Outsourcing

Outsourcing (or contracting out) is often defined as the delegation of non-core operations or jobs from internal production within a business to an external entity (such as a subcontractor) that specializes in that operation. Outsourcing is a business decision that is often made to lower costs or focus on core competences. A related term, offshoring, means transferring work to another country, typically overseas. Offshoring is similar to outsourcing when companies hire overseas subcontractors, but differs when companies transfer work to the same company in another country. Outsourcing became a popular buzzword in business and management in the 1990s. EDS was the first company to establish the outsourcing business.

Overview

Outsourcing is defined as the management and/or day-to-day execution of an entire business function by a third party service provider.

Outsourcing and/or out-tasking involve transferring a significant amount of management control to the supplier. Buying products from another entity is not outsourcing or out-tasking, but merely a vendor relationship. Likewise, buying services from a provider is not necessarily outsourcing or out-tasking. Outsourcing always involves a considerable degree of two-way information exchange, co-ordination, and trust.

Organizations that deliver such services feel that outsourcing requires the turning over of management responsibility for running a segment of business. In theory, this business segment should not be mission-critical, but practice often dictates otherwise. Many companies look to employ expert organizations in the areas targeted for outsourcing. Business segments typically outsourced include Information Technology, Human Resources, Facilities and Real Estate Management and Accounting. Many companies also outsource customer support and call center functions, manufacturing and engineering. Outsourcing business is characterized by expertise not inherent to the core of the client organization.

The overhead costs of customer service are typically less where outsourcing has been used, leading to many companies, from utilities to manufacturers, closing their in-house customer relations departments and outsourcing their customer service to third party call centers. The logical extension of these decisions was of outsourcing labor overseas to countries with lower labor costs, this trend is often referred to as offshoring of customer service.

Due to this demand call centers have sprung up in Canada, China, Eastern Europe, India, Israel, Ireland, Pakistan, Philippines and even the Caribbean. Many companies, most notably Dell and AT&T Wireless, have gained significant negative publicity for their decisions to use non-US labor for customer service and technical support; one of the most prominent complaints being the expectation that the replacement staff will have more trouble communicating with customers.

A related term is out-tasking: turning over a narrowly-defined segment of business to another business, typically on an annual contract, or sometimes a shorter one. This usually involves continued direct or indirect management and decision-making by the client of the out-tasking business.

The term "outsourcing" became more well known largely because of a growth in the number of high-tech companies in the early 1990s that were often not large enough to be able to easily maintain large customer service departments of their own. In some cases these companies hired technical writers to simplify the usage instructions of their products, index the key points of information and contracted with temporary employment agencies to find, train and hire generally low-skilled workers to answer their telephone technical support and customer service calls. These agents generally worked in call centers where the information needed to assist the calling customer was indexed in a computer system. The agents were often not able to tell the customer they did not actually directly work for the original manufacturer. In some cases, the agents are not allowed to even give out their real name.

Outsourcing, Offshoring, and Offshore Outsourcing

Note that “outsourcing”, “offshore outsourcing” and “offshoring” are used interchangeably in public discourse despite important technical differences. To be consistent, “outsourcing”, in corporate context, represents an organizational practice that involves the transfer of an organizational function to a third party. When this third party is located in another country the term “offshore outsourcing” makes more sense. “Offshoring”, in contrast, represents the transfer of an organizational function to another country, regardless of whether the work stays in the corporation or not. In short, “outsourcing” means sharing organizational control with another organization, or a process of establishing network relations within an organizational field. "Offshoring”, on the other hand, represents a relocation of an organizational function to a foreign country, not necessarily a transformation of internal organizational control.

Arguments for Outsourcing

A recent poll of economists by the Wall Street Journal found that only 16 % of them saw outsourcing as having a significant impact on the overall job picture. [1]

One criticism of outsourcing is that product quality suffers. But the outsourcing firm has freedom to move a firm department or division back home if its profits are suffering as a result of poor quality. In fact, many American companies like Dell have moved customer service divisions back to America as a result of poor quality [2]. The decision to outsource is like any other business investment decision in that there is risk. Critics of outsourcing often talk about outsourcing failures without mentioning instances of outsourcing success. The decision to outsource is like the decision to expand a business overseas, to incorporate computer technology, or to hire new workers. If the company does it correctly, it benefits from higher profits. Proponents of outsourcing believe that arguing that outsourcing leads to lower product quality is pointless because if it were true, consumer demand will force firms to shift back to producing the good or service in-firm rather than out-firm. That many large businesses outsource and continue to outsource suggests that in many cases outsourcing is successful in that it increases product quality, lowers costs substantially, or both.

