Outsourcing Activity is Boon or Bane: A Case Study of City Circle Bhopal

Transcription

1 Journal of IMS Group Vol. 10, No. 2, July-Dec 2013, pp Outsourcing Activity is Boon or Bane: A Case Study of City Circle Bhopal Dr. S.K. Khatik & Dr. G.S. Khanooja Abstract Outsourcing is a very common word in these days. Outsourcing is nothing but allowing someone else to do your work for you so that you are able to devote your time to more important jobs. Outsourcing is a better way of doing business. It is used by small as well as huge business firms in achieving greater success. More and more firms are looking at new ways to reduce costs and meet the pressures of increasing accountability. The main purpose of outsourcing is to take advantages of service providers of their expertise in non-core activities with the economies of scale in order to reduce the expenses and ensure quality services of M.P.M.K.V.V.Co.Ltd. It will help to reduce the incurred cost and improve their financial position. This research paper reflects cost effectiveness of outsourced MRBD activity of city circle Bhopal. The M.P.M.K.V.V.Co.Ltd. Bhopal carried out various activities to run their business, out of them some activities were outsourced. This research study covers only one activity i.e. MRBD. MRBD is a very important activity for any distribution company as the monthly receivables from consumers is largely depends on how effectively this activity is carried out. Efficient and accurate Meter reading and bill distribution not only results in high earning but also reduces the consumers complaints, most of which arises only due to wrong reading of meters. In this regard we have taken a case study of City Circle Bhopal and compare the cost of outsourced MRBD with the cost if these MRBD would be done departmentally and found that departmental cost is very high and we come to the conclusion that the outsourcing of MRBD activity is boon to the organisation Keywords: Outsource, non-core, service provider, MRBD, in house, receivables, Cost effectiveness, boon, bane Dr. S.K. Khatik Professor and Head, Department of Commerce, Dean Faculty of commerce and Chairman BOS, commerce, Barkatullah University Bhopal. shankhla2003@yahoo.com Dr. G.S. Khanooja DGM, M.P.P.M.C.L., Bhopal g.khanooja@gmail.com INTRODUCTION Outsourcing is a very common word in these days. Outsourcing is nothing but allowing someone else to do your work for you so that you are able to devote your time to more important jobs. This concept is relevant in all areas, as today one can also outsource some routine works to some other person. Outsourcing is a better way of doing business. It is used by small as well as huge business firms in achieving greater success. 56 Journal of IMS Group Volume 10 No. 2 July - December 2013

2 The concept of outsourcing gained popularity in the mid of 1990 due to rapid growth in the number of high-tech companies. The outsourcing has become a buzz since the last few years. Almost every country and almost every organization is outsourcing a part of its task or some task. The reasons that have been found for the increase in the trend of outsourcing for business process is that, it increases profit and lowers cost, and business focuses mostly on these aspects. In short, it can be said that the transfer or delegation of some of the operations of the business to an external service provider is called outsourcing. Outsourcing can simply be defined as the continuous outsourcing of a specific part of the business process. The practice of buying from another company a commodity or service that is not central to a company s competitive advantage is called outsourcing. The companies realize that non-core activities can be affectively and economically performed by others and outsourcing helps the companies to focus their charges on the core activities and leave the noncore activities to others who are specified in performing the non-core activities. In the current era of business scenario where the customers are enjoying customer driven market, there exists very high thrust on manufacturers or companies to stand up to the expectation of customers for their survival. Today s customer is not only demanding but is also very cost conscious and expects innovative and discriminative products. In order to stand up to the customers demands and expectation the companies have to constantly strive for providing better features in their product, better quality, correct timing of product life cycle and high degree of value for money. To include all the above requirements of the customer under one roof often becomes difficult for the companies or manufacturers, and hence in order to achieve the solution to the above problem the companies peep outside their premises. The business process outsourcing system allows companies to contract for services that are not within the scope of their expertise, so that they can focus their time, money and energy on their core competencies instead of wasting valuable resources trying to gain understanding of areas that are somebody else s expertise. Today outsourcing, in its most concise form, can be defined as the delegation to another party of the authority for the provision of services under a business contract that incorporates service-level agreements related to cost, quality, and the timelines of deliverables. Given a diverse nature of business processes a firm has to manage today, it is nearly impossible for a firm to manage all of its processes by solely depending on its own expertise. Even if it is feasible, the firm may lose its focus and efficiency. Outsourcing some or all of non-core business processes can enable a firm to focus on core competencies, rather than services that fall outside of expertise. It will not only improve function effectiveness and flexibility by accessing a support network with highly qualified and specialized workforce, but also help firms control their costs and business risk by transforming high fixed costs to predictable expenditures. Technically speaking, outsourcing is not nearby the contract with a third party to perform a service for an organization, but it also involves transferring a significant amount of management control and decision making to the external supplier. The process of outsourcing is very much formed like other business process and it always includes a considerable degree of two way information exchange and trust. IMPORTANCE OF OUTSOURCING Outsourcing is a grand opportunity especially for the individuals who are lucky to have the job and its more advantages for the company who is doing this kind of strategy. It is beneficial to companies or firm who are using it but one of the best impacts of this business strategy is giving more job opportunities to countries that had a low employment rate. Journal of IMS Group Volume 10 No. 2 July - December

