- When and how did outsourcing start?
Evolution of Global Outsourcing Period Event 1776 Adam Smith’s Wealth of Nations propagates competitive advantage through outsourcing. Term “outsourcing” itself was not in use. 18th and 19th centuries With whaling fleets and floating factory ships, the concept of “offshore manufacturing gets a fillip Early 20th century Companies like Ford Motors own everything, even forests to make rubber for car tyres! General Motors runs a 2000 people HR and travel desk to cater to its employee needs 1940s ADP starts with handling payroll outside companies. Today the $8 billion, 41000 employee payroll expert handles payrolls for one in six US workers and recently opened office in India. 1960s Hundreds of call centres spring up in the US and UK. Convergys, the largest call centre company started as a captive unit of Cincinnati Bell. Hived off in the late 1990s. US companies from oil majors, telecom operators, pharma firms to FMCG firms outsource customer care, telemarketing, payroll and other functions. 1970s-1980s C. K. Prahalad’s core competency theory expounded ina Harvard Business School paper caught the imagination of big corporations around the world. The basic lessons of the theory – identify your core competencies, focus on them and get out of everything else. American Express, Swissair, British Airways and General Electric(GE) start captive units in India. 1980- 1990 US and European companies start shifting work to Ireland, Israel and Canada. Ireland particularly benefits as costs are lower and it offers multi language capability. At their peak the over 100 call centres in Ireland employ over 300,000 staff 1990-1999 C. K. Prahalad’s core competency theory expounded ina Harvard Business School paper caught the imagination of big corporations around the world. The basic lessons of the theory – identify your core competencies, focus on them and get out of everything else. American Express, Swissair, British Airways and General Electric(GE) start captive units in India. 1999 The New Telecom Policy of 1999 ended the state monopoly on international calling facilities. This heralded the growth of inbound/outbound call centres and data processing centres one of the first outsourced services to third party players was medical transcription. Though outsourcing of business processes like data processing, billing, and customer support began towards the end of the 1990s when MNCs established wholly owned subsidiaries. 2000 Third Party players spring up in India. By 2005 end, over 300 open shop in India and beyond. Some of them even set up operations outside. About 45 global destinations BPOs bandwagon and are now competing to get a slice of the annual $300 billion outsourcing pie.
Source: Bussiness World
