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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
SOURCE: Data collected from General Section of office of Superintending Engineer, City Circle,
MPMKVVCo Ltd., Bhopal.
Mean 405.12
Std. Deviation 219.24
Coefficient of Variation 54.12
Growth rate 505.73
Average annual Growth rate 38.90
Table 1 shows the average annual expenditure of Annual expenditure on this activity was
departmentally operated MRBD activity under calculated by assessing no of employees required
City Circle MPMKKVVCo Ltd Bhopal during the to take the metre reading and bill distribution @
period of study and Table 2 shows the average 1500 consumers bill per employees for example
annual expenditure of outsourced MRBD under the no of consumers in the year 2000-01 was
City Circle MPMKKVVCo Ltd Bhopal during the 177229 and as per norms of the company one
period of study. The cost effectiveness of this person can read and distribute bill of 1500
activity is depicted in the table 3. consumers in a month thus at that time the
minimum required employees per month would
Table 1 represents average annual expenditure be 118 in the year 2000-01. The expenditure on
on departmentally executed MRBD Work under departmentally executed MRBD have shown an
City Circle MPMKKVVCo Ltd Bhopal. The increasing trend. In the year 2000-01 the total cost
M/s Tera
2010-2011 320456 4.41 1413211 16958532 169.59 Software Pvt
Ltd.
M/s Sharp
2011-2012 340427 4.33 1474049 17688587 176.89 agency
Bhopal
M/s Sharp
2012-2013 356853 4.33 1545173 18542082 185.42 agency
Bhopal
988.60
SOURCE : Data collected from Establishment and Acct Section of SE City Circle,MPMKVVC L Bhopal.
Mean 141.23
Std. Deviation 32.28
Cefficient of Variation 22.86
Growth rate 81.28
Average annual Growth rate 11.61
The table 2 reflects the total cost of outsourced the total cost has represented the figures of Rs.
MRBD activity per year of Bhopal city circle from 102.29 Lacs, Rs. 108.82 Lacs, Rs. 119.54 Lacs, Rs.
the year 2006-07 to 2012-13. The outsourcing of 126.06 Lacs and Rs. 169.59 Lacs, Rs. 176.89 Lacs
this activity has been given to an outsider agency and Rs. 185.42 Lacs for the year 2006-07 to 2012-
of Bellary M/s Bellary Computer & IT Solution 13respectively.
Pvt Ltd for year 2006-07 and 2007-08 @ Rs. 3.33
per consumer’s metre reading and bill The various statistical tools such as Mean,
distribution. After that this work has given to standard deviation, coefficient of variation,
M/s Sterling Transformers of Trupati @ Rs. 3.54 growth & average growth has been applied for
for the year 2008-09 and 2009-10. In the year 2010- the analysis of significant data. The outsourced
11 this work has been awarded to M/s Tera MRBD activity reflects a Mean of Rs. 141.23 Lacs.
Software Ltd. of Hyderabad through open bid @ The standard deviation was Rs. 32.28 Lacs and
Rs. 4.41. And for the year 2011-12 and 2012-13 this Coefficient of variation reflects a figure of
work was allotted to M/S Sharp agency Bhopal 22.86%. The growth of outsourced MRBD
at the lowest rate of Rs. 4.33 During these years 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
No of Total Cost of Total Cost of Total Cost Total Cost Cost
Consumers Departmental Departmental of of Effctiveness
YEAR MRBD Per MRBD Per Outsourced Outsourced (Net
Yr. Yr. MRBD Per MRBD Per Saving)
Yr. Yr.
NOS IN Rs. IN LAC Rs. IN Rs. Rs. (in Lacs) Rs. (in Lacs)
2000-2001 177229
SOURCE: Data collected from Establishment and Account Section of SE City Circle,
MPMKVVCo Ltd, Bhopal
Mean 423.12
Std. Deviation 146.27
Cefficient of Variation 34.57
Growth rate 198.46
Average annual Growth Rate 28.35
Table 3 has highlighted the cost effectiveness of departmental MRBD had represented a huge
MRBD work under City Circle MPMKKVVCo amount of Rs. 553.05 Lacs as compared to Rs.