Some economists have argued that outsourcing is a form of technological innovation analogous to machines on a car assembly line. American Motor Company Ford relied heavily on workers in the past to assemble car parts. Today these workers are replaced by machines because they are cheaper in the long run, produce better quality products, or a combination of both (the firm is trying to increase its quality to cost ratio, quality being defined by the consumer and inferred from revenue). Economists argue that machines on the car assembly line must have a higher quality to cost ratio than workers because, if they didn’t, there would be no incentive for the firm to replace workers with machines. Although workers’ jobs were lost from this replacement of workers with machines, the Ford Motor Company made more money by lowering costs (or increasing quality, thereby increasing revenue). Some argue that greater profits to the labor owners lead to higher consumption, which leads to further job creation, allowing those who lost jobs to gain jobs in other sectors of the economy. However, economists do concede that labor is not always perfectly mobile and that some workers may have difficulty getting new jobs. Some economists suggest that government training programs be provided.

A firm's motivation for replacing workers with machines is identical to the motivation for outsourcing, i.e. the firm is trying to maximize the quality of its product given cost (its productivity). Because outsourcing allows for lower costs, even if quality reduces slightly or not at all, productivity increases, which benefits the economy on aggregate.

Economist Thomas Sowell from the University of Chicago said “anything that increases economic efficiency--whether by outsourcing or a hundred other things--is likely to cost somebody's job. The automobile cost the jobs of people who took care of horses or made saddles, carriages, and horseshoes.” [1] Walter Williams, another economist, said “we could probably think of hundreds of jobs that either don't exist or exist in far fewer numbers than in the past--jobs such as elevator operator, TV repairman and coal deliveryman. ‘Creative destruction’ is a discovery process where we find ways to produce goods and services more cheaply. That in turn makes us all richer.” [2]

Professor Drezner reports that for every dollar spent on outsourcing to India, the United States reaps between $1.12 and $1.14 in benefits. [3] Drezner also points out that large software companies such as Microsoft and Oracle have increased outsourcing and used the savings for investment and larger domestic payrolls. Nationally, 70,000 computer programmers lost their jobs between 1999 and 2003, but more than 115,000 computer software engineers found higher-paying jobs during that same period. [3]

Advocates of outsourcing also claim that outsourcing-related fraud is insignificant, averring that such malpractices can occur in any country. For example, 40 million credit card numbers were stolen in June 2005 at CardSystems Solutions in Tucson, Arizona. (See the full story.). In December 2005, nearly 50 people were indicted in connection with a scheme that bilked at least $200,000 from Katrina relief fund at Red Cross claim center in Bakersfield, Calif., which handled calls from storm victims.

Criticisms of Outsourcing

Because "outsourced" workers are not actually paid agents of the company, it has been argued that there is less incentive for the agent to show loyalty or work ethic in its representation of said company. It has been therefore argued that quality levels of customer service and technical support of outsourced tasks are lower than where they have remained 'in-house'.

The 2004 US presidential election race focused on outsourcing to some degree. This debate did not center on problems of declining quality of customer services but on the threat to US jobs and work. Criticism of outsourcing, from the perspective of US citizens, by-and-large, revolves around the costs associated with transferring control of the labor process to an external entity in another country. A Zogby International poll reports that 71% of American voters believe that “outsourcing jobs overseas” hurts the economy and another 62% believe that the US government should impose some legislative action against companies that transfer domestic jobs overseas, possibly in the form of increased taxes on companies that outsource. The poll of over 1,000 Americans was conducted in August 2004 (See Zogby International survey results online at zogby.com).

Outsourcing appears to threaten the livelihood of domestic workers and the American Dream. This is especially true for high-tech workers who were promised the “jobs of tomorrow”- a phrase Bill Clinton iterated in 1994 to justify his conservative position on NAFTA. Outsourcing appears to work contrary to the claim that “free trade” will create the “jobs of tomorrow” in America when high-tech or high paying white collar jobs are transferred to or created in foreign countries. Thus, outsourcing is criticized as it represents a new threat to labor, contributing to rampant worker insecurity, and reflective of the general process of globalization where the United States government fails to mediate business-labor relations in a way conducive to prevailing values that places the American middle class worker as a central priority.

