Outsourcing and Accounting Outsourcing to India - Case Study Example

Introduction Outsourcing is a concept used when companies contract essential business processes and services to third party vendors, domestically or internationally. The global economies are expanding gradually and many managers are under pressure to increase productivity and profitability while lowering operational costs. Thus, outsourcing has emerged as a well-liked competitive approach for big and small companies that aim at expanding their business processes offshore so that to survive in the domestic and international market place. The outsourcing in India is vast because they do not have laws that are as strict as those in the United State. Measures that are set for companies that outsource to India and Indian venders ensure confidential data is stored on the servers of the outsourcing companies and Indian vendors have strongly controlled access. Although, the outsourcing may have adverse outcomes to the European company that decide to outsource to India, it may as well yield beneficial outcomes to this company. Benefit of outsourcing to India The economic crisis has made many European companies to decide the focus on India as an outsourcing objective for their information technology requirements (Schniederjans, 2005). Thus, these companies should ensure that the outsourcing contracts must be carefully drawn to protect their intellectual property rights. The European company outsourcing to India should not allow the team in India to know much about their business, but Indian should only understand the details of equity trading and settlement. However, the outsourcing will cause unemployment due to the introduction of information technology, but it is significant for European companies to outsource in India because they will have a competitive advantage in the global market. The competition will ensure that the profits decline in the long-run, and profits accrue to employees via more job creation, and to clients via cheaper prices. For instance, the research indicates that most European companies would gain new jobs in the long-run due to offshore information technology outsourcing to India (Schniederjans, 2005). Higher wages in India are one of the significant drivers of global outsourcing, and would cause the wage differential to narrow in the European companies. Meanwhile, the skill differentials and higher productivity as a result of outsourcing to India will tend to preserve Europe companies wage levels, with differentials decreasing gradually due to increase in the low end wages. The outsourcing is growing significantly in Europe due to labor laws that make relocating jobs via offshore outsourcing a long and costly process in India. The European companies have considered outsourcing option in India to avoid layoffs because they only outsource work and projects that require new hiring. Meanwhile, the Indians outsourcers indicate that Europeans business persons are reluctant to take risks or try new ideas. European companies play a dual role, as a consumer outsourcing its process and as a destination for other consumers companies to outsource to India. The global financial crisis made outsourcing a viable option for Europeans companies to reduce costs and remain competitive in the market. The outsourcing market in Europe is expected to increase between 7 and 10 percent that is focused on banking and financial services (Schniederjans, 2005). Meanwhile, the outsourcing is expected to benefit the automotive, chemical and the telecommunications industries in Europe. Indian IT specialists are in view of European companies’ acknowledgment, since the federal government attracted these people to the world in Germany with work permit. The outsourcing to India is extremely beneficial to Europe companies because it has assisted in improving the service and product quality. Meanwhile, Europe due to its conservative manner tends to benefit from outsourcing because they like face to face contact that is created via interactions with Indians venders. The European companies will benefit from outsourcing to India because it cheaper and affordable by the large and small businesses. The programming activities in India are extremely expensive because the cost thousands of dollars, but the outsourcing becomes cheaper because of the cheap labor in India. India programmers are cheap compared to the expensive programmers in Europe and the costly IT systems; thus, cheap programmers can cater for the expensive programs in Europe. The more employees working on a project balance the higher cost and unproductive programs that are prone to make errors and inefficiencies, in case the size of data increases (Mezak, 2006). The cost benefit of outsourcing is vital and applicable to large companies because extra cost of communication between parties can be offset by saving routine of programming activities of large companies. Meanwhile, the outsourcing to India will not be complicated to Europe companies because Europeans are not prone to communication difficulties and cultural differences promote the development in various regions. Moreover, the Indians vendors and programmers have great knowledge and understanding of English that make it easy to explain and translate concepts to consumers that establish feasible project objectives. The offshore groups are specialized in various skills that offer more than just cheap programmers who require less detail of European companies (Mehrotra, 2008). The European companies will benefit from outsourcing because they will be provided with better value due to quick execution and reduction of errors and misunderstandings. The outsourcing will be a significant strategic for the Europe companies because it enhances their job stability and improves the overall success of the country’s economy. The outsourcing will