pirates looking to
grab any available American job. Politicians, instead of rationally analyzing
the benefits and disadvantages of outsourcing and explaining it to the public,
are using the public fear to further their political agenda. As result middle
class America, the largest demographic, sees outsourcing as a villain. More
and more companies are under pressure to provide job security and refrain
from outsourcing. With low and mid-level jobs in Technology and
manufacturing sector being outsourced, the workforce is forced to seek jobs
elsewhere, in most cases with pay cut. This means less purchasing power, in
turn slowing down economy. Although it may take some time for the country
so see the effects in economy, some areas like Detroit are already seeing it.
As for host nation, the issues raised by outsourcing are totally different.
Racist attacks on call center workers, disturbed social life of workers because
of odd working hours, disenchantment with local culture and life style are the
effects felt in countries like China, India, and Philippines.

A CASE STUDY ON DELLS CALL CENTER OUTSOURCE:


1. Introduction
As a computer giant, Dell has also given some tries to ride on this opportunity
by outscoring its some non-core businesses, for instance, call center, offshoring
to sharpen its core-business to be more competitive in the market compete and
hence to further maximize its return on investments (ROI).
In the past decades, dell has made a lot of successful stories, but in this report
we shall use the Dells failure outsourcing case outsourcing call center to
India to 1) analyze the case to find out what reasons during the planning and
execution might have contributed to the failure, 2) through this case study to
draw up some conclusions and 3) further discuss what good lessons we could
learn from and may apply for the future outsourcing success.
The structure of this report we organized is to firstly give an overview of Dell
Company and discuss some findings about its history of outsourcing call center
to India. Secondly, we present an in-deep analysis of the case to reason why it
failed. Finally, we give the conclusion and some proposals for the future
outsourcing.
2. History of Dell's outsourcing call center to India
Dell is a well-known brand of personal computers which are sold directly to
end-users. With the direct sales model, Dell could save costs and became the
cost leader in PC industry. Its revenue increased from 6.2 millions USD in 1985
to 62 millions USD in 2009. Dell was the number one market share in USA and
globally for a long time. In order to serve a large number of customers better
and cut down costs, Dell decided to outsource call centers in India. Dell opened
its first call center in Bangalore, India in 2001 to provide technical support for
customers in U.S. After that, it set up the second customer contact center in
Hyderabad in 2003 to deal with the increase in customer base. Eventually, the
third call center of Dell was opened in Chandigarh metro area in the north of
India.
In recent years, call centers are one of the most popular businesses that are
outsourced. Not only Dell but also many global and famous companies such as
AOL, American Express, and General Electric have outsourced their call centers
to improve their cost efficiency. Among many countries, China and India are

ideal choices for outsourcing due to the cheap and skilled labor in these
countries.
2.1 Reasons and benefits to choose India
An interview with Romi Malhotra [1], the director of Dells Indian operations,
has revealed the benefits in offshoring its customer services, and also disclosed
reasons why Dell outsourced call centers to India.
The largest driver is talent. Dell found that labor in India is not only
cheap but also skilled. In the interview, Romi Malhotra shared The
people we hired in India are often overqualified for the job.
Since Dell has seasonality in the business, outsourcing business to India
allowed Dell to ramp up and down without changing employee count.
Outsourcing helps Dell benchmark its quality and cost.
Dell can gain more working experience by working with third-party
vendors.
Outsourcing to India allowed Dell to spread its call centers
geographically, and then, may mitigate something such as natural
disasters.
Risk mitigation is another reason for Dell to outsource its business
function.
2.2 Challenges
In the interview, besides benefits, Romi Malhotra also discussed some
challenges that Dell has encountered
Dell has encountered the problem talent constraint. Dell has spent a long
time to find right people in India and teach them about Dells culture.
Language, cultural dimensions are also challenges. In fatc, its not easy to
getting an agent to understand the culture in a country that is halfway
across the globe.