Criticism of outsourcing from the public and media sometimes tend to concentrate on lackluster customer service and technical support being provided by either local workers who are not actually employees of the company, or by overseas workers attempting to communicate with Americans in broken or incomprehensible English. Defenders of outsourcing say if this were true, then companies would experience market forces compelling them to return service and support handling back from the outsourced company. However, service and support are often not considered by customers as part of their original purchases. Customers only experience outsourced service and support after they have spent their money since sales is generally done in-house by the original company. Dealing with lackluster outsourced service is a negative surprise after the money is already spent.

Policy solutions to outsourcing are also criticized. One solution often offered is retraining of domestic workers to new jobs. However, some of these workers are already highly educated and already possess a bachelor's and master's degree. Retraining to their current level in another field may not be an option due to years of study and cost of education involved. There is also little incentive given that the jobs in their new field could also be outsourced as well. Proportions of workers trained for Science, Technology, Engineering, and Mathematics (STEM) fields fields in developing nations are viewed to outstrip traditional technology leaders such as the U.S. With these traditionally "safe" jobs perceived to be endangered, this raises questions regarding whether origin countries can maintain any comparative advantage given the losses in both low and high-value jobs.

There are also security issues concerning companies giving outside access to sensitive customer information. In April of 2005, a high-profile case involving the theft of $350,000 from four Citibank customers occurred when Indian call center workers in Pune, India, acquired the passwords to customer accounts and transferred the money to their own accounts opened under fictitious names. Citibank did not find out about the problem until the American customers noticed discrepancies with their accounts and notified the bank. (See the full report.)

Outright fraud is also a concern. In 2005, Intel discovered and fired 250 Indian employees after they faked their expense reports. The firings followed from Intel's internal Business Practice Excellence programme of expenses claims. The report concluded that fraudulent practises such as "faking bills to claim your allowances like conveyance [and] drivers’ salaries" were some common malpractices in India. Intel would not put up with such fraud. NASSCOM, which is a forum of IT and ITeS companies, has attempted to address these fraud concerns in India by creating the National Skills Registry. That database contains personal and work-related information, enabling employers to verify a staff member's credentials and allowing police to track the background of workers.

Democratic U.S. presidential candidate John Kerry blasted firms that outsource jobs abroad or that incorporate overseas in tax havens to avoid paying their fair share of US taxes during his unsuccessful 2004 campaign, calling such firms "Benedict Arnold corporations," in reference to the infamous traitor Benedict Arnold.

It is argued a malicious implementation of the Higher Education Role Analysis (HERA) in the UK may force Higher Education administrative and support staff to prematurely retire or seek for new employment in other organisations, thus freeing of staff many departments which could then be effectively outsourced. Outsourcing departments like Accounts, Payroll and Procurement is now common practice, as seen in August 2005 at the University of Portsmouth.

Notes

  1. ^  This view is borne out by a recent study by Richard Freeman at the National Bureau of Economic Research in Washington. He found that in the year 2000, 17 % of university bachelor degrees in the U.S. were in science and engineering compared with a world average of 27 % and 52 % in China. Universities in the European Union granted 40 % more science and engineering doctorates than the United States, with that figure expected to reach nearly 100 % by about 2010 according to Freeman's paper.
  2. 1. ^  “Outsourcing” and “Saving Jobs” by Thomas Sowell
  3. 2. ^  Should we “Save Jobs”? by Walter Williams
  4. 3. ^  "Outsourcing is the Kool" (kOOL PEOPLE)

Literature

Mark Kobayashi-Hillary. 2004. (2nd ed 2005) Outsourcing to India. ISBN 354023943X.


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(2nd ed 2005) Outsourcing to India. ISBN 354023943X. Main article: History of banking. 2004. has acquired Bank One Corp., making the combined 6/30/04 deposit total for the merged company $377 billion, vaulting it to second place on the list. Mark Kobayashi-Hillary. Morgan Chase & Co. Outsourcing departments like Accounts, Payroll and Procurement is now common practice, as seen in August 2005 at the University of Portsmouth. (1) Since this report, J.P.