3 Larger corporations use outsourcing to cut their overhead costs. But the other benefits of outsourcing particularly in the area of marketing, manufacturing, risk management, use of IT etc. etc. necessitate all size of business companies to adopt this management tools. OUT SOURCING: A BOON OR BANE Outsourcing flourished in India after the new economic reforms. In Indian economy population, poverty and employment have always being long debated issues. Public and private sectors create only a few jobs. They could not create ample job opportunities for the public. Hence Indians are facing unemployment. In this era outsourcing has became a new source of employment. After outsourcing Indian companies are feeling a big relief for cut-throat competition and fulfil the accountability towards the society by creating more and more jobs through outsourcing. After outsourcing the large number of jobs are created by the companies with the help this technique. Apart from these benefits companies are also able to reduce their cost and increase foreign reserve resulted to increase in growth of Indian economy. All these could be possible when companies are adopting outsourcing technique in their business. As above the facts it is clear that outsourcing is a boon for the developing country like India. Outsourcing technique is able to create only low cadre employment opportunities like testing and operating data entry, billing, meter reading, Tele calling, Tally accounting, bill distributing, complaint attending, queries, cleanliness etc. They are not been paid sufficient salary to survive. Apart from it, outsourcing has negative impact on our culture and tradition because youth is moving away from our values and culture. Their thinking and their outlook, outwards values have undergone through a drastic change due to western culture. The influence of the western culture is all time high on our culture and it has nothing to do with industry. The life style and ideologies of an august college student in a metro may not be any different from a young outsourcing employee. Outsourcing is killing our tradition, culture, value and education. However on the above reasons outsourcing should be banned for the Indian economy. Thus it is clear that outsourcing is not able to create better jobs like research, development and controlling of the organization etc. and it has a negative drastic effect on our Indian culture. It has hampered our society because it is not accountable towards the weaker section of the society and also against the employee salaries as they render their services and they deserve a good salary, but outsourcing is paying less salary as compared to their work. JUSTIFICATION OF TOPIC Madhya Pradesh Madhya Kshetra Vidyut Vitran Co. Ltd., (M.P.M.K.V.V.Co.Ltd) manages power distribution and retail supply in the central region which comprises of the commissionaires of Bhopal, Hoshangabad, Gwalior and Chambal. The company is facing a net loss since its inception in An attempt has been made through this study to determine the significance and meaning of outsourcing of different activities of M.P.M.K.V.V.Co.Ltd. and also how the net saving can be achieved through these outsourced activities is also studied. The increased savings by way of outsourcing noncore activities will increase the earning of the company which in turn will enable the company to pay interest and debt, without the financial help from outside agencies. REVIEW OF LITRATURE Outsourcing has become commonplace in modern business. In addition to outsourcing in profit seeking organization; there is considerable outsourcing effort in government and non-profit organization also. According to Hannan and Freeman (1984) ongoing outsourcing practices are due to organizational inertia in following the leader without any efficiency concerns. Apart from various advantages of outsourcing like cost reduction, use of advance technology, capital investment etc, William Son (1985) in his study suggest that the outsourcing creates opportunities for firms to shift the burden of risk 58 Journal of IMS Group Volume 10 No. 2 July - December 2013

