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Comparative Study on Development Mode of Undertaking Country of International Offshore Outsourcing

Author: ZhouChangZuo
Tutor: LiLi
School: Dongbei University of Finance
Course: International Trade
Keywords: Service Outsourcing Development Modes Countermeasures
CLC: F719
Type: Master's thesis
Year: 2010
Downloads: 388
Quote: 1
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Abstract


In the past few years, with the fast development of economic globalization, outsourcing has become a universal phenomenon in the world, and an important link of the value chain for companies. With the development of globalization and information technology, the environment where multinational corporations survive and compete has been dramatically changed. International service outsourcing has been the strategic option of multinational corporations to increase their core competence, which forces the new global shift of industries and offers large potential development opportunities for those developing countries through international service outsourcing industry.Since early 1990s, with the rapid development of information technology, especially the wide existence and application of the Internet, service outsourcing has been developed vigorously. Especially in recent years, India, Ireland, Mexico and other countries that are developed in providing outsourcing services cannot satisfy the growing market demand and began to transfer to second batch of service outsourcing bases including China. As a main undertaking country of international service outsourcing transfer, China should seize the historical opportunity to vigorously develop service outsourcing industry, optimize industrial structure, and promote the level of service outsourcing industry. Chinese government pays great attention to service outsourcing, and the relevant contents about service outsourcing have been included in the eleventh five-year plan. Along with the implementation of the" Thousand, Hundred, and Ten Project", Ministry of Commerce of China has identified the 16 service outsourcing base cities and four service outsourcing demonstration base cities. The local government also formulated some related supporting policies. However, compared with other countries, China’s ability to undertake international service outsourcing is backward. Based on this, this paper analyzes the modes of development of the three major undertaking countries in international service outsourcing. Through comparative analysis, this paper tries to find a suitable way for China to better undertake international service outsourcingThere are six chapters in the paper.The introduction part presents the background and significance of the topic and literature review. With the rapid development of global service outsourcing, service outsourcing has become an important force for the new wave of economic globalization. The so-called outsourcing services (Service Outsourcing) is the process that original company engaged in service activities transfer their business to external companies to carry them out. Since the 1990s, with the rapid development of information technology, especially the wide use of the Internet, the cost of cross-border communication and coordination has been greatly reduced, the efficiency of cross-border communication and coordination has been improved, and the uncertainty and risks caused by inconvenience of cross-border communication and coordination have also been reduced.The second chapter firstly presents the concept of international service outsourcing, including the types of service outsourcing and the theory of offshore services outsourcing. Outsourcing means companies focuses on their core competencies due to limited resources; they rely on information technology and make use of external professional service providers to complete their work, which is original done by internal workers. There are four types of service outsourcing according to geographical location that is onshore in sourcing, offshore in sourcing, onshore outsourcing and offshore outsourcingService outsourcing can be divided into three categories according to the content and scope of the outsourcing, that is, information technology outsourcing (ITO), business process outsourcing (BPO) and knowledge process outsourcing (KPO). The global service outsourcing shows the following development characteristics:the scale of services outsourcing will continue to expand under economic crisis; the technical content of outsourcing will be increased; more and more countries are participating in service outsourcing; core competencies are becoming the more concerned objective for global service outsourcing.The third chapter introduces the comparative analysis of development modes of the three undertaking countries of service outsourcing. From a global view of the international service outsourcing, India now accounts for 2.8% of the global information industry, the total share of the global software outsourcing market have reached 65%, and the total share of the global service outsourcing market have reached 46%. In the development of India’s outsourcing industry, it mainly adopted the following three modes:the progressive development mode; the active competitive development mode; inshore outsourcing→offshore development mode.Overall, the Indian outsourcing industry is taking the international market, export-oriented mode. The Indian government attaches great importance to the development of service outsourcing industry. The Indian government also introduced the relevant policies and security measures for the smooth development of service outsourcing industry. At the same time, Indian companies also actively respond to the call, behave actively in the overseas venture. The reasons why it can achieve such a success are due to the following aspects:quality control and international quality standards; rich resources of talent; supportive policy from government; intermediary organizations---booster for outsourcing; internationalization of languageThe disadvantage of India’ mode include:impeding factor of outsourcing resources supply---market concentration; shortage of professionals in Indian service outsourcing development process; rising human resources cost; laggard infrastructureThis chapter also introduces Ireland’s mode of service outsourcing. Software and information services industry of Ireland began to develop in the 1970s. It got rapid development in the mid 1990s, and formed its unique development mode and became a service outsourcing power country. In the 1990s, Ireland Software Company has experienced from providing services for overseas companies to providing independent product, and shifting its attention from the local community to overseas. In 1996, the Software Steering Committee (NSD) introduced risk investment supported by the government, which has laid a solid foundation for the rapid development in the late 1990s of software industry. Since 1996, many multinational corporations have begun to enter the market of Ireland, and local enterprises begun to grow rapidly. The advantages of the Ireland’s mode are:perfect security system; improved education system and a sound training system; language competitiveness and historical relationship with United States; good business environment; The disadvantages of this mode are:negligence of quality certification; high labor costs and many foreign-owned companies. As a big country in economic and technological development in Latin American, Mexico have advantages in geography, language and other aspects in the development of service outsourcing. The disadvantages of this mode are:shortage of a high level of outsourcing service providers; inadequate supply of professionals. Currently, Mexico’s service outsourcing ranked the second place in the entire Latin American region. Mexico has taken a big leap in service outsourcing industry in recent years.The fourth chapter conducts a SWOT analysis of China’s offshore service outsourcing in the aspect of undertaking. First this chapter reviews the status of china’s offshore service outsourcing. In recent years, China’s service outsourcing is expanding in scale, quantity and scope. Service outsourcing of China’s provides has supported for the development of export-oriented economy. China is gradually emerging as a global outsourcing center and entering a rapid development stage.The second part of this chapter introduced the SWOT analysis of China’s service outsourcing compared to the three modes. The strength of china’s service outsourcing includes:rapid economic development, strong government support, the convenient infrastructure and educated labor market and so on. The weaknesses of service outsourcing in China are mainly:shortage of key technical personnel in China; shortage of competitive enterprises; laggard service outsourcing related policy establishment. Opportunities of China’s service outsourcing includes:active cooperation between China and India; new opportunities brought by financial crises; Beijing Olympic Games and Shanghai World Expo and the opportunities of the development of KPO. The threads mainly include:the global economic slowdown and worldwide rising prices; boycott mood of the public from the Europe and the United States; challenges from Southeast Asian countries and the gap among china, India, Ireland and other countries.The fifth chapter sums up the inspiration from three modes in China’s offshore outsourcing industry. Through the comparison of the three modes, some inspiration about the development of service outsourcing in China can be drawn. One is macroeconomic policy based on national level, such as optimization of industrial and service outsourcing structure; building intellectual property protection environment; strengthening of the construction of infrastructure; development of industry association organization; development of outsourcing core industry. The other one is micro-economic policy based on enterprise level. Such as competitiveness enhancement of outsourcing enterprises; national brand building; strategic alliances of outsourcing enterprise; improvement of service outsourcing talents and overseas market exploration The last chapter is the conclusion part. The development course of the three countries’service outsourcing implicates a lot for China to better develop the service outsourcing industry. This paper can sum up the common experience from the three countries’promotion in offshore service outsourcing and may draw the conclusion that China’s service outsourcing industry has a long way to go but also has a great expectation if China’s government and enterprise can take related measures. The government should fully take advantage of China’s strengths and grasp the current opportunities to attract the aboard service outsourcing business.

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