It is argued a malicious implementation of the Higher Education Role Analysis (HERA) in the UK may force Higher Education administrative and support staff to prematurely retire or seek for new employment in other organisations, thus freeing of staff many departments which could then be effectively outsourced. based global banks. presidential candidate John Kerry blasted firms that outsource jobs abroad or that incorporate overseas in tax havens to avoid paying their fair share of US taxes during his unsuccessful 2004 campaign, calling such firms "Benedict Arnold corporations," in reference to the infamous traitor Benedict Arnold. This is not a ranking of the largest U.S. Democratic U.S. deposits only. That database contains personal and work-related information, enabling employers to verify a staff member's credentials and allowing police to track the background of workers. These are U.S.

NASSCOM, which is a forum of IT and ITeS companies, has attempted to address these fraud concerns in India by creating the National Skills Registry. As of June 30, 2004. Intel would not put up with such fraud. The banks' main obstacles to increasing profits are existing regulatory burdens, new government regulation, and increasing competition from non-traditional financial institutions.
. The report concluded that fraudulent practises such as "faking bills to claim your allowances like conveyance [and] drivers’ salaries" were some common malpractices in India. Banks make money from card products through interest payments and fees charged to consumers and companies that accept the cards. The firings followed from Intel's internal Business Practice Excellence programme of expenses claims. However, with convenience there is also increased risk that consumers will mis-manage their financial resources and accumulate excessive debt.

In 2005, Intel discovered and fired 250 Indian employees after they faked their expense reports. These products make it easier for consumers to conveniently make transactions and smooth their consumption over time (in some countries with under-developed financial systems, it is still common to deal strictly in cash, including carrying suitcases filled with cash to purchase a home). Outright fraud is also a concern. These products include debit cards, pre-paid cards, smart-cards, and credit cards. (See the full report.). Third, they have sought to increase the methods of payment processing available to the general public and business clients. Citibank did not find out about the problem until the American customers noticed discrepancies with their accounts and notified the bank. This dramatically helps to offset the losses from bad loans, lowers the price of loans to those who have better credit histories, and extends credit products to high risk customers who would have been denied credit under the previous system.

In April of 2005, a high-profile case involving the theft of $350,000 from four Citibank customers occurred when Indian call center workers in Pune, India, acquired the passwords to customer accounts and transferred the money to their own accounts opened under fictitious names. Second, they have moved toward risk based pricing on loans, which means charging higher interest rates for those people who they deem more risky to default on loans. There are also security issues concerning companies giving outside access to sensitive customer information. Merging banking, investment, and insurance functions allows traditional banks to respond to increasing consumer demands for "one stop shopping" by enabling cross-selling of products (which, the banks hope, will also increase profitability). With these traditionally "safe" jobs perceived to be endangered, this raises questions regarding whether origin countries can maintain any comparative advantage given the losses in both low and high-value jobs. First, this includes the Gramm-Leach-Bliley Act, which allows banks again to merge with investment and insurance houses. Proportions of workers trained for Science, Technology, Engineering, and Mathematics (STEM) fields fields in developing nations are viewed to outstrip traditional technology leaders such as the U.S. In the past 10 years in the United States, banks have taken many measures to ensure that they remain profitable while responding to ever-changing market conditions.

There is also little incentive given that the jobs in their new field could also be outsourced as well. industries combined. Retraining to their current level in another field may not be an option due to years of study and cost of education involved. Now if Citigroup were to be as dominant in its industry as a Home Depot, Starbucks, or Wal Mart in their respective industries, with a 30 percent market share , it would make more money than the top ten non-banking U.S. However, some of these workers are already highly educated and already possess a bachelor's and master's degree. For example, the largest bank, Citigroup, which for the past 3 years has made more profit than any other company in the world, has only a 5 percent market share. One solution often offered is retraining of domestic workers to new jobs. This amount is even higher if one counts the credit divisions of companies like Ford, which are responsible for a large proportion of those company's profits.

Policy solutions to outsourcing are also criticized. Large banks in the United States are some of the most profitable corporations, especially relative to the small market shares they have. Dealing with lackluster outsourced service is a negative surprise after the money is already spent. Specific concerns are policies that permit banks to hold deposited funds for several days, policies that permit banks to apply withdrawals before deposits, policies that permit applying withdrawals from greatest to least, which is most likely to cause the greatest overdraft, policies that allow backdating funds transfers and fee assessments, and policies that authorize electronic funds transfers despite an overdraft. Customers only experience outsourced service and support after they have spent their money since sales is generally done in-house by the original company. Currently, many people are outraged due to various banking policies that take advantage of consumers. However, service and support are often not considered by customers as part of their original purchases. Jackson fought against the bank as a symbol of greed and profit-mongering, antithetical to the democratic ideals of the United States.