4 and uncertainty associated with the business to someone else. Prahalad and Hamel (1990 P. 84) point out outsourcing can provide a shortlist to a more competitive product but it typically contributes little to building the people embodied skills that are needed to sustain product leadership. A desire to save indirect cost may also drive outsourcing. Having fewer employees requires less infrastructure and support system Hubbar (1993). Before implementing outsourcing, there are some additional indirect and social cost associated with outsourcing which must be considered indirect cost like contract monitoring cost, contract generation cost, transition cost etc. Gillett (1994). Capital expenses incurred by the relationship should also be calculated by Burzawa (1994). The Major reason behind outsourcing is to save the cost Bergsman (1995), and Saunders et al. (1997) in a study of outsourcing found that in many cases the major motives for outsourcing were technological and strategic and not cost reduction. It was found that the outsourcing allowed organizations to achieve a number of strategic benefits ranging from the more rapid adoption of new technologies to being more responsive to customer needs by better coping with variations in product demand. As Oates (1998) suggests the outsourcing decision is a strategy one and is generally taken at a senior level. Ulrich (1998) suggested that core activities are transformational work that creates unique value for employees, customers, and investors. Non-core activities would be transactional work that is routine and standard and can be easily duplicated and replicated. Hall and Torrington (1998) found that training, management, development, recruitment and selection, outplacement, health and safely, quality initiatives, job evaluation and reward strategies were the likely HR activities to be outsourced either because they were considered non-core or because of the organization locked the expertise to handle them internally. There are, however, potential pit falls when outsourcing is done for strategic reasons. Organization may give away the crown jewels if they are not careful Gillett (1999). The most often cited strategic reason for outsourcing is to allow organization to focus more on its core competencies Quinn and Hilmer (1999). Price Waterhouse Coopers (1999) in a study of outsourcing have found that outsourcing has moved from searching for efficiencies and improvements in a single process or activity, to reconfiguring entire processes in order to obtain greater value across the organization. The ability of organizations to reduce costs is regarded as a pre-requisite for participation in many industries whereas innovation and responsiveness to customer needs are regarded as potential sources of competitive advantage. Before implementing different types of outsourcing like human resources, legal processes, marketing, Information Technology, call centre, manufacturing operation process etc. proper care must be taken or proper process must be followed for the successful outsourcing. If proper care is not taken in implementing outsourcing i.e. poor contract or poor selection of partner then according to Klopack (2000), outsourcing may result in loss of control or loss of core competence and it may also result in power shift to supplier Kakabadse and kakabadse (2000). The supplier or outsourcer may also not give access to best talent and may lose customers, opportunities Robert V. (2001). Quelin and Duhamel, (2003) in a study of outsourcing gives idea about whether outsourcing is appropriate for the organization and, if so, how the outsourcing process should be managed, Economist Paul Samuelson, a Nobel Prize winner, wrote in a 2004 paper that the economic effect of outsourcing is similar to allowing mass immigration of workers willing to compete for service jobs at extremely low wages. Scott Naxton (2006) in his article Outsourcing is necessary to beat the competition published in the year 2006 stated Considering the cut throat competition in almost all the businesses, it has now become necessary for established companies to outsource their time-consuming and labour intensive jobs to others so that they can concentrate more on areas of their core competencies. This way companies would concentrate more on marketing, expansion, takeovers and mergers. Journal of IMS Group Volume 10 No. 2 July - December

