Global outsourcing is basically approaching towards the huge global talent which is available for all type of businesses nowadays. It is very difficult for firms to decide on the decision regarding the global outsourcing. The decisions that firms make to decide for global outsourcing include the selection of vendors which must help them in cost reduction, and it must provide the enhanced performance in IT sector, its effectiveness in achieving gain in productivity, seek for correct partners. Due to the changes in the global market like globalization and technological advancement, the decision aspects of global outsourcing are changing nowadays.
Global outsourcing provides a competitive advantage to companies in the global market by in helping the organization in achieving their aims and objectives. In addition to this, global outsourcing has the capability to provide great business value more than cost savings and efficiency on operations. Firms believe that rather than just accessing the local sources it is much beneficial if they also try to enhance their relationships with global business partners, suppliers and customers all over the world. This helps them to decide that they should engage in global outsourcing (IBM, 2008). These advantages are the reason for companies getting involved in global outsourcing.
The countries U.S. companies have been outsourcing their IT products and services are India, China. These both the countries are rapidly developing countries, which possess ample of opportunities for business development. In comparison to India, economic development of China is slightly better. In addition to this, the political system of China also supports the direct investments from western countries such as the US. Along with this, in comparison to India, technological development of China is quite advanced which provide ample of opportunities for US companies to outsource their business operations.
A company that wants to outsource its operations in global markets needs to face several critical risks. For instance, while outsourcing, the political environment of the host country, economic diversity and cultural adoption of the business practice in the host country can be considered as critical risk factors for the company. In addition to the in the global business environment, dynamics of currency exchange rate can be also considered as matter of concern for outsourcing firms across the globe (Hahn, Doh & Bunyaratavej, 2009).
In order to achieve excellence in global outsourcing, firms must follow some features that prove to be effective for global outsourcing. They must pursue a proper well designed process to achieve global outsourcing. A committee must be designed which must be work towards achieving the best results of global outsourcing through speeches, funds or actions. They must take proper use of available resources before the global markets demands for them.
Management skills must be properly integrated with information technology for better results. They must maintain the proper database regarding the supply chain at every location. With the help of this data, analyst of companies can compare the number of resources used, performance of the employees and supplier and the changes in the prizes (Trent & Monczka, 2005). Proper organizational design must be used to review the accessibility of resources, and the communication system, control and coordination of labor involved in global outsourcing.
Hahn, E.D., Doh, J.P. & Bunyaratavej, K. (2009). The evolution of risk in information systems Offshoring: the impact of home country risk, Firm learning, and competitive dynamics. MIS Quarterly 33(3): 597-616.
IBM. (2008). The outsourcing decision for a globally integrated enterprise: from commodity outsourcing to value creation. Retrieved October 13, 2014, from https://www- 935.ibm.com/services/uk/cio/pdf/theoutsourcingdecisionfullreport.pdf.
Trent, R.J. & Monczka, R.M. (2005). Achieving Excellence In Global Sourcing. MIT Sloan Management Review, 47 (1): 24-38.