Labor Economics Term Paper

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Labor Economics is the study of labor force as a factor of production. The labor force in the broad sense of the term refers to all those who work for a definite gain that includes employees, employers, self-employed and also includes the unemployed seeking of jobs. The labor economics involves the study of the factors influencing the efficiency of labor, their deployment, determination of their wages, etc. Geographical factors, mobility of labor, climatic and environmental conditions are a few of such important factor that affects the efficiency of labor and determination of the wages. The revolutions in information technology coupled with globalization has given rise to a new concept of Business Process Outsourcing which facilitated electronic mobility of the labor without actual movement of the laborer reducing the influence of the geographical factors in labor economics.

The development of internet technology wiped out the distance between employer and employee, the geographical differences between the job and the laborer there by helping the employers to choose among the cheapest labor and the laborers on the other hand to choose among the highest paying employments. The Business process Outsourcing is seen as a method for bringing an improvement on the operational performances at the same time lowering the costs. Adoption of methods for cutting of costs and improving efficiency is the rule of each and every business strategy presently. The IT and Finance companies in their effort to bring an expansion in their business adopting methods in such direction found considerable advantage in Business Process Outsourcing. [Online BPO]

It has rightly been observed that the success in business is measured by the volume of sales and involving costs. Restructuring of the business practices and workforce by the companies has become the need of the day in order to ensure higher productivity. It is seen that many of the cost-efficient U.S. companies in order to absorb the advantages of the low overseas labor costs have resorted to opening of the offshore branches. However, such openings involve considerable up-front expenses and also long-term commitments. Against this jargon Business Process Outsourcing is viewed as an alluring alternative to the offshore branching. [Online BPO]

The Business Process Outsourcing can be compared as a natural next step in business as the next step of tadpole is from water to land. It involves primarily outsourcing of non-core operational or business support services to a service provider. Not necessarily, the services so involved need to lie under distinctive category of business units. Any business process involving a service provider for processing of its business support services of non-core competency can be a party to the BPO. The non-core competent items of the business fit for outsourcing may include payroll processing, financial administration, mortgage processing in case of banking business, reservation processing in case of railways or airlines, human resources and processing of legal documents etc. [Business Process Outsourcing] [Ask Ella: Is Outsourcing Good]

The main philosophy behind resorting to the Business Process Outsourcing by the business establishments is the need for concentration of the company in its core competencies in an environment of cut-throat competition and to pass on the non-core activities to others, already specialized in the respective fields. This leads to specialization in the respective fields of activities ensuring savings in cost, improvements in the quality and thereby increasing productivity. This rationale is being generalized to embrace each and every business activity amidst the scope of information technology developments and economic globalization. The benefits of Business Process Outsourcing however not limited only to the rationale operating behind its implementation and execution. [Business Process Outsourcing] [Ask Ella: Is Outsourcing Good]

The new types of data encryption and faster methodologies enabled instantaneous global rushing of confidential data making possible for the BPO. India has become the best destination for offshore outsourcing by the U.S. companies. The U.S. companies find multiple advantages in choosing India for their back end activities offering cost advantages, as their destination. Presently Indian software is exported to 95 countries around the globe and also having expertise in global methodologies. India is presently grabbing a giant share in the offshore outsourcing market due to unavailability of equally cheap and good quality outsourcing destinations. Factors like comparatively low labor costs, superior quality and low turnover rates in India offering competitive advantages are attractions for offshore companies for outsourcing to India. [Business Process Outsourcing] [Ask Ella: Is Outsourcing Good]

Initially, the main components of out sourcing constituted the low end jobs like data entry and call centre activities. Later on the increased confidence of the companies on Indian capabilities impelled the U.S. IT and Finance companies to outsource back office operations, the higher value added works like processing of HR/Payroll services, Finance and accounting, settlement and clearing, administration and other non-core functions.

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This also led to setup own captive operations by several banks like Citibank, HSBC, standard chartered and companies like Dell, Hewlett Packard. There is an increasing trend towards growth of the global BPO market. The growth is estimated to grow globally from $128 billion in 2003 to $280 billion. The U.S.A. And Canada has a major chunk of the outsourcing market, both together constituting about 58% of the global outsourcing. The BPO was flowing mostly to Ireland the preferred destination. However, the liberalizations in developing countries also included countries like, Malaysia, Philippines, China, and Mexico etc. As attractive destinations. [Business Process Outsourcing] [Ask Ella: Is Outsourcing Good]

The benefits that accrued out of the implementation process are enormous. The efficacy of the BPO activity is often judged in terms of the reduction of operating and administrative costs by way of improvement and re-engineering of the business process with a simultaneous combination of new technologies. Outsourcing of non-core jobs by the companies leads to their concentration and focus with more time and resources on productive constructions of their core business enhancing productivity. The day-to-day back office operations are entrusted to a service provider already specialized in the field and the management is made to concentrate more on its core business. After outsourcing the methodology of business of the company is more organized and with available resources efforts are made to streamline the activities so as to provide qualitative and consistent results. [Business Process Outsourcing: Facts and Fictions]

Moreover, the service provider receiving the processing job with their specialization experience in the field and incentives is keener on providing advanced technology and methodologies with large scale implementations of the outsourced jobs making it cost effective and qualitative. Outsourcing also facilitates access to the experts in the field. Valuable managerial guidance on the business process is provided by to the fullest possible extent by the service providers. The incentives and specializations in the field encourage the service providers to concentrate on developing and improving processes with tuning up of procedures and methods bringing an enhancement in the efficiency in customer service and satisfaction. Maximization of the benefits of outsourcing however depends on the very important object of transparency in the matters relating to the product being purchased and also about its actual cost. It has become essential to correctly define the scope of the process outsourced. On this only depends the offering of prices by the service providers as well as determination of the output as per the requirement of the company. [Business Process Outsourcing: Facts and Fictions]

Such correct definition of the process also assist in correct determination of service levels required to be applied to the outputs from that process and also enabling the business incorporating the outputs into the end products. There is no fixed pricing structure for all the outsourced processes and services. This necessitates a perfect balance between the fixed prices or cost-plus models and risk and reward pricing aiming at improvement of the process for lowering costs. The main goal of Business Process Outsourcing is to attain the benefits that are objectively measurable. It necessitates full alignment of service levels in consonance with the business objectives as well as requirements of the end customers. Sometimes it is viewed as a mixture of both hard measures referring to the quantity of work performed within a time frame and soft measures that includes key performance indicators like customer satisfaction results. [Business Process Outsourcing: Facts and Fictions]

The impact of outsourcing is primarily viewed on Human Resources perspectives. Emphasis on strategic approaches to manage the human resources is one of the major concerns of the companies. It is presumed that the corporate performance, profitability, shareholder value etc. are greatly influenced by the measures of human resources management in terms of globalization, organizational development, executive succession, workforce planning, compensation policies etc. Resorting to outsourcing of the management of the day-to-day human resources functions saves management time and energy without distraction of back office administration that can be better utilized on strategic planning initiatives. In order to achieve most out of the process the Human Resourced Department executives find it beneficial to tie up with integrated business solutions in terms of both human resource processes and supporting systems.….....

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