5 Every year in the United States, companies pay about $68 billion to other companies for key services or products that help them focus on their core business and delegate other functions (Thurm, 2007). Outsourcing even a large portion of IT may not be substantial enough to affect firm-level financial metrics such as profitability (Aubert et al., 2008). The impact of contractual and relational governance mechanisms on BPO success and report that process standardization, contract completeness, coordination, and consensus are directly associated with BPO success. Like Poppo and Zenger, (2002), and Goo et al., (2009). OBJECTIVES OF STUDY The research study has the following objectives: I) To understand the concept of outsourcing II) To study the Meter reading and bill distribution activity being carried out on outsourcing at City Circle M.P.M.K.V. V.Co.Ltd Bhopal III) To examine that how far Outsourcing of MRBD helps to reduce the operating cost of the organization. IV) To analyse the net saving or cost effectiveness of Outsourcing of MRBD being carried out at City Circle M.P.M.K.V.V.Co.Ltd Bhopal V) To give the suggestions on the basis of findings of the study. HYPOTHESIS OF THE STUDY The following hypothesis have been set up for testing of the significance of the study H O = NULL HYPOTHESIS H O1 = There is no significant difference between internal and outsourced MRBD for revival and survival of the company H O2 = There is no significant impact of Outsourcing of MRBD on the financial performance of the company RESEARCH DESIGN Research designs are concerned with turning the research question into a testing project. The best design depends on the research questions. Every design has its positive and negative sides. The research design has been considered as a "blueprint" for research, dealing with at least four problems: what questions to study, what data are relevant, what data to collect, and how to analyze the results. Researchers not only need to know how to develop certain indices or tests, how to calculate the mean, Growth rate, Standard Deviation, Coefficient of Variation and Student t test etc. Research tools have been deployed for justifying the result of the study, whether the result are significant or not. The sources of primary data are through experiments, observations, interviews, questionnaire, scheduling etc. The sources of secondary data are annual reports, budgets and any other published documents. In this study, secondary data collected by means of annual reports, budgets, executive business plan etc. has been considered. Apart from these data, the opinions, and observation of employees in various departments of City Circle M.P.M.K.V.V.Co.Ltd has also been considered. The data was qualitatively and quantitatively analyzed. LIMITATIONS Every research has its own constraints, problems and limitation. In this context this research study is also having some limitations, which are given as follows. i) City Circle M.P.M.K.V.V.Co.Ltd Bhopal deals with number of activities in their business but in this study we have taken only one activity i.e. outsourcing of MRBD. ii) This research study is of micro nature and based on only one selected Circle i.e. City Circle M.P.M.K.V.V.Co.Ltd Bhopal iii) This research study is based on the 12 years data, which were related to the year 2000 to iv) For the analysis of outsourcing of MRBD under City Circle M.P.M.K.V.V.Co.Ltd 60 Journal of IMS Group Volume 10 No. 2 July - December 2013

6 Bhopal, on the basis of given data and computed data are grouped and sub grouped. v) The reliability of data depends on audit which is not sufficient. Analysis of Meter reading and bill distribution (MRBD) under City Circle MPMKKVVCo Ltd Bhopal. In global economic market the business activities do not easily survive due to cut-throat competition in the market. Nowadays every organization is facing problems of increasing cost and deterioration in the quality of output. Only those organizations are able to run their business who are able to reduce their operating cost. All these problems are faced by private, semi govt. or Govt. organizations. M.P.M.K.V.V. Co. Ltd. is also one of the Govt. undertaking company, which is rendering the services and supplying power to its consumers. This organisation is running in loss since last so many years due to several reasons. Now these challenges are faced by almost all govt deptt. In this light, I have taken a management technique i.e. Outsourcing and how it will be helpful as a cost-effective tool for survival of M.P.M.K.V.V. Co. Ltd. In this regard in this case study I have taken outsourcing of MRBD activities of City Circle M.P.M.K.V.V.Co.Ltd. Bhopal as my case study. In this case study how far outsource technique will be helpful in reducing the cost has been analyzed. In Bhopal City at present there are total 3,56,853 consumers on LT Side. The Work of Regular Monthly reading of all consumers is a big task, previously this work was carried out through departmental employees. As per norms of the company one person can take 1500 readings (with distribution of bills) per month. It means for taking regular monthly reading of consumers, Two hundred thirty eight employees are required. The number of employees required is very large due to which large financial burden is being faced by the company. To take the advantages of outsourcing The MPMKVVCL has decided to do this job in Bhopal city circle on pilot bases. The chief Engineer Bhopal had issued NIT for this work and the successful bidder in the year was M/s Bellary Computer & IT Solution Pvt Ltd.,1 Cross Gandhi Nagar Bellary. The lowest rate quoted by him was Rs per consumer, this agency worked for two years upto In the year the company has again issued an NIT and the lowest bidder for the period to was M/s Sterling Transformers Flat No 22, Padmawati, Apartment, a Kakatia Nagar, Tirupati and the rate quoted by this form was Rs per consumer. Again the Chief engineer Bhopal has issued a tender vide No. CE/BR/02/Pur/4811 dt for Meter reading and bill distribution (MRBD) for the area covered under City Circle MPMKKVVCo Ltd. Bhopal and after following purchase procedure M/s Tera Software Ltd. of Hyderabad was found to be the successful bidder. The lowest rate quoted by the firm was Rs per consumer for reading and distribution of energy bill, including of all taxes. For the successful running of this activity in Bhopal city circle the company has given this work with following scope. Again the Chief engineer Bhopal has issued a tender for the year and and found that M/S Sharp agency Bhopal has bided the lowest rate of Rs per consumer for meter reading and distribution of energy bill. Journal of IMS Group Volume 10 No. 2 July - December

