Visteon and IBM. Visteon, Founded

¶ … Visteon and IBM. Visteon, founded by Ford, is attempting to move away and by outsourcing its products to IBM endeavors and is succeeding in furthering its independence by diversification.

Through this project, Visteon will be outsourcing its IT system to IBM by transferring to them the ability to control their help desk centers and existing data systems. Some of the Visteon IT professionals will also be transferred to IBM.

Visteon's deals is one of the biggest that IBM has yet landed in outsourcing. IBM sees outsourcing as major source of its profits and has landed major outsourcing deals with various other companies, J.P. Morgan Chase being one of them. It sees outsourcing as offering tremendous lucrative opportunity for the company, and Visteon agrees. Outsourcing, it thinks will provide it with profitability and long-term growth.

One of the profits of outsourcing and this is what makes it so attractive to IBM and the main factor that induced Visteon to direct its business to IBM is the huge savings in investment costs in technology that Visteon has now generated liberating itself to focus on its core business. Contrary to predictions of critics and disgruntlement with outsourcing, Visteon is not intending to dismiss any of its employees.

Part of the IT outsourcing services that IBM will provide for Visteon will include disaster recovery, data centers, customer supports centers, data network management, applications maintenance and development, desktop support, and mainframe support services.

IBM's optimistic prognosis of outsourcing is not the only optimistic source on the subject. According to a survey published by Dataquest, 36 outsourcing vendors ranked offshore application managements as one of the greatest economic opportunities.

What outsourcing is.

Outsourcing generally is the contracting of one's business to external providers, primarily in other countries. In its narrow sense, it initially started with one business contracting to another to providing parts of its service. Outsourcing then expanded to business turning to foreign nations as contractual agreement in a concept known as 'offshoring' or 'offshore outsourcing'. Other terms include strategic outsourcing', 'multisourcing', and 'nearshoring'.

Laws structured to regulate outsourcing are generally, linked to the EU Council Directive 77/187 relating to protection of employees' rights in the situation of part or totality of business transfer, its actions, resources, and property. Although formulated in 1977, they apply to outsourcing since they refer to protection of rights of employees who are guaranteed protection of continuance of employment when they, together with their employment, are contracted to another provider. Although outsourcing has provided opportunities and cases that argue this regulation, instances of outsourcing generally rely on this law for protection and guidance.

The advantages of outsourcing

Advantages of outsourcing include cost savings where companies, by transferring all or part of their operations to external countries may be able to save enormously in cheap labor (called 'labor arbitrage'), resources, and all benefits of lower cost economies in general. As in the case of Visteon, this enables the business to restructure itself so that it can now devote itself to focusing on its core business. In a different way, focusing can be achieved by, again in the case of Visteon, outsourcing their business to specialized companies (in Visteon's case it was outsourcing its IT system to IBM).

Related to costs it's the fact that the move makes variable costs more predictable. This is particularly opportunate in a shaky economic climate. Proponents of outsourcing also point to the move as progress in quality although such may not necessarily be the case, there will certainly be a change in quality thoguh since external providers, rather than local company, will now provide all or part of the operations and services. If the company in question (such as Visteon) is transferring to a specialized company (such as IBM), there will certainly be improvement in services in this situation, as well as the fact hat its knowledge pool and access to wider experience and data will be expanded. This will naturally widen its appeal and bring it more customers. Not to be underrated is the fact that outsourcing provides a legally binding contract that comes with financial penalties and legal redress; a situation that often is non-existent with internal sources.

Furthermore, outsourcing, particularly in science and engineering, provides a new and large pool of talent and innovative and potentially long-term source of skills. This may consequent in product innovation leading to change and diversification for the company. The supplier, too, now shares part of the risk of excess capacity management. This is particularly advantageous when the offshoring company intends change and uses outsourcing as the catalyst for attempted and intended major change.

Outsourcing may also accelerate the time needed from project start to completion by other external sources working on the product simultaneously. Time to market may therefore be greatly reduced.

Finally (amongst other overlooked benefits), outsourcing also offers tax benefits in that countries offer tax reductions for operations to move their services to those countries. Taxes in those countries are often significantly lower than in their own (this is specifically so in the U.S. with its corporate income tax that is far higher in comparison to OECD countries), and organizations may choose to transfer their liabilities to external sources preferring to retain for themselves and focus on aspects that reside more within their core competencies.