Defenders of outsourcing say if this were true, then companies would experience market forces compelling them to return service and support handling back from the outsourced company. In United States history, the National Bank was a major political issue during the presidency of Andrew Jackson. Criticism of outsourcing from the public and media sometimes tend to concentrate on lackluster customer service and technical support being provided by either local workers who are not actually employees of the company, or by overseas workers attempting to communicate with Americans in broken or incomprehensible English. There is almost always a lender of last resort—in the event of a liquidity crisis (where short term obligations exceed short term assets) some element of government will step in to lend banks enough money to avoid bankruptcy. Thus, outsourcing is criticized as it represents a new threat to labor, contributing to rampant worker insecurity, and reflective of the general process of globalization where the United States government fails to mediate business-labor relations in a way conducive to prevailing values that places the American middle class worker as a central priority. Another reason banks are thoroughly regulated is that ultimately, no government can allow the banking system to fail. Outsourcing appears to work contrary to the claim that “free trade” will create the “jobs of tomorrow” in America when high-tech or high paying white collar jobs are transferred to or created in foreign countries. In addition, banks are usually required to purchase deposit insurance to make sure smaller investors are not wiped out in the event of a bank failure.

This is especially true for high-tech workers who were promised the “jobs of tomorrow”- a phrase Bill Clinton iterated in 1994 to justify his conservative position on NAFTA. Major banks are subject to the Basel Capital Accord promulgated by the Bank for International Settlements. Outsourcing appears to threaten the livelihood of domestic workers and the American Dream. The amount of capital a bank is required to hold is a function of the amount and quality of its assets. The poll of over 1,000 Americans was conducted in August 2004 (See Zogby International survey results online at zogby.com). The combination of the instability of banks as well as their important facilitating role in the economy led to banking being thoroughly regulated. A Zogby International poll reports that 71% of American voters believe that “outsourcing jobs overseas” hurts the economy and another 62% believe that the US government should impose some legislative action against companies that transfer domestic jobs overseas, possibly in the form of increased taxes on companies that outsource. Savings and Loan crisis in 1980s and early 1990s, the Japanese banking crisis during the 1990s, and the bank run that occurred during the Great Depression,and the recent liquidation by the central Bank of Nigeria.where about 25 banks were liquidated.

Criticism of outsourcing, from the perspective of US citizens, by-and-large, revolves around the costs associated with transferring control of the labor process to an external entity in another country. Prominent examples include the U.S. This debate did not center on problems of declining quality of customer services but on the threat to US jobs and work. Banking crises have developed many times throughout history when one or more risks materialize for a banking sector as a whole. The 2004 US presidential election race focused on outsourcing to some degree. Risks include liquidity risk (the risk that many depositors will request withdrawals beyond available funds), credit risk (the risk that those that owe money to the bank will not repay), and interest rate risk (the risk that the bank will become unprofitable if rising interest rates force it to pay relatively more on its deposits than it receives on its loans), among others. It has been therefore argued that quality levels of customer service and technical support of outsourced tasks are lower than where they have remained 'in-house'. Banks are susceptible to many forms of risk which have triggered occasional systemic crises.

Because "outsourced" workers are not actually paid agents of the company, it has been argued that there is less incentive for the agent to show loyalty or work ethic in its representation of said company. Even where the reserve ratio is not controlled by the government, a minimum figure will still be set by regulatory authorities as part of bank regulation. In December 2005, nearly 50 people were indicted in connection with a scheme that bilked at least $200,000 from Katrina relief fund at Red Cross claim center in Bakersfield, Calif., which handled calls from storm victims. Some governments (or their central banks) restrict the proportion of a bank's balance sheet that can be lent out, and use this as a tool for controlling the money supply. (See the full story.). This behaviour is called fractional-reserve banking and it is a central issue of monetary policy. For example, 40 million credit card numbers were stolen in June 2005 at CardSystems Solutions in Tucson, Arizona. Bank reserves are typically kept in the form of a deposit with a central bank.