Ltd Bhopal between total cost of departmental 126.06 Lacs of outsourced MRBD showing a cost
MRBD per year and the total cost of outsourced effectiveness of Rs. 426.99 Lacs. The last year also
MRBD per year. In both the cases, the cost had followed the same trend where the total cost had
shown an increasing trend from 2006-07 to 2012- shown a figure of Rs. 656.95 Lacs when
13. But it clearly shows that there was a huge performed by the department which was far
difference in the total cost of departmental greater than the outsourced work performed by
MRBD per year and total cost of outsourced M/S Terasoft company representing a figure of
MRBD per year. In the year 2006-07 the Rs. 169.58 Lacs which shows a difference of Rs.
departmental MRBD per year had shown the 487.36 Lacs. Similarly for the year 2011-12 and
amount of expenditure of Rs. 320.81 Lacs but the 2012-13 the net saving is Rs. 570.03 Lacs and Rs.
outsourced MRBD in this year had shown an 652.18 Lacs respectively
amount of Rs. 102.29 Lacs. The cost effectiveness
in this year was Rs. 218.52 Lacs. In the year 2007- The Various statistical tools such as Mean,
08 the departmental MRBD per year had shown standard deviation, coefficient of variation,
an expenditure of Rs. 389.56 Lacs while the growth & average growth has been applied for
outsourced MRBD had shown an expenditure of the analysis of significant data. The Mean of cost
only Rs. 108.82 Lacs which shows a difference of effectiveness of MRBD represents a figure of Rs.
Rs. 280.74 Lacs. In the year 2008-09 the cost 423.12 Lacs & its standard deviation represents
effectiveness between the departmental MRBD Rs. 146.27 Lacs. The coefficient of variation
and the outsourced MRBD had shown an shows 34.57% and its growth shows 198.46%. The
amount of Rs. 325.99 Lacs. In the year 2009-10 the average growth of cost effectiveness has
represented a figure of 28.35%.
Outsourcing of MRBD of City Circle In the beginning of the study period the net
M.P.M.K.V.V.Co.Ltd Bhopal. The research tool swing or cost effectiveness was Rs. 280.74 lacs
has been applied for analyzing the significance which goes on increasing till 2012-2013 to the
value of the hypothesis at the level of 5% of the tune of Rs. 652.18 lacs..and In the complete
Student t-test whether hypothesis is accepted or period of study 2000-01 to 2012-2013, the total
rejected. saving through outsourcing comes to Rs. 2961.82
(x1 - x2 ) n1n2 lacs. Thus M.P.M.K.V.V. Co. Ltd. has saved Rs.
t = –––––––– ––––––––– 29.61 Cr by outsourcing of only one activity ie
S (n1 -n2 ) MRBD. The various suggestions are
1. As the MRBD is a non-core to the
The value of combined standard deviation is M.P.M.K.V.V. Co. Ltd. and it is found to be
calculated by the following formula. very cost effective on outsourced, hence it
should be continued on outsource.
? (x1-x1) ? (x2-x2) 2. The staff spared from this job may be
S = = –––––––––––––––– assigned some revenue earning jobs like cross
n1+n2- -2 checking of meter reading, Arrear Recovery,
organizing camps to release new connections
Outsourcing of MRBD of City Circle
Case study: etc.
M.P.M. K.V.
V.Co.
Ltd Bhopal. 3. The numbers of consumers are increasing
every year in city circle Bhopal which
t = 3.52 t0.05 =2.09 requires more number of persons to be
engaged to do the MRBD works thus it would
Since calculated value of t=3.52 which is higher be costlier, hence this activity should be
than the critical value of t0.05 which was 2.
09,the continue to be outsourced..
null hypothesis stands rejected. Hence there is 4. The M.P.M.K.V.V. Co. Ltd. should also
significance difference in this activity for continue the practice of outsourcing of MRBD
departmental cost and outsourced cost. Internal in future and extend it to all the jurisdiction of
cost is higher than the outsourced cost, thus its company.
cleared that outsourced of this activity will be 5. The company should increase outsourcing of
helpful for cost effectiveness and also better for other activities also as it is very beneficial to
revival and survival of vehicle activity of City the company.
Circle M. P.
M. K.V.V. Co.Ltd Bhopal. 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
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Weblinks
• www.outsource2india.com
• www.deloitte.com
• www.fiveoclockclub.com/article/2005/2005-5-outsourcing.pdf
• www.boston-enet.org/newsletter/spring99-4.htm
• www.reason.or/apr2004/outsourcing.pdf
• www.accenture.com