Advantages And Disadvantages Of Outsourcing In Business

Forms of Outsourcing

Question:

Discuss about the International Business Machines Corporation.

In the current world we are living, business have devised new ways of thriving in order to thrive effectively in the face of competition. It is important to note that competition is becoming severe and every business yearns to become the best in its field of specialization. Among this strategies is outsourcing where business make out official contract with third party service providers. Since time in memorial, this business strategy was associated with large manufacturing businesses but nowadays it has been adopted by other small-scale firms because it proves successful in carrying out business operations .Outsourcing may take various forms, which include back office sourcing of front office sourcing (Bharadwaj et al., 2010). With back office sourcing, internal operations of a business such as human resources, accounting are outsourced. On the other hand, front office outsourcing includes customer related services among other key services.

As mentioned earlier, outsourcing is very vital in the operation of a business as it helps increase the flexibility in some way. However, outsourcing of business increases the flexibility of an organization in variety of ways (Bharadwaj et al., 2010). For instance, outsourcing vendors offer services at a fee and hence employing the use of models such as remote outsourcing help the company increase flexibility through changing fixed into costs. Secondly, outsourcing helps increase its flexibility by making it pay more attention on its competencies with pressure from outside demands (Bustinza & Arias-Aranda, 2010). Basing our argument on the importance of outsourcing in business, this paper aims at looking at the advantages as well as disadvantages associated with it in the global environment.

As prior stated, the aim of every business is to ensure it overdoes other competitors at a fair competition. This can be achieved through employing of various strategies to see the achievement of the set goals. We have to agree with the point that globalization has taken the world and hence businesses have to change their old strategies and adopt new ones for the better. Since time in memorial, companies have been using partnership as a business strategy to improve results. Indeed partnership helps companies grow bigger with time and gives the business a wide access to workers with adequate skills and experience. On the other side of reality, some well-known companies have incurred losses because of outsourcing from the third party agents.

Advantages of Outsourcing

This makes us raise some questions. For example, how can outsourcing be trusted by businesses? It the effort of answering the above question we need to look at the positive as well as the negative side of outsourcing. By doing so, we would be able to understand the impact/effect of outsourcing in the current business trends. This project therefore hints at doing a thorough discussion on the already existing literature review on outsourcing. It goes deep into highlighting the advantages as well as the disadvantages associated with outsourcing process.

There already exists information from peer-reviewed journals on the process of outsourcing in business. This paper aims to provide a literature review from this already done research. Moreover, real examples would be incorporated to bring some sense in the project. In addition, these examples would seek to elaborate the goods and the ills of outsourcing in business. From a general point of view, it is always advisable for businesses to co-work in collaboration with other enterprises in order to secure resources and increase the efficiency of the workers.

This current project will not go without examining all this issues that are related to the process of outsourcing in business. Looking at the existing gaps in the literature as well as the limitations are some of the major concerns that cannot be left.

It is important to note that every other business aims at minimizing the cost while maximizing the profit at the same time. The will be no progress if a business incurs a lot of expense in production than the one it ploughs back. Outsourcing process helps minimize the expenditure of a business (Bustinza & Arias-Aranda, 2010). The question arises here, how does it achieve this? This is because many large companies have a tendency of looking for cheap labor from various parts of the world in order to minimize their cost of production. Normally, labor from Far East countries like India, china and Arabia are cheap and hence companies from western countries tend to divert their labor force from these regions (Zhang et al., 2006).

From a real example, most countries in the west including United States of America have diverted there economy to the china. Assembling of electronics is nowadays done in china simply because labor there is cheap and affordable. Moreover, we also need to look at another perspective in that through hiring labor from foreign countries, new trends and innovation come along with these workers hence merge them to their business processes (Wüllenweber et al., 2008). This is very good ways acquiring new technology as chances of protecting individual innovations are minimal.

Disadvantages of Outsourcing

It is crucial to note that outsourcing leads to a corresponding increase in the quality of after sell services in that the time spent in delivery is minimized too (Carnahan & Somaya, 2013). Also fostering innovation is also possible by utilizing the newly acquired labor.

Nowadays companies are investing a lot of capital in coming up with a kind of infrastructure that sustains the production process. Remember there is need for a business to keep at par with others other business in terms of technological advancements. However, with outsourcing, this proves unimportant bearing in mind that most of production is performed by the third party agencies (Nadkarni & Herrmann, 2010).