Advocates of outsourcing also claim that outsourcing-related fraud is insignificant, averring that such malpractices can occur in any country. It must keep a certain proportion of its funds in reserve so that it can repay depositors who withdraw their deposits. [3]. However, it would not be prudent for a bank to lend out all of its balance sheet. Nationally, 70,000 computer programmers lost their jobs between 1999 and 2003, but more than 115,000 computer software engineers found higher-paying jobs during that same period. The bank then lends out most of these funds to borrowers. [3] Drezner also points out that large software companies such as Microsoft and Oracle have increased outsourcing and used the savings for investment and larger domestic payrolls. A bank raises funds by attracting deposits, borrowing money in the inter-bank market, or issuing financial instruments in the money market or a capital market.

Professor Drezner reports that for every dollar spent on outsourcing to India, the United States reaps between $1.12 and $1.14 in benefits. They act as Lender of last resort in event of a crisis. That in turn makes us all richer.” [2]. Central banks are non-commercial bodies or government agencies tasked with responsibility for controlling interest rates and money supply across the whole economy. ‘Creative destruction’ is a discovery process where we find ways to produce goods and services more cheaply. In some jurisdictions retail and investment activities are, or have been, separated by law. The automobile cost the jobs of people who took care of horses or made saddles, carriages, and horseshoes.” [1] Walter Williams, another economist, said “we could probably think of hundreds of jobs that either don't exist or exist in far fewer numbers than in the past--jobs such as elevator operator, TV repairman and coal deliveryman. However, some are owned by government, or are non-profit making.

Economist Thomas Sowell from the University of Chicago said “anything that increases economic efficiency--whether by outsourcing or a hundred other things--is likely to cost somebody's job. Most banks are profit-making, private enterprises. Because outsourcing allows for lower costs, even if quality reduces slightly or not at all, productivity increases, which benefits the economy on aggregate. Banks' activities can be characterised as retail banking, dealing direct with individuals and small businesses, and investment banking, relating to activities on the financial markets. the firm is trying to maximize the quality of its product given cost (its productivity). Although the type of services offered by a bank depends upon the type of bank and the country, services provided usually include:. A firm's motivation for replacing workers with machines is identical to the motivation for outsourcing, i.e. .

Some economists suggest that government training programs be provided. In recent history, with historically low interest rates a limited ability to earn money by lending deposited funds, much of a bank's income is provided by overdraft fees and riskier investments. However, economists do concede that labor is not always perfectly mobile and that some workers may have difficulty getting new jobs. Traditionally, a bank generates profits from transaction fees on financial services and on the interest it charges for lending. Some argue that greater profits to the labor owners lead to higher consumption, which leads to further job creation, allowing those who lost jobs to gain jobs in other sectors of the economy. Money lenders in Northern Italy originally did business in open areas, or big open rooms, with each lender working from his own bench or table. Although workers’ jobs were lost from this replacement of workers with machines, the Ford Motor Company made more money by lowering costs (or increasing quality, thereby increasing revenue). The terms bankrupt and "broke" are similarly derived from banca rotta, which refers to an out-of-business bank, having its bench physically broken.

Economists argue that machines on the car assembly line must have a higher quality to cost ratio than workers because, if they didn’t, there would be no incentive for the firm to replace workers with machines. The word bank is derived from the Italian banca, which is derived from German language and means bench. Today these workers are replaced by machines because they are cheaper in the long run, produce better quality products, or a combination of both (the firm is trying to increase its quality to cost ratio, quality being defined by the consumer and inferred from revenue). Banks have a long history, and have influenced economies and politics for centuries. American Motor Company Ford relied heavily on workers in the past to assemble car parts. There are also financial institutions that provide certain banking services without meeting the legal definition of a bank, a so called non-banking financial company. Some economists have argued that outsourcing is a form of technological innovation analogous to machines on a car assembly line. Banking licenses are granted by bank regulatory authorities and provide rights to conduct the most fundamental banking services such as accepting deposits and making loans.

That many large businesses outsource and continue to outsource suggests that in many cases outsourcing is successful in that it increases product quality, lowers costs substantially, or both. Currently the term bank is generally understood as an institution that holds a banking license. Proponents of outsourcing believe that arguing that outsourcing leads to lower product quality is pointless because if it were true, consumer demand will force firms to shift back to producing the good or service in-firm rather than out-firm. A bank is an institution that provides financial service, particularly taking deposits and extending credit. If the company does it correctly, it benefits from higher profits. Imperial Bank of Persia — History of banking in the Middle-East. The decision to outsource is like the decision to expand a business overseas, to incorporate computer technology, or to hire new workers. United States Banking.