7 Table 1: (MRBD Activity) Average Annual Expenditure on Departmental MRBD Work under City Circle Bhopal YEAR No of Consumers Salary of LH Per MTH No. Of Employee Required For Readings Per Employee) Total Cost If MRBD Done Departmentaly Per MTH Total Cost Of Departmental MRBD Per Yr. Total Cost of Departmental MRBD Per Yr. (In Lacs) NOS IN Rs. NOS IN Rs. IN Rs. Rs. (in Lacs) SOURCE: Data collected from General Section of office of Superintending Engineer, City Circle, MPMKVVCo Ltd., Bhopal. Mean Std. Deviation Coefficient of Variation Growth rate Average annual Growth rate Table 1 shows the average annual expenditure of departmentally operated MRBD activity under City Circle MPMKKVVCo Ltd Bhopal during the period of study and Table 2 shows the average annual expenditure of outsourced MRBD under City Circle MPMKKVVCo Ltd Bhopal during the period of study. The cost effectiveness of this activity is depicted in the table 3. Table 1 represents average annual expenditure on departmentally executed MRBD Work under City Circle MPMKKVVCo Ltd Bhopal. The Annual expenditure on this activity was calculated by assessing no of employees required to take the metre reading and bill 1500 consumers bill per employees for example the no of consumers in the year was and as per norms of the company one person can read and distribute bill of 1500 consumers in a month thus at that time the minimum required employees per month would be 118 in the year The expenditure on departmentally executed MRBD have shown an increasing trend. In the year the total cost 62 Journal of IMS Group Volume 10 No. 2 July - December 2013

8 represented an amount of Rs Lacs per year and it was increased to Rs Lacs by the year which was further increased to Rs Lacs in the year The expenditure was continuously increasing due to increase in the no of consumers in the City circle as well as increase in the salary of the employee. The expenditure increased continuously at Rs Lacs, Rs Lacs, Rs Lacs, Rs Lacs, Rs Lacs, Rs Lacs, Rs Lacs and Rs lacs respectively from , , , , , , and The total cost of MRBD activity carried out departmentally comes to Rs Lacs. The Various statistical tools such as Mean, standard deviation, coefficient of variation, growth & average growth rate has been applied so that the calculated information is in accordance with the predefined standard of accuracy. The Mean of the total cost of departmentally executed MRBD activity per year was Rs Lacs and its standard deviation was Rs The coefficient of variation & growth affects a figure of 54.12% & % respectively. The average growth represents 38.90%. Table 2: (MRBD Activity) Average Annual Expenditure on Outsourced MRBD Work Under City Circle Bhopal YEAR No of Consumers Rates of Outsourced MRBD Per Consumer Total Cost of Outsourced MRBD (In Rs.) Per MTH Total Cost of Outsourced MRBD (In Rs.) Per Year Total Cost of MRBD (In Lacs) Per Yr Name of Outsourcing Agency To Whom MRBD was Outsourced NOS IN Rs. IN Rs. IN Rs. Rs. (in Lacs) M/s Bellary Computer & IT Solution Pvt Ltd Journal of IMS Group Volume 10 No. 2 July - December