Technology is also a big challenge. When Dell set up its first call center,
it took about seven months for Dells officers to decide what kind of
routers and switches to use.
Retention is another difficulty. In parallel with recruiting new talent, Dell
had to come up solutions to keep skilled labor to work for the company.
2.3 Downfall
Although Dell has set up many call centers in India and the market share of Dell
has continued to grow, customer satisfaction had dropped. In 2003, Dell stopped
using a technical support center in Bangalore, Inida to handle calls from U.S.
customers due to many complaints, mainly is poor quality of service, from
customers. Some U.S. customers complained that it was difficult to
communicate with Indian technical support representatives because of thick
accents and scripted responese. There are other complaints such as delays in
reaching senior technicians when speaking technical support employees in
India.

3. Case analysis
There are some reasons why Dell had failed the outsourcing call center in
Bangalore in India. In fact, many business white papers outsourcing IT have
clearly stated that outsourcing can only be beneficial to those who do so
analyzing the short as well as long term goals of an organization. Therefore first
and foremost organizations should research outsourcing what is it and in which
way will it be beneficial to them. IT outsourcing advantages are many, but same
is the case with operations failing and organizations backing up. [1] Here are the
reasons:
3.1 Planning and Managing
The most difficult part in outsourcing is planning. For a big outsourcing project
like the call center in India, proper planning is very important. Dell had failed to
plan and predict for their growth. That is why the call center worked in the way
that did not have any clear processes or well-structured plan to serve for the big
growth. In the end this become more complexity and unmanageable. In the Dell
case, the poor management comes from the fact that they did not plan enough
for the call center in long term. Dell had been growing a lot in their sales and

the call center did not have enough resources in handling a large volume of call
from the customers. Everything is not structured in processes and requires more
time to support. Therefore, the quality of the answer from the service went
down and did not meet customer satisfactions.Customers had complaint a lot
due to the poor answer and long waiting time. In fact, it is indirectly affecting
their sale revenue since out of 10 calls from the customers; there is likelihood
that 8 customers will buy the product from Dell. As a result, the call center in
India had failed to meet the expectation. Managing processing in outsourcing is
a challenge.
3.2 Technical skills
The technology keeps changing; Dells products are more complicated.
Moreover, Dell has been growing a lot and the number of product lines also
increase. Therefore, the skills of the staffs need to be improved so that they will
have more domain knowledge as well as technical skill to answer all the
complicated questions from the customers. However, Dell had not planned
enough to catch up and train the staffs with the new technology. In fact, a lot of
phone calls were being transferred to different technicians and in the end the
customers were frustrated and not happy about the service. As reference [4], we
can see that how important of agent with good skill, they can convert one call to
become one sale if the answer is qualified. The call center in India did not have
enough domain knowledge to deal with a lot of difficult questions. That is why
it led to a lot of complaints.
Surveys released in February showed that, while Dell's market share has
continued to grow, customer satisfaction has declined. The company has
acknowledged the problem and said steps are being taken to improve tech
support and other customer services.
Brooks Gray, analyst with research firm said Dell customers complained of
language difficulties and delays in reaching senior technicians when speaking
to tech support personnel in India.
3.3 People
The call center in India needed a large volume of employees since it needed to
handle a lot of calls. Although, India is a big country and the number of talented
people is large, but Dell still had problem to find enough quality employees.
India is famous as an outsourcing country, and the needs in finding talented

people are high. Dell had also faced some difficulties in finding quality people,
keeping them so that the turnover is not high is always a challenge. In fact, there
are possibilities for the local workers to change to another job because the
market and the high demand are very hot that they do not need to stay at Dell.
Dell had lost 30 percent of manager because other companies are willing to pay
more than Dell. With the current rapid growth of Dell, the call center was not
able to find enough people to deal with a lot of phone calls.
3.4 Culture issues
Culture is always a big issue in outsourcing, especially the call center is the one
that dealing with most customers in other countries. Call center seem to be easy
if you serve the people that you understand well, but different cultures may lead
to misunderstanding or miscommunication and the result is the customers are
not satisfy about the service. For instance, what does a customer mean when
they say this? Agents have probably never been in the customers shoes, how
do they learn what the customer means? [6] For the Dell case, most of the
customers that the call center in India serve are American, they expect a clear
and straight forward answer (that is the culture of American), however, Indian
tend to answer in a lengthen way and usually forward the phone to other people
that take a long time for waiting. Although most Indian speaks English, but
most of the complaints are about the thick accent and difficult to communicate
with them is also a problem. So the lesson learn from this is, Dell need to train
the people in call center not only their culture in Dell but also the culture of the
customers that they serve.
In conclusion, there is a lesson from this case study is that outsourcing is not
easy, you need to have a proper planning for your short term and long term plan.
3.5 Recommendations
3.5.1 Planning
Planning is the biggest problem in Dells case. First of all, to outsource,
especially do an offshore outsourcing, the degree of outsourcing shall be well
tuned. A progressive model is highly recommended due to the uncertainty,
especially the call center services directly affects the main business process.
Dell shall use one of its regional markets as the test bed to try out the result
before they fully outsource the whole call center services to India.