Critics of outsourcing often talk about outsourcing failures without mentioning instances of outsourcing success. Swiss bank. The decision to outsource is like any other business investment decision in that there is risk. Bank of America — The invention of centralized check and payment processing technology. In fact, many American companies like Dell have moved customer service divisions back to America as a result of poor quality [2]. Bank of England — The evolution of modern central banking policies. But the outsourcing firm has freedom to move a firm department or division back home if its profits are suffering as a result of poor quality. Bank of Sweden — The rise of the national banks.

One criticism of outsourcing is that product quality suffers. Bank of Amsterdam. [1]. Banknotes — Introduction of paper money. A recent poll of economists by the Wall Street Journal found that only 16 % of them saw outsourcing as having a significant impact on the overall job picture. Florentine banking — The Medicis and Pittis among others. "Offshoring”, on the other hand, represents a relocation of an organizational function to a foreign country, not necessarily a transformation of internal organizational control. — 64 billion.

In short, “outsourcing” means sharing organizational control with another organization, or a process of establishing network relations within an organizational field. National City Corp. “Offshoring”, in contrast, represents the transfer of an organizational function to another country, regardless of whether the work stays in the corporation or not. BB&T Corporation — 67 billion. When this third party is located in another country the term “offshore outsourcing” makes more sense. — 78 billion. To be consistent, “outsourcing”, in corporate context, represents an organizational practice that involves the transfer of an organizational function to a third party. SunTrust Banks, Inc.

Note that “outsourcing”, “offshore outsourcing” and “offshoring” are used interchangeably in public discourse despite important technical differences. Bancorp — 112 billion. In some cases, the agents are not allowed to even give out their real name. U.S. The agents were often not able to tell the customer they did not actually directly work for the original manufacturer. — 150 billion (1). These agents generally worked in call centers where the information needed to assist the calling customer was indexed in a computer system. Bank One Corp.

In some cases these companies hired technical writers to simplify the usage instructions of their products, index the key points of information and contracted with temporary employment agencies to find, train and hire generally low-skilled workers to answer their telephone technical support and customer service calls. — 193 billion. The term "outsourcing" became more well known largely because of a growth in the number of high-tech companies in the early 1990s that were often not large enough to be able to easily maintain large customer service departments of their own. Citigroup Inc. This usually involves continued direct or indirect management and decision-making by the client of the out-tasking business. — 227 billion (1). A related term is out-tasking: turning over a narrowly-defined segment of business to another business, typically on an annual contract, or sometimes a shorter one. Morgan Chase & Co.

Many companies, most notably Dell and AT&T Wireless, have gained significant negative publicity for their decisions to use non-US labor for customer service and technical support; one of the most prominent complaints being the expectation that the replacement staff will have more trouble communicating with customers. J.P. Due to this demand call centers have sprung up in Canada, China, Eastern Europe, India, Israel, Ireland, Pakistan, Philippines and even the Caribbean. — 238 billion. The logical extension of these decisions was of outsourcing labor overseas to countries with lower labor costs, this trend is often referred to as offshoring of customer service. Wachovia Corp. The overhead costs of customer service are typically less where outsourcing has been used, leading to many companies, from utilities to manufacturers, closing their in-house customer relations departments and outsourcing their customer service to third party call centers. — 256 billion.

Outsourcing business is characterized by expertise not inherent to the core of the client organization. Wells Fargo & Co. Many companies also outsource customer support and call center functions, manufacturing and engineering. — 526 billion. Business segments typically outsourced include Information Technology, Human Resources, Facilities and Real Estate Management and Accounting. Bank of America Corp. Many companies look to employ expert organizations in the areas targeted for outsourcing. Merrill Lynch — 4 billion.

In theory, this business segment should not be mission-critical, but practice often dictates otherwise. Morgan Stanley — 5 billion. Organizations that deliver such services feel that outsourcing requires the turning over of management responsibility for running a segment of business. Wachovia — 5 billion. Outsourcing always involves a considerable degree of two-way information exchange, co-ordination, and trust. UBS AG — 6 billion. Likewise, buying services from a provider is not necessarily outsourcing or out-tasking. JP Morgan Chase — 7 billion.

Buying products from another entity is not outsourcing or out-tasking, but merely a vendor relationship. Wells Fargo — 7 billion. Outsourcing and/or out-tasking involve transferring a significant amount of management control to the supplier. Royal Bank of Scotland — 8 billion. Outsourcing is defined as the management and/or day-to-day execution of an entire business function by a third party service provider. HSBC — 10 billion. . Bank of America — 15 billion.

