Discuss About The Innovative And Networked Business Functions.
Outsourcing is one of the techniques that are taken into consideration so that the expenses can be reduced by transferring the functions of the company to the third part, instead of conducting the activities in the business internally. In this strategy, the focus is given by various organizations so that reduction can be made in the overall operating cost and also profits can be achieved. In IBM there are many activities which are conducted.
It is seen that organizations outsource the functions of the company so that it can be conducted smoothly. Manufacturing parts and human resources activities are outsourced. Advantages and disadvantages of outsourcing will be explained in this paper. Outsourcing is also done by IBM in various countries.
The main aim of the paper is to evaluate the advantages and challenges of outsourcing the functions of the organization to the third party. The paper objective is to evaluate the disadvantages and advantages in context to IBM company. It can be analyzed that at the time of outsourcing the functions is can give negative impact also or can give a loss to the company. The organization outsources the functions of the organization can give negative results on the activities and the organization can also face the problem of data loss. If data is lost then it can directly impact the overall satisfaction level of the customers.
The discussion will focus on the success and failure of outsourcing the functions of the business. This report will also focus on the overall advantages and drawbacks that the organization has to face when they outsource the functions of the business. It is important for the company to consider the strategies at the time of outsourcing the activities. So, in this report, the focus will also be given to the strategies that should be considered by the company when the functions of the company are outsourced to the third party. Also, analyzes will be made on various concepts of outsourcing which is given by the experts of the markets so that rewards and limitations can be determined.
IBM is the biggest company who give focus on outsourcing the activities to the third party. It is seen at the time of outsourcing the functions are also outsourced to the third-party companies. It is an essential method that helps to reduce the overall cost that is taken into consideration by the organization worldwide. Also, it is seen that developed countries also give emphasis on the process of outsourcing (Gospel and Sako, 2010).
IBM is one of the biggest American international technology companies that are established in 1911. There are many activities conducted in the company like computing, cloud programming and in information technology industry. Outsourcing is the best practice which is considered by many companies so that activities can be conducted smoothly by shifting jobs and tasks It can be analyzed that the organization has outsourced the functions of the business to the third-party company from India to Singapore which has given a positive impact on the values (Pierce 2011). The activities are contracted out so that third party can complete it.
The company has more than 40 data center that operated the functions related to IT sector. Outsourcing of a process is basically handing over the organization’s internal process to some other company. It helps the company to focus more on their business process and activities which certainly reduces the operational costs of the process. There are many options available for a company to outsource their business activities. It is evaluated that activities of the company are given to the third party by focusing on the IT system and support is also given by the users.
The main aim of IBM to outsource the process is just to give more emphasis on the quality of the customer service which also reduces the cost of operation. There are many activities which are given to the third party so that it can be conducted properly. The activities related to call center and also services to management. This also creates more and more opportunities for temporary and permanent employment also enhances the skills of a labor. The company should formulate the strategies and also focus on the grounds basis on which they are outsourcing the activities. It should be ensured that the strategizing is done keeping in the mind the business that is outsourced.
The major benefit of outsourcing is that it is beneficial for the business and also helps in achieving competitive advantage. The advantage is achieved by the companies and it also helps to grow in the market. Many big companies, in the recent years, have been seen outsourcing their process and have considered it as an important part of their business activities.
Outsourcing is important for a company as it helps in implementing all the resources and also makes the process more effective and efficient. The company merely gives focus on the information technology so that manufacturing of other software can be done properly. This keeps the process of IBM more effective. This effectiveness is maintained by IBM as it has successfully outsourced the IT service globally (Han and Mithas 2013). It is seen that the hardware service and quality have been improved as this process is not interrupted by the other activities conducted by the company.
When it comes to cost-cutting, it can be seen that several operational costs involved in the process are also minimized like infrastructure expense, maintenance expense and several other expenses related to the workplace. Companies are getting an advantage when it comes to cost-cutting as it becomes economical when the process is outsourced (Drucker, 2017).
The company only outsources their business process to a particular company who has the expertise in a specific field. It can be analyzed that the employees of the company have proper skill and knowledge related to technology that assist to conduct the activities in a proper way It is seen that company achieved the advantage by outsourcing the services related to IT services to the 40 data services worldwide (Gorla and Somers, 2014). It is seen that it will give assistance to the company to accomplish overall goals and objectives. The services which are given can also be modified.