9 M/s Sterling Transformers M/s Tera Software Pvt Ltd. M/s Sharp agency Bhopal M/s Sharp agency Bhopal SOURCE : Data collected from Establishment and Acct Section of SE City Circle,MPMKVVC L Bhopal. Mean Std. Deviation Cefficient of Variation Growth rate Average annual Growth rate The table 2 reflects the total cost of outsourced MRBD activity per year of Bhopal city circle from the year to The outsourcing of this activity has been given to an outsider agency of Bellary M/s Bellary Computer & IT Solution Pvt Ltd for year and Rs per consumer s metre reading and bill distribution. After that this work has given to M/s Sterling Transformers of Rs for the year and In the year this work has been awarded to M/s Tera Software Ltd. of Hyderabad through open Rs And for the year and this work was allotted to M/S Sharp agency Bhopal at the lowest rate of Rs During these years the total cost has represented the figures of Rs Lacs, Rs Lacs, Rs Lacs, Rs Lacs and Rs Lacs, Rs Lacs and Rs Lacs for the year to respectively. The various statistical tools such as Mean, standard deviation, coefficient of variation, growth & average growth has been applied for the analysis of significant data. The outsourced MRBD activity reflects a Mean of Rs Lacs. The standard deviation was Rs Lacs and Coefficient of variation reflects a figure of 22.86%. The growth of outsourced MRBD activity has been representing a figure of 81.28% & its average growth was 11.61%. Table 3: (MRBD) Cost Effectiveness of MRBD Work Under City Circle Bhopal YEAR No of Consumers Total Cost of Departmental MRBD Per Yr. Total Cost of Departmental MRBD Per Yr. Total Cost of Outsourced MRBD Per Yr. Total Cost of Outsourced MRBD Per Yr. NOS IN Rs. IN LAC Rs. IN Rs. Rs. (in Lacs) Cost Effctiveness (Net Saving) Rs. (in Lacs) 64 Journal of IMS Group Volume 10 No. 2 July - December 2013

10 SOURCE: Data collected from Establishment and Account Section of SE City Circle, MPMKVVCo Ltd, Bhopal Mean Std. Deviation Cefficient of Variation Growth rate Average annual Growth Rate Table 3 has highlighted the cost effectiveness of MRBD work under City Circle MPMKKVVCo Ltd Bhopal between total cost of departmental MRBD per year and the total cost of outsourced MRBD per year. In both the cases, the cost had shown an increasing trend from to But it clearly shows that there was a huge difference in the total cost of departmental MRBD per year and total cost of outsourced MRBD per year. In the year the departmental MRBD per year had shown the amount of expenditure of Rs Lacs but the outsourced MRBD in this year had shown an amount of Rs Lacs. The cost effectiveness in this year was Rs Lacs. In the year the departmental MRBD per year had shown an expenditure of Rs Lacs while the outsourced MRBD had shown an expenditure of only Rs Lacs which shows a difference of Rs Lacs. In the year the cost effectiveness between the departmental MRBD and the outsourced MRBD had shown an amount of Rs Lacs. In the year the departmental MRBD had represented a huge amount of Rs Lacs as compared to Rs Lacs of outsourced MRBD showing a cost effectiveness of Rs Lacs. The last year also followed the same trend where the total cost had shown a figure of Rs Lacs when performed by the department which was far greater than the outsourced work performed by M/S Terasoft company representing a figure of Rs Lacs which shows a difference of Rs Lacs. Similarly for the year and the net saving is Rs Lacs and Rs Lacs respectively The Various statistical tools such as Mean, standard deviation, coefficient of variation, growth & average growth has been applied for the analysis of significant data. The Mean of cost effectiveness of MRBD represents a figure of Rs Lacs & its standard deviation represents Rs Lacs. The coefficient of variation shows 34.57% and its growth shows %. The average growth of cost effectiveness has represented a figure of 28.35%. Journal of IMS Group Volume 10 No. 2 July - December

