IBBS: 334.761

Ýêîíîìè÷åñêèå íàóêè/

2. Ôèíàíñû è áàíêîâñêîå äåëî

 

 

Zanevska Irina Sergiivna

Second year student

Economic science faculty

Specialization: Finance and credit

with the knowledge of English

Petro Mohyla Black Sea State University    

 

Outsourcing: development prospects in Ukraine

Actuality: To achieve success in the competitive market environment, the companies need to minimize the expenses, providing thus high quality of goods and services. One of modern instruments of management, which gives possibilities to the enterprise to strengthen the competitive advantages in the market based on business processes’ efficiency increasing and quality of products and services, is outsourcing.

Nowadays, more and more companies using this method and the Ukrainian companies are not an exception. Therefore, it is define the actuality of outsourcing developing in Ukraine. For increase of work’s efficiency and maximizing profit, the enterprise needs to minimize the expenses that it’s possible to make, having transferred part of the obligations to the outsourcing company. It to allow to cut costs without loss of production’s quality, and in certain cases will allow to increase quality of services (for example, IT technologies, promotion).

Based on the previously mentioned, it is possible to claim that research of outsourcing’s development in Ukraine is actual today and on the near future.

Connection with scientific research: Problem of outsourcing’s essence, tasks and efficiency are investigated by A. Zagorodniy, V. Luchenko, K. Gavrilenko, and others domestic and foreign economists, in particular Zh. L. Bravar, R. Morgan, D. Doyle. Their researches significantly enriched the general theory of outsourcing, however, single questions demand detailed study.

In addition, scientific conferences at which discussed problems and prospects of outsourcing’s development in Ukraine were held. In particular, in 2012 the consulting company EBS and ASSA Ukraine held the conference devoted to 10 years of successful work in the market of outsourcing. Besides the IT of Ukraine Association with support of "Lyuksoft Ukraine" in 2012 held conference "The Ukrainian branch of development of the software: development and prospects. Look of the international analysts".

Therefore, it is possible to claim that the question of outsourcing’s development widely investigated.

Goal: Based on research make a conclusion about efficiency of outsourcing developing in Ukraine.

Task: Investigate outsourcing’s means, its pros and cons. Prove or disprove importance of outsourcing developing in Ukraine.

In modern world, we need to understand importance of maximizing profit and ways to achieve this goal. One of the ways that leads to maximizing profit through minimizing of costs – its outsourcing. Outsourcing has become a major trend in human resources.

Outsourcing is no longer just a means of reducing overhead and cost. It has become an integral part of the way the world does business. This allows you to focus more of your assets and energies back where you need them the most, in your own people. More and more companies, large and small, are turning to outsourcing as a way to grow while restraining payroll and overhead costs. The most common model of outsourcing that is in the news today refers to jobs that are being sent overseas to countries like India or China. This is more commonly called offshoring [1].

There are several types of outsourcing as:

1)    Secretarial Outsourcing;

2)    Typing / Transcription Outsourcing;

3)    Accounting / Financial Outsourcing;

4)    Human Resources Outsourcing;

5)    Customer Support Outsourcing;

6)    Sales and Marketing Outsourcing;

7)    I.T. Support Functions Outsourcing;

8)    Distribution Outsourcing.

There are many reasons why a company may choose outsourcing as a particular function of their business. Most managers have the end-result-in-mind that they are going to save time and/or money. Therefore, as we can see there are risks and benefits to outsourcing that must be considered when looking at different types of outsourcing services. The greatest benefit typically is cost reduction, because the company saves in both equipment and labor costs. The largest risks are related to quality and control [5].

However, talking about advantages and disadvantages more closely. Start from advantages.  There are several importance pros of outsourcing [4]:

1.     Better revenue realization and enhanced returns on investment;

2.     Lower labor cost and increased realization of economics of scale;

3.     Tapping in to a knowledge base for better innovation;

4.     Frees management time, enabling companies to focus on core competencies while not being concerned about outsourced routine activities;

5.     Increases speed and the quality of delivery of outsourced activities;

6.     Reduces cash outflow and optimizes resource utilization.

However, in spite of previous advantages, there are several disadvantages, such as  [4]:

1.     Possible loss of control over a company’s business processes;

2.     Problems related to quality and turnaround time;

3.     Sluggish response times coupled with slow issue resolutions;

4.     Shortcomings in performance vis-à-vis expectations;

5.     Lower than expected realization of benefits and results;

6.     Issues pertaining to lingual accent variation;

7.     An irate customer base coupled with enraged employee unions.

Now we are going to see some examples of outsourcing in the world [3].

1.       A global chemical company outsourced a Pharmaceutical and Biotechnology Research Centre Laboratory to Intertek. The Intertek Analytical Sciences Group (ASG) Laboratory is created.

2.       A global producer of polymer catalysts outsourced catalyst production quality testing to Intertek, de-bottlenecking quality control for production and inventory cycles by outsourcing key quality control tests. Outsourcing included process engineering design services.

3.       A major global integrated oil company outsourced a large R&D Technology Center to Intertek, transferring laboratory staff and instrumentation.