Citing some living examples, we all know about the famous Samsung Company that deals with electronics ranging from mobile phones, radio, and television sets (McIvor, 2000). Having discovered that the operation costs were high, this company decided to collaborate with other companies to at least cut off some cost (Carnahan & Somaya, 2013). As a result, several third party agents have collaborated with it. Through this collaborative role, Samsung has been able to get a good reputation from many people through its superb after sell services, which include giving a warrant (Carnahan & Somaya, 2013).

Apple Company is also known for its expensive and unique products. Apple merges its operations with the Foxconn among other minor partners. Foxconn is delegated with the role of manufacturing all mobile phones that come under the brand name of apple (Massini & Miozzo, 2012). Through this strategy, Apple Company has been able to go global in that its products are getting market in Asian countries and American countries.

In the effort of implementing a business plan, a number of activities take place to affect it. Some of this activities include carrying a though business market survey aiming to collect information that would facilitate in making the final business plan as well decision (Halvey & Melby, 2007). It is important to note that having a proper knowledge of current market trends gives an upper hand to a business in competing favorably with other businesses.

Getting the recent market news is enhanced through large companies with various research firms. Having the already existing market information, the business managers will therefore be able to focus on the core issues of the business (Handley & Benton, 2009). Consequently, minimal time would be used in drawing the business plan.

Examples of Outsourcing in Business

Large companies are always faced with the problem of selecting a competent manpower. This problem can be solved through outsourcing where companies the type of workers they think fit for their organization (Javalgi et al., 2011).

Considering the main aim of a business being to minimize the expenditure of the company, there is exists unforeseen costs that come across in the process of outsourcing. Costs are incurred in the process of contacting a third party agency (Lacity & Willcocks, 2012).All the money spent in this process is the responsibility of the business but there is tendency by companies to fail to include it in its expenses. In addition, money is used in following the legal procures of contracting. All these costs tend to be excluded in the final company’s financial report hence this makes part of hidden cost.

It is beyond doubt that in the process of outsourcing, the company has to expose some of its secrets to the contracting agency. This may be sometimes risky, as information may be made known to the rivals. In addition, information relating to finance may be made public hence posing a great threat to the company.

Despite numerous researches done on this, there exist some gaps, for instance, there are no intentions to counteract with the burning issues resulting from outsourcing, and hence it forms a fertile ground for further research.

1. What are the disadvantages and disadvantages of outsourcing in business?(primary)
2. Are there existing gaps that need to be addressed?
3. Is outsourcing an outdated strategy or latest strategy in business?

Both qualitative and quantitative methods were employed in carrying out research on outsourcing. Methods employed in collecting the data ranged from, observation, interview among other methods. These methods proved to be effective and dependable in coming with results that can be substantial (Mani et al., 2010). Indeed these methods used were the most effective for the problem at hand. Random choice of participants was made. It is important to note that data collected through direct observation was mainly qualitative and hence seemed hard to people. In order to make it simple, drawing tools were used to present it (Lacity & Willcocks, 2013). Data collected through interview was quantitative and was more meaningful compared to quantitative one.

Moreover, quantitative data collected was put into graphs to make it more meaningful tend adverse research has been done on the same topic and hence a lot of information was available in the internet that opened a platform for comparison.

The process of collecting the data was not smooth from the start to the end as several constraints hindered its success. Some of these limitations included;

1. The formulation of research aims and objectives posed a problem, as there was the feeling that the aims were so broad.
2. Also choosing data collection methods was also a problem as we were uncertain of which method best suited the scope of study.
3. Coming up with a scope of discussion was not as easy task as we were not used to producing such long academic papers.

Market Research and Manpower Outsourcing

In order to come up with successful research conclusions at the end, we had to come up with strategy on how to spend out the available time. First, we had to come up a research goal, which would act as our guide. Secondly, figuring out where to conduct the research was our next step in our plan. This was followed by setting ways of conducting the study then the actual study. Lastly, after gathering data we had to make sense out of the collected research.

Conclusion

Verily it is true beyond doubts that the main aim of company to outsource is to reduce the expenditure in its operations expenditure. As mentioned earlier, sourcing of business operations minimizes labor costs and manufacturing process (Lacity et al., 2010). A business will not be worthy existence if the operation costs outdo the returns given back. Outsourcing helps a company delegate some of it minor activities to other agencies hence concentrating on the core issues. Hence, with this kind of business strategy, working day and night become easier.

However, there are some dangers associated with; outsourcing and some of these challenges are so hard to be dealt with. It is clear when carrying out the process of outsourcing; some crucial information can be leaked to competitors or malicious individual hence posing a great threat to confidential business information. The gaps existing in the literature are that there are no interventions put into place to deal with issues arising from outsourcing in business.

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