It is evaluated that companies outsource many activities which helps them to achieve positive results. It is seen when that the activities which are outsourced are given to other party to complete. So internally training is not given to the employees as it helps to focus them on other activities as stated by Sekaran and Bougie (2016),
Satisfaction level is one of the important aspect for every company. If the customers are satisfied then it can help to achieve success in the market. So, outsourcing gives positive impact on the overall satisfaction level of the customers. At the time of outsourcing the activities, it is seen that the issue which is faced by the organization is related to the high quality of the products (Zirpoli and Becker, 2011). It is evaluated that when the worker of the organization cannot conduct the activities due to any reason then it is important for the company to appoint someone who can complete it with efficiency. It is analyzed that the company has more than 3, 80,000 workers who are completing the assigned task on regular basis.
There are many employees who conduct the activities in call centers located in Singapore and in many countries. It assists the organization to provide 24 hours services to the customers. The activities conducted in the data center focuses on enhancing the satisfaction level of the customers (Eggert, Böhm and Cramer, 2017).
According to Spohrer (2017), Outsourcing assists the organization to increase the efficiency of the organization. This helps in proper maintenance of the quality of the company. The focus is given by the workers so that operations of the company can be conducted in a right direction. IBM has offered a good infrastructure that assists to focus on the overall objectives and also helps to give direction to the data centers so that activities can be conducted smoothly.
Outsourcing is one of the contracts that organizations give to the third party so that activities can be conducted smoothly. If they are not able to conduct the activities in a proper manner the company who outsourced can sue them in court. IBM tries to share their risk by outsourcing the activities. It is seen that responsibility is also shared which help to conduct the activities smoothly.
It helps the company to share the risks so that the quality which is offered can be good. IBM focuses on the policies so that quality can be offered well and also the risk can be shared with the other companies or with the third party (Solli-Saether and Gottschalk, 2015).
By giving emphasis on the advantages it can also be analyzed that there are disadvantages also at the time of outsourcing the functions of the business. By outsourcing the functions, it can also give a negative effect on the organization and also they face an issue when the functions are outsourced.
According to Mourdoukoutas (2011), it can be analyzed that outsourcing is considered as a replicate by the organizations. For instance: It is analyzed that IBM has reduced the cost by outsourcing the overall services related to IT but the advantages achieved by the company are same as from the competitors. Outsourcing the activity also introduces the new competitors for the companies as it is considered by many IT organizations. Competitive advantage can be attained if outsourcing of the activities is given to the company which is trustworthy and safe to keep the information private.
When the functions of the business are outsourced it is analyzed that the company focuses on rules and policies of the many companies and countries. For validating the agreement of outsourcing there are various rules and regulations that are important for the company to consider so that activities can be completed easily.
At the time of outsourcing if the activities are not completed properly then charges are given by the third party but there are companies who have suffer from the charges which are hidden. By focusing on the market regulations which are in India it is analyzed that the organization focuses on the new rules and regulations and also it is important to implement the structure related to an organization (Gruszewski et al., 2017).
It can be evaluated that to outsource the functions of the business can be the drawback for the company. It is seen for organization information is one of the important factors and if it is leaked then the loss can be seen on the overall revenue of the company. When the functions are outsourced then companies share their data and their opinions which can result in the loss of the privacy of the company. It is important to minimize the disadvantages so that targets can be achieved by the company (Kshetri,2014)
IBM has to face the issue related to the privacy of the information with the customers and also with the call centers who offer services to the customers. If there are no proper regulations of one the data center then it can result in the leakage of the information of the customers which could affect the activities of the company in a negative way (Sparrow, 2012).
By giving focus on the agreement related to outsourcing it is seen that organization give responsibilities and right to the third party so that activities can be conducted in an effective manner. The company considers managerial control that is important so that operations can be transferred in a proper way (Tunisini and Sebastiani, 2015).
The company who is outsourcing the activities cannot conduct the activities according to the basic principles that should be followed and also they cater the customers who reduce their focus on the tasks related to the organization. It is analyzed that IBM has also faced the same problem various times as it is analyzed that data centers of the organization are situated in Singapore, India, and Malaysia. So, it is seen that there should be proper control so that activities can be conducted smoothly (González, Gascó and Llopis, 2016).
It is seen quality is the important factor on which focus should be given so that it can be easy to conduct the activities according to the rules and policies of the company. If quality is not provided by the third party then the mindset of the customers will change for the company who is making the deal with the customers. So, outsourcing can also be the risk related with quality (Hribar, Kravea, and Wilson, 2014)
According to Bordeman, Kannan, and Pinheiro (2014), it is seen that when the activities are outsourced then company dismisses the workers who are conducting the activities in the company. At the time of focusing on the planned process of the company, it can be evaluated that layoffs are unavoidable. This can affect the working pattern of the workers who are conducting the routine activities of the company. By giving emphasis on IBM it is analyzed ha more than 5,000 workers are dismissed in the coming few months. The decisions which are considered has given impact on the image of the organization and also affected the overall productivity level.