Besides that, a careful execution planning shall be made before the actual action
was taken into place. The planning will cover the schedule, cost involved and
the milestones, which gives the clear picture.
Moreover, based on the investigation result, the whole process shall be
evaluated again and the major problems found shall be addressed and possible
solutions shall be proposed before the whole plan was actually executed. Dell
found the staff retention problem in the investigation process but they had never
come out solutions to solve the issues.
3.5.2 Investigation and Pre-outsourcing Analysis
The investigation and analysis shall be done in a more systematic way. The preoutsourcing analysis in Dells case missed out the important details, e.g. heavy
accent. And all these led to a serious consequence and directly affect the whole
operation. Dell shall be doing this investigation as detail as possible, which will
give the management accurate information. If Dell does not have enough power
to do that, a third party consultancy shall be engaged to guarantee the
investigation and analysis result.
3.5.3 Training
Communication and skill set needed by the call center service shall be proper
defined and the corresponding training plan shall be made and executed upon
the outsourcing starts. Although this introduced additional cost but it is
compulsory to guarantee the quality of the service.
American Express sets the good example in providing the English language
training for its outsourcing center in India. This will reduce the communication
problems which were created by the Indian operators heavy accent.
Moreover, Dells call center is also in the role of converting the calls into orders,
which is also an important marketing method in the direct sales model. By
providing the training, Dell will have more skillful operators for the call center
and eventually the sales will be increased as well.
3.5.4 Monitoring
Proper timelines shall be set and the management shall keep track of the
progress and take necessary action to make sure the timelines are strictly
followed. By all means, the router and switch shall never block the whole

process by 9 months. The lack of monitoring caused the schedule slippery and it
also reflected the low execution power. For outsourcing project, especially the
offshore outsourcing project, the monitor process must be introduced and there
ought to be some outsource manager to keep an eye on the whole process
throughout the whole development and operation period.
4. Conclusion
IT Outsourcing still has its strong position and momentum to bring values
across the different industry. But these values achievability should not be
arbitrary, as this Dells call center outsourcing case study revealed, but subject
to the below dedicated contexts:
The first and foremost is to work out a better long term plan, which should
together with proper processes and well-structuring defined. It will help
improve the management efficiency and relieve the management chaos as the
expanding sales volume in the future. Moreover, with a good plan in hand plus a
good execution, it will help increase the sale revenue indirectly but significantly
as the user satisfaction improved.
Secondly, as an outsourced company, Dell in this case for example, in order to
provide consistent and better services to the customer, who cannot overlook the
importance of developing a technologies competence team but just focusing on
the market exploiting, otherwise the adversary of the customer relationship, say
retaining existing customers and develop new customers, will be hurt.
Thirdly, enhance the people managements ability to remain talents. Talent
recruiting competition is quite intensive in the outsourced country and when
turnover rate reaches a certain degree, it could be very disruptive to an
outsourcing company. E.g., In India the turnover rate will go up if the people
management does not do well as other outsourcing companies can tempt the
staff by offering better package. This, without as stable team, will directly affect
the service quality also.
What is more? The culture for outsourcing is also posting its importance.
Language influences and communication ways should be diversified based on
the service destination preferences, such as American prefers direct
conversation with local accent but not a lengthy one.

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