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From Offshore Outsourcing to Totally Disaggregated Corporation Abstract Alexander Suetin, Ph.D. Associate Professor SolBridge International School of Business 151-13 Samsung 1-dong, Dong-gu Daejeon 300-814, South Korea Phone: +82 42 630 8565 E-mail: suetin@solbridge.ac.kr Website: www.solbridge.ac.kr The purpose of this paper is to investigate offshore outsourcing as a way and a tool to the practical realization of the concept of totally disaggregated corporation.The paper revisits the notion and methodology of outsourcing with the special reference to the BFSI (Banking, Financial Services and Insurance).The process of outsourcing generally encompasses four stages. Big layoffs often accompany big outsourcing deals. Success in the Financial Economics lies in the ability to improve business agility and to alter working practices. Even though it is still facing uncertain times, one thing is very likely, important partnerships with outsourcers will soon become the de facto practice across the industry. The paper adds insight into offshore outsourcing. Keywords: Outsourcing, Offshoring, Strategic Thinking, Productivity, Financial Economics, Disaggregated Corporation, Business Agility. Alexander A Suetin is at SolBridge International School of Business since March 2010. As associate professor he is here to lecture and study in Economics (Micro- and Macro), International Financial Market, International economics, World Economy and International Foreign Exchange and Lending Relations. One semester – February - July 2011 – Alexander Suetin was at Beijing Foreign Studies University (BFSU-SolBridge). Economist in the field of International Foreign Exchange and Lending Relations Mr Suetin graduated from Moscow State International Relations Institute (MGIMO) in 1974. His Ph.D. thesis related to Environmental economics with special reference to American industry. It was defended at Moscow State University (MGU), Russia in 1984. DScs. in Economics was conferred after the defense of dissertation at Moscow State University (MGU), Russia 1993.Academic title of Professor was obtained 1994. For the last 20 years Mr Suetin was with Finance University under the Government of the Russian Federation. Among other things he used to be main advisor of eleven defended doctoral dissertations.He is Honorary Worker of Higher Vocational Education of the Russian Federation and Honorary Worker of the Finance Academy. Many years Alexander has been active in commercial banking in Russia. Tenth Annual International Daejeon, South Korea P a g e | 14 Smart Sourcing Conference June 28-29, 2012
Introduction Outsourcing is contracting with another company or person to do a particular function. Almost every organization outsources in some way. Typically, the function being outsourced is considered non-core to the business. Outsourcing takes many forms. Organizations still hire service providers to handle distinct business processes, such as benefits management. But some organizations outsource whole operations. The last case could be considered as actual implementation of the concept of the totally disaggregated corporation. There is an abundance of literature on outsourcing, where many decision factors, benefits and impacts have been presented although the relationships, and perceptions existing to understand offshore outsourcing as a trend to the emergence of totally disaggregated corporations, viz. outsourcing the most or even all of its operations have not been investigated, which is the rationale and basis of this study. Literature review Findings from the literature suggest the issue of outsourcing has generated a great deal of debate. Amongst those broadly in favour of outsourcing as a strategic response to increased competition are Quinn and Hilmer (1994), who claim most organisations can substantially leverage their resources through strategic outsourcing. This view was shared by Jennings (1996) and Hinton (1996). Those opposed to outsourcing suggest organisations that rely on outsourcing invite a disastrous loss of competitiveness. Prahalad and Hamel (1990) suggest the skills that give rise to the next generation of core competencies cannot be ‘rented in’ by outsourcing, and accordingly organisational competitiveness may be seriously undermined. Flexibility can be a decisive factor in an organisation’s success, and an outsourcing manoeuvre can usually contribute to its internal and external flexibility (Bengt 2005). Outsourcing may also be seen as the strategic use of resources outside the buying organisation, performing activities that would otherwise have been carried out by in-house personnel using internal resources (Ray 2007). Bagranoff, Simkin and Strand (2005) state that advantages provided by outsourcing include; an attractive business solution, lower costs, avoids seasonal fluctuations, and affords greater flexibility. Kremic, Tukel and Rom (2006) state specialisations and economies of scale are mechanisms used to achieve these levels of efficiency and cost savings due to outsourcing can be quite significant. Many businesses are increasingly involved in outsourcing due to changes in technology, organisational structure, strategic planning and customer demands (Ray 2008). Outsourcing is a hierarchical sequence of decisions (Beaumont & Sohal 2004), with the fundamental decision being whether or not to outsource a business process or activity. In summary, outsourcing may be seen as a strategic or tactical initiative adopted by business to satisfy increasing demands of competitiveness and sustainability through increased cost savings and improved core activity focus. Hypotheses For studying the concept of disaggregated corporation, we test the following hypotheses: H1: The association between returns and comprehensive outsourcing is stronger in offshore context. H2: There is a significant association between outsourcing and human resources management. H3: There should be natural limits to outsourcing opportunities. H4: Outsourcing market should have positively growing trend. Tenth Annual International Daejeon, South Korea P a g e | 15 Smart Sourcing Conference June 28-29, 2012
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