11 Testing of Hypothesis In this study I have taken null Hypothesis which are testing the significance of the study. H0 There is no significance difference between internal and outsourced MRBD activity for revival and survival of the company. This hypothesis have been analysed through taking the case study of MRBD outsourced in City Circle M.P.M.K.V.V.Co.Ltd Bhopal. Outsourcing of MRBD of City Circle M.P.M.K.V.V.Co.Ltd Bhopal. The research tool has been applied for analyzing the significance value of the hypothesis at the level of 5% of the Student t-test whether hypothesis is accepted or rejected. (x 1 - x 2 ) n1n2 t = S (n 1 -n 2 ) The value of combined standard deviation is calculated by the following formula.? (x -x )? (x -x ) S = n +n Case study Outsourcing of MRBD of City Circle M P M K V V Co Ltd Bhopal t = 3.52 t = Since calculated value of t=3.52 which is higher than the critical value of t 0.05 which was 2 09 the null hypothesis stands rejected. Hence there is significance difference in this activity for departmental cost and outsourced cost. Internal cost is higher than the outsourced cost, thus its cleared that outsourced of this activity will be helpful for cost effectiveness and also better for revival and survival of vehicle activity of City Circle M P M K V V Co Ltd Bhopal. FINDINGS AND SUGGESTIONS After detailed analysis and discussion of this study, it was found that, the MRBD outsourced activity of city circle M.P.M.K.V.V.Co. Ltd. Bhopal has enormous cost effectiveness ie the cost of running MRBD internally is very high as compared to the cost of outsourced MRBD in a study period for to which shows that the outsourcing of this activity is boon to the organisation In the beginning of the study period the net swing or cost effectiveness was Rs lacs which goes on increasing till to the tune of Rs lacs..and In the complete period of study to , the total saving through outsourcing comes to Rs lacs. Thus M.P.M.K.V.V. Co. Ltd. has saved Rs Cr by outsourcing of only one activity ie MRBD. The various suggestions are 1. As the MRBD is a non-core to the M.P.M.K.V.V. Co. Ltd. and it is found to be very cost effective on outsourced, hence it should be continued on outsource. 2. The staff spared from this job may be assigned some revenue earning jobs like cross checking of meter reading, Arrear Recovery, organizing camps to release new connections etc. 3. The numbers of consumers are increasing every year in city circle Bhopal which requires more number of persons to be engaged to do the MRBD works thus it would be costlier, hence this activity should be continue to be outsourced.. 4. The M.P.M.K.V.V. Co. Ltd. should also continue the practice of outsourcing of MRBD in future and extend it to all the jurisdiction of company. 5. The company should increase outsourcing of other activities also as it is very beneficial to the company. 7. The company M.P.M.K.V.V. Co. Ltd. may extend outsourcing to other circles in its jurisdiction to reap the maximum benefits from it. Employees who will be freed due to outsourcing of these activities can be 66 Journal of IMS Group Volume 10 No. 2 July - December 2013

12 assigned other departmental work like revenue recovery work. 8. Keeping in view the net saving through MRBD outsourcing, it is suggested that the company should outsourced other non core activities like security service, receipt and dispatch service of each office, maintenance of transformer and lines, replacement of faulty equipments with new one, payrolls etc. REFERENCES [1] Abraham, K.G., and Taylor, S. K. (1996). Firms' use of outside contractors: Theory and evidence. Journal of Labor Economics, (Vol No. 14, pp ). [2] Anthes, G.H. (1991), Outsourcing may be only answer for many, computerworld, (Vol. 25 No. 12, pp. 51, 54.) [3] Bers, J.S. (1992), Outsourcing: a deal or dilemma for FMs?, Facilities Design & Management, Vol. 11 No. 3, pp [4] Burnes, B., & Anastasiadis, A. (2003). Outsourcing: a public-private sector comparison [Electronic version]. Supply Chain Management: An International Journal, Vol.8 (4), pp [5] Domberger, S. and Fernandez, P. (1999), Public-private partnerships for service delivery, Business Strategy Review, Vol. 10 No. 4, pp [6] Elliot, V. (1995), Outsourcing without risk, Journal of Property Management, Vol. 60 No. 1, pp [7] Elliott, T.L.I. and Torkko, D.E. (1996), World-class outsourcing strategies, Telecommunications, Vol. 30 No. 8, pp [8] Gillett, J. (1994), Viewpoint. The cost-benefit of outsourcing: assessing the true cost of your outsourcing strategy, European Journal of Purchasing & Supply Management, Vol. 1 No. 1, pp [9] Gordon, M.L. and Walsh, T.P. (1997), Outsourcing technology in government: owned, controlled, or regulated institutions, Journal of Government Information, Vol. 24 No. 4, pp [10] Kakabadse, A. E, and Kakabadse, N. (2005). Outsourcing: Current and future trends. Thunderbird International Review, Vol.47, pp [11] Lewis, A. (1999), Outsourcing a strategy for increased profitability or catastrophe?, Management Accounting, Vol. 14, Issue 2, pp.3. [12] Richardson, H.L. (1992), Outsourcing: the power work source, Transportation and Distribution, July, Vol. 89, pp [13] Tefft, J. (1998), Outsourcing benefits administration: pros and cons, Employee Benefit Plan Review, Vol. 52 No. 8, pp [14] Willis, M. (1996), Outsourcing benefits administration: a disciplined process for conducting a thorough cost-benefit analysis, Compensation & Benefits Management, Vol. 12 No. 1, pp Weblinks Journal of IMS Group Volume 10 No. 2 July - December