There are various impact of outsourcing the activities of the company. The company has affected the services of the customers and also resources to consider proper decisions. IBM has done a proper research on more than 56 competitors and also with the help of the customers who are not the IBM customers (IBM 2010).
There are many benefits which consist of various aspects or elements that are affected (Figure 1):
Research done by Mclvor (2010), stated that the advantages of outsourcing has given success to IBM and also productivity level of the company. If other competitors are considered then it is seen that satisfaction of the customers is essential and high in IBM.
Conclusion
By evaluating the report, it is analyzed that there are many organizations that outsource the functions of the business. This provides many benefits and also increases the service of the customers. IBM is one of the largest companies in outsourcing the activities and also the focus is given on the guidelines so that outsourcing of the functions can be done in a proper manner.
References
Bordeman, A., Kannan, B. and Pinheiro, R., 2014. Intra Industry Contagion Effects of layoff Announcements. Unpublished Manuscript.
Dhar, S., 2012. From outsourcing to Cloud computing: evolution of IT services. Management Research Review, 35(8), pp.664-675.
Drucker, P.F., 2017. The Theory of the Business (Harvard Business Review Classics). Harvard Business Press.
Eggert, A., Böhm, E. and Cramer, C., 2017. Business service outsourcing in manufacturing firms: an event study. Journal of Service Management, 28(3), pp.476-498.
González, R., Gascó, J. and Llopis, J., 2016. Information systems outsourcing reasons and risks: review and evolution. Journal of Global Information Technology Management, 19(4), pp.223-249.
Gorla, N. and Somers, T.M., 2014. The impact of IT outsourcing on information systems success. Information & Management, 51(3), pp.320-335.
Gospel, H. and Sako, M., 2010. The unbundling of corporate functions: the evolution of shared services and outsourcing in human resource management. Industrial and Corporate Change, 19(5), pp.1367-1396.
Gruszewski, R., Smith, B.H., Thresh, D.E., Van Bortel, J. and Esterman, M., 2017, August. Uncovering Hidden Costs in R&D Outsourcing: A Case Study. In ASME 2017 International Design Engineering Technical Conferences and Computers and Information in Engineering Conference (pp. V004T05A025-V004T05A025). American Society of Mechanical Engineers.
Hribar, P., Kravet, T. and Wilson, R., 2014. A new measure of accounting quality. Review of Accounting Studies, 19(1), pp.506-538.
IBM., 2010. Business impact of outsourcing: a fact-based analysis. [PDF file]. IBM Global Services. Retrieved from < https://www-03.ibm.com/innovation/ca/en/pdf/business_impact_of_Outsourcing.pdf >
Kshetri, N., 2014. Big data? s impact on privacy, security and consumer welfare. Telecommunications Policy, 38(11), pp.1134-1145.
McIvor, R., 2010. Global services outsourcing. Cambridge University Press.
Mourdoukoutas, P., 2011. The Unintended Consequences of Outsourcing. Forbes. Retrieved from < https://www.forbes.com/sites/panosmourdoukoutas/2011/12/09/the-unintended-consequences-of-outsourcing/#1b39d7467e36 >
Pierce, F., 2011. The Top 10 Outsourcing Companies in the World. Supply chain. Retrieved from < https://www.supplychaindigital.com/scm/top-10-outsourcing-companies-world >
Sekaran, U. and Bougie, R., 2016. Research methods for business: A skill building approach. John Wiley & Sons.
Solli-Saether, H. and Gottschalk, P., 2015. Stages-of-growth in outsourcing, offshoring and backsourcing: Back to the future?. Journal of Computer Information Systems, 55(2), pp.88-94.
Sparrow, E., 2012. Successful IT outsourcing: from choosing a provider to managing the project. Springer Science & Business Media.
Spohrer, J., 2017. IBM’s service journey: A summary sketch. Industrial Marketing Management, 60, pp.167-172.
Tunisini, A. and Sebastiani, R., 2015. Innovative and networked business functions: customer-driven procurement. Journal of Business & Industrial Marketing, 30(3/4), pp.302-311.
Zirpoli, F. and Becker, M., 2011. What happens when you outsource too much?. MIT Sloan Management Review, 52(2), p.59.
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