Disadvantages of outsourcing

New communication methods may be needed and alteration in the management procedure since usually enormous physical distance between management and production floor employees necessitates differences in management communication in order for inspection and feedback to occur. Inspection and feedback too may be less routine and common with corruption, therefore, occurring in the process.

Outsourced help centers (such as those that Visteon will now be using) may also provide difficulties of their own and possibilities of customer dissatisfaction and miscommunication, aside from the missing face-to-face contact, differences in accent, linguistic features and cultural context and understanding may interfere in communication.

Offshoring to another country transfers responsibility of employees who are now no longer directly responsible to their company or liable for their actions. It is true that they may still belong to the same company but their legal status has changed and they have now transferred allegiance to another employer and to different regulations. This may cause all sort of legal complications including issues of security and often has to be addressed by mediating sources. Fraud may become a consequence too.

In a related manner, one of the problems that companies face is relocating their corporate culture to a foreign country without alterations. Often, the company's culture gets distorted diluting the company's reputation in the process. Determining what is core to the organization so that these elements get passed on intact to external providers remains an ongoing challenge and will continue to be so in the future (Kakabadse & Kakabadse, 2005).

Many Americans, particularly during present moments of recession, are vociferous critics of outsourcing on the charges that jobs are deflected from nationals who most need them. It is also contended that outsourcing causes people to loose their jobs thereby introducing a greater climate of job instability and insecurity. Governments introduce compensation to workers who are impacted by outsourcing (such as the Trade Adjustment Assistance Act in the U.S.), but these compensations may be insufficient aside from which they do not provide the worker with a job. Other criticisms revolve around the factor of transferring costs associated with the company from one country to another that may hurt the local company particularly during a depressed economy. Researchers at CIA, for instance, are also concerned that countries, such as India and China, are creating huge low-cost labor forces in America. Such a trend could result in a strong political backlash and indications of nationalism from workers in the U.S. who will lose their jobs as a result of this increase in outsourcing (Dobbs, 2005). Whilst America is still a preeminent international force, outsourcing may cause India and China to emerge, by 2020, as major global powers (Dobbs, 2005).

Outsourcing may, in fact, promote disturbing trends in that it may create and exacerbate national unrest, particularly during economic difficulties. That this is so may be seen from the fact that opponents of best value and human rights activists have already begun clamoring for change. The fear is that outsourcing may cause powerful corporation to influence government and to become a de facto provision of government itself aside from causing economic deprivation to the country because of their greed. (Proponents of outsourcing, on the other hand, argue benefit of outsourcing to economy in that offshoring reduces prices of products therefore making products cheaper and more affordable, whilst a recent study (found on http:www.Nasscom.org) showed that, outsourcing does benefit America, since it increases employment, straightens out the bumps caused by inflation, lowers inflation, increases wages, and creates an increased demand for U.S. exports (Yourdon, 2004)).

Other arguments against outsourcing include the contention that the company may replace staff with people less qualified to do the job or with individuals whose qualifications, experiences, skills, and credentials differ from those demanded by the local country. This is aggravated by the fact that companies may be fleeing the requirements of the Sarbanes-Oxley act that demands certain standards of fairness and equitability from American-based corporations.

Trends in outsourcing

Outsourcing seems to be a trend that is on the increase in the U.S. To the extent that the ICA sees most opportunities and businesses by 2020 being produced from abroad (Das, 2010). Another -- and fascinating trend seems to be one of "Reverse Outsourcing" (Das, 2010) which is defined by ICA as the "reversal of the outsourcing pattern between two markets consisting of businesses and workforce" (p.3). This is of encouragement to people who fear loss to American economy and American jobs since here non-American companies are increasingly hiring American individuals to perpetrate certain tasks, whilst Internet employment sites connect American freelancers to specific companies often located in China, India, or Brazil to work, either via virtual or direct communication with these foreign companies. This is done as means of either reducing expenses (such as that of visas and travel), or of understanding their American market, diversifying their talent pool, or achieving greater penetration into a promising American market (Das, 2010).

Related to reverse outsourcing is the phenomenon of 'crowdsourcing' where projects and specific operations will be outsourced to groups or communities in the form of open calls. These large groups of people could be freelancers or contractors, and so, instead of the task that was once performed in America, and then performed by another individual (so as to save on labor) in, for instance India or China, this task will, instead, be broken up and disseminated to various individuals who, in the form of a network, will each perform various parts of the job in collaboration with others. Telecommunication will enable aspects of the job to be distributed globally, distinctions will disappear between professional and amateur, and originality and innovation will become the key of the game (Social machinery.Com)