And what about outsourcing development in Ukraine? In recent years, Ukraine has become one of the most attractive outsourcing destinations in Eastern Europe. Outsourcing to Ukraine and the collaboration are facilitated by geographical and cultural proximity to Europe. The USA and Western Europe are unalterably the well-established importers of software development services from the Ukraine. In spite of increases in developers’ salaries software, development costs are still highly competitive and attractive for Western customers. The attractive prices are accompanied with progressively improving quality of products and knowledge of developers. In its recent study Goaleurope, an Eastern European advisory firm, estimated the size of the outsourcing industry in Ukraine reached over US$246 million in 2006 [6].

Pros of outsourcing in the Ukraine

1.                 Substantial reduction of travel and communication costs and time;

2.                 Cutting project cost: Ukraine is not a EU member, the manpower and infrastructure are still rather cheap here;

3.                 Convenience in communications and control – almost the same business hours;

4.                 Close business rules: Ukraine strives to be involved in the main European organizations, now it is entering WTO; ISO standards are adopted as state acts and are obligatory for some industries; different MBA programs become more and more popular;

5.                 Close communication and business culture: Ukraine is a European country, a lot of Ukrainians have worked in the EU countries and the USA including managers positions.

Ukraine has a great potential in deal with outsourcing. Nowadays, outsourcing market increase on 18% every year and can achieve profit in size 10 milliard dollars. There are a lot of company that are provide outsourcing support for foreign companies (over 90%). Usually, it is IT outsourcing: «Intetics», «Luxoft», «EPAM Systems» and «Miratech» [2].

So, as we can see, Ukraine it is the perspective center of rendering outsourcing services, first of all, for the European companies. In comparison with the Asian countries, Ukraine have some advantage because it closer and can win on a time difference about transportation costs.

Conclusion: In process of investigating using outsourcing practice, there were define what does outsourcing means, its pros and cons. In addition, based on analysis of international companies and Ukrainian offshore market, author prove importance of outsourcing developing in Ukraine.

Summary:

In modern world, we need to understand importance of maximizing profit and ways to achieve this goal. One of the ways that leads to maximizing profit through minimizing of costs – its outsourcing. Outsourcing has become a major trend in human resources.

Problem of outsourcing’s essence, tasks and efficiency are investigated by N. Chukhray, V. Luchenko, A.Koptelov, and others domestic and foreign economists.

Outsourcing is no longer just a means of reducing overhead and cost. It has become an integral part of the way the world does business. More and more companies, large and small, are turning to outsourcing as a way to grow while restraining payroll and overhead costs. The most common model of outsourcing that is in the news today refers to jobs that are being sent overseas to countries like India or China. This is more commonly called offshoring. 

There are many reasons why a company may choose outsourcing as a particular function of their business. There are risks and benefits in outsourcing that must be considered when looking at different types of outsourcing services. The greatest benefit typically is cost reduction, because the company saves in both equipment and labor costs. The largest risks are related to quality and control.

Talking about Ukraine we should say that in recent years it has become one of the most attractive outsourcing destinations in Eastern Europe. Ukraine has a great potential in deal with outsourcing. Nowadays, outsourcing market increase on 18% every year and can achieve profit in size 10 milliard dollars. There are a lot of company that are provide outsourcing support for foreign companies (over 90%). Usually, it is IT outsourcing: «Intetics», «Luxoft», «EPAM Systems» and «Miratech». So, Ukraine it is the perspective center of rendering outsourcing services, first of all, for the European companies.

Reference:

1.     Çàãîðîäí³é À.Ã. Àóòñîðñèíã òà éîãî âïëèâ íà âèòðàòè ï³äïðèºìñòâà / À. Ã. Çàãîðîäí³é, Ã. Î. Ïàðòèí // Ô³íàíñè Óêðà¿íè. – 2009. - ¹9. – Ñ. 87-97. 

2.     ×åòûðå óêðàèíñêèå IT-êîìïàíèè âîøëè â ÷èñëî 100 ëó÷øèõ àóòñîðñèíãîâûõ êîìïàíèé ìèðà // [Åëåêòðîííûé ðåñóðñ]. - [Ðåæèì äîñòóïà]: http://newsradio.com.ua/rus/2013_03_01/CHetire-ukrainskie-IT-kompanii-voshli-v-chislo-100-luchshih-autsorsingovih-kompanij-mira/

3.     Laboratory Outsourcing Examples // [Electronical resources]. – Access: http://www.intertek.com/outsourcing/laboratory/examples/

4.     The Pros and Cons of Outsourcing // [Electronical resources]. – Access: http://www.flatworldsolutions.com/articles/pros-cons-outsourcing.php

5.     What Are the Different Types of Outsourcing Services? // [Electronical resources]. –Access: http://www.wisegeek.com/what-are-the-different-types-of-outsourcing-services.htm#didyouknowout

6.     Why Outsource to Ukraine // [Electronical resources]. – Access: http://www.mitridat.com/company/why-outsource-to-ukraine