EDS was the first company to establish the outsourcing business. Citigroup — 21 billion. Outsourcing became a popular buzzword in business and management in the 1990s. Mitsubishi Tokyo Financial Group — 832 billion. Offshoring is similar to outsourcing when companies hire overseas subcontractors, but differs when companies transfer work to the same company in another country. BNP Paribas — 835 billion. A related term, offshoring, means transferring work to another country, typically overseas. ING Group — 843 billion.

Outsourcing is a business decision that is often made to lower costs or focus on core competences. Fannie Mae — 888 billion. Outsourcing (or contracting out) is often defined as the delegation of non-core operations or jobs from internal production within a business to an external entity (such as a subcontractor) that specializes in that operation. Deutsche Bank — 892 billion. ^  "Outsourcing is the Kool" (kOOL PEOPLE). Sumitomo Mitsui Financial Group — 903 billion. 3. UBS — 907 billion.

^  Should we “Save Jobs”? by Walter Williams. Allianz — 1,002 billion. 2. Citigroup — 1,097 billion. ^  “Outsourcing” and “Saving Jobs” by Thomas Sowell. Mizuho Financial Group — 1,265 billion. 1. BNP Paribas — 35 billion.

Universities in the European Union granted 40 % more science and engineering doctorates than the United States, with that figure expected to reach nearly 100 % by about 2010 according to Freeman's paper. HBOS — 36 billion. were in science and engineering compared with a world average of 27 % and 52 % in China. Mizuho Financial Group — 39 billion. He found that in the year 2000, 17 % of university bachelor degrees in the U.S. Mitsubishi Tokyo Financial Group — 40 billion. ^  This view is borne out by a recent study by Richard Freeman at the National Bureau of Economic Research in Washington. Royal Bank of Scotland — 43 billion.

Credit Agricole Group — 63 billion. Bank of America — 64 billion. HSBC — 67 billion. JP Morgan Chase — 69 billion.

Citigroup — 73 billion. Also, deposit makers earn a share of the Bank’s profit as opposed to a predetermined interest. Instead of interest, the Bank earns profit (mark-up) and fees on financing facilities that it extends to the customers. Since the concept of Interest is forbidden in Islam, all banking activities must avoid interest.

Islamic banking revolves around several well established concepts which are based on Islamic canons. Islamic banks adhere to the concepts of Islamic banking. In Europe and Asia, big banks are very diversified groups that, among other services, distribute also insurance, whence the bancassurance term. Almost all large financial institutions are diversified and engage in multiple activities.

For example, Citigroup, a very large American bank, is involved in commercial and retail lending; it owns a merchant bank (Citicorp Merchant Bank Limited) and an investment bank (Salomon Smith Barney); it operates a private bank (Citigroup Private Bank); finally, its subsidiaries in tax-havens offer offshore banking services to customers in other countries. Universal banks, more commonly known as a financial services company, engage in several of these activities. Unlike Venture capital firms, they tend not to invest in new companies. The modern definition, however, refers to banks which provides capital to firms in the form of shares rather than loans.

Merchant banks were traditionally banks which engaged in trade financing. Examples of investment banks are Goldman Sachs of the USA or Nomura Group of Japan. Investment banks "underwrite" (guarantee the sale of) stock and bond issues and advise on mergers. Building societies and Landesbanks both conduct retail banking.

Today, some countries have broadened the permitted activities of savings banks. Savings banks traditionally accepted savings deposits and issued mortgages. Many offshore banks are essentially private banks. Offshore banks are banks located in jurisdictions with low taxation and regulation, such as Switzerland or the Channel Islands.

Private banks manage the assets of high net worth individuals. Japan and Germany are examples of countries with prominent postal savings banks. Postal savings banks are savings banks associated with national postal systems. Community development bank are regulated banks that provide financial services and credit to underserved markets or populations.

Since the two no longer have to be under separate ownership, some use the term "commercial bank" to refer to a bank or a division of a bank that mostly deals with corporations or large businesses. Commercial bank, is the term used for a normal bank to distinguish it from an investment bank. Storing valuables, particularly in a safe deposit box. Issuing credit cards, ATM, and debit cards.

Facilitating money transactions such as wire transfers and cashiers checks. Cashing cheques. Making loans to indivudals and businesses. Taking deposits from the general public and issuing checking and savings accounts.

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