expose the intellectual property of the Europe companies’ product to consumers outside the country, and potentially in other countr4ies. The European companies should evaluate the intellectual property risk in the process of selecting outsourcing strategy and in selecting which portions of their product development to outsource (Mark, 2005). The ability to communicate with workers at the outsourcing site and during contracts process is greatly increased with a common language that reduces misunderstandings. Another reason for outsourcing is to increase the technical quality that enhances the access to a larger pool of qualified labor. Meanwhile, the Europe companies should ensure its products are created from standard software technology and has user interfaces that are easily specified, in case they want to outsource software products to china. The outsourced work has gone to companies in India, where developers have a reputation for high quality work. Thus, India companies are increasingly competitive with Europe companies, but wages are beginning to increase in these countries. The distance between Europe and India has made it easy for outsourcing process because electronic communication has alleviated these distances (Kuster, 2004). As emerging nations develop their companies find it useful to outsource certain activities to more developed nations; for instance, Indian telephone giant Bharti Tele-ventures outsourced hundreds of millions of dollars of work to western firms. Disadvantages of outsourcing to India The outsourcing to India many prove to be difficulty for the European companies due to licensing and copyright problems in case the contract is copied and sold again to other rival countries in the industry. There is time wasting in the process of managing the product that makes the companies to be discouraged and misunderstanding caused due to lack of the effective communication contribute to waste of time (Hunter, 2006). The outsourcing projects need reasonable deal of trust because the value of programming will depend on the quality of that service. Meanwhile, the Indians vendors may fail to deliver quality services due to improper standards of contract as a result of poor communication and cultural diversity between the parties. There is risk of the outsourcing process in India due to risks to confidential information and personal data that are caused by lack of proper law and regulations governing the outsource contracts. Moreover, India is not politically stable like United State or Australia that make the outsourcing process extremely risk because the influence can cause street unrest that can led to closing the business (Gaspar, 2006). The distance between India and Europe many interfere with the outsourcing process in case poor infrastructures that will make it difficult to visit physically. A number of basic policies that require to be adopted during the contract creation and transaction process can have a strong influence on the overall success of the outsourcing process to Europe. It is advisable to adopt the basic policies throughout the entire process because if is not done there is a possibility of the shutting done of the business. The companies that have outsourced some of their service or products development have encountered a number of problems because of the problems that the visibility into the offshore process may be extremely low. These increase the risk of the outsourced project because it will lead to slowdown of progress on the project. The outsourcing is growing significantly in Europe due to labor laws that make relocating jobs via offshore outsourcing a long and costly process in India. Thus, the outsourcing can cause lay off of workers in the outsourcing companies in order to cater for the cost involved in the outsourcing process (Chillibreeze, 2010). Some of outsourcing contacts take a long period before they are approved by the authority that is involved in the contact policies that will make the outsourcing company to lag behind in terms of development. Meanwhile, the outsourcing is extremely expensive that make it hard for the established companies to adapt the approach like the larger, established companies. Conclusion Many companies are searching for methods to reduce their services and product development cost and they are increasingly turning to outsourcing in order to take advantage of the lower wages in the global market. The companies that involve in outsourcing find themselves in the increasing trend of outsourced services and the product in the global market due to the ability to handle the competition. Meanwhile, the outsourcing involves various benefit and benefit that influence the trend of the outsourced product in the market. There is risk of the outsourcing process in India due to risks to confidential information and personal data that are caused by lack of proper law and regulations governing the outsource contracts. Meanwhile, the outsourcing will be a significant strategic for the Europe companies because it promotes their job stability and improves the overall success of the country’s economy. References Chillibreeze, M. (2010). Legal Process: Outsourcing and Accounting Outsourcing to India. New York: GRIN Verlag Press Gaspar, J. (2006). Introduction to Business. New York: CengageBrain Inc. Hunter, I. (2006). HR Business Partners. New York: Gower Publishing. Kuster, B. (2004). Outsourcing Manufacturing. New York: Springer Press. Mark, K. (2005). Outsourcing to India: The Offshore Advantage. New York: Springer Press. Mehrotra, N. (2008). Business Process Outsourcing - The Indian Experience. New York: CengageBrain Inc. Mezak, S. (2006). Software without Borders: A Step-By-Step. United State: Earthrise Press. Schniederjans, J. (2005). Outsourcing and in sourcing in an International Context. New York; M.E. Sharpe Press. Read More