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Global Sourcing


Global outsourcing is harder than domestic outsourcing for several reasons as discussed in the following sections.

Size and complexity

The size and complexity of global outsourcing is huge when comparing to domestic outsourcing.  It is because it is not looking at running a data centre or supporting business applications, but also including network and infrastructure solutions on a worldwide scale.  Therefore only few big global presence vendors can support global scale contract.

Political and social

Political is one of the major concerns.  The effect of a °•force majeure°¶ event is a significant issue in outsourcing contracts because the degree of risks is greater in terms of the number of countries involved.  Delays caused by other party, acts of God, war labour disputes and third-party non-performance are all unexpected shocks and affect the progress or success of the global outsourcing.

Legal and regulations

Different countries have different regulations and laws such as the human resource laws, which affect a wide variety of employee issues.  Most employment contracts usually contain some kind of protection to the employees but it might not be workable for some countries.  For example, the United States does not allow using child labour but this is popular in some developing countries.

In addition, asset transfer laws are different in each country.  These differences can make it difficult to transfer hard assets like real estate.  And, in many nations, the transfer of intellectual property such as software could create unexpected legal liabilities.

Technology issue

Technical feasibility is the most challenge job for global sourcing as the pace of technological development varies between countries, for example local telephone infrastructure.

Economic issue

Creating a single contract for global outsourcing might also have difficulty due to different currency fluctuations between countries.  Xerox created a price book system that dynamically adjusted IM prices to ensure that Xerox groups in other countries were better off after implementation of the outsourcing agreement.  For most services, prices for each country were in local currencies, not dollars, and were benchmarked against the local economy.

With the reasons above, global sourcing is harder than domestic sourcing not only because of its size and complexity, but also the concerns of political, social, legal, regulations, technological and economic issues of different countries.


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