Advantages And Disadvantages Of Outsourcing In Businesses

Advantages of Outsourcing

Discuss about the Cost Economics and Supply Chain Management.

Outsourcing is a very common activity in businesses. It is an agreement between companies where a company contracts out one or more of its activities to another company. Outsourcing may involve domestic contracting or foreign contracting. In domestic contracting, a company contracts its activities to another company in the same country while foreign contracting involves contracting of activities between companies in different countries (Tomiura, 2009, pp. 219-226). Some of the companies which have engaged in outsourcing in a great way are the IT companies and different manufacturing companies (Goo, Kishore, and Nam, 2009, pp.119-145). We have many other businesses and companies which have engaged in outsourcing in the modern world to enjoy the many advantages of outsourcing. This research will cover outsourcing in details and give some its major advantages, and some disadvantages of outsourcing in businesses.

The main objective of our research is to research on the main advantages of outsourcing in businesses. In our research, we shall also consider some of the disadvantages which businesses have experienced from engaging in outsourcing activities. Comparison of the advantages and the disadvantages of outsourcing will help us to conclude if businesses should engage in outsourcing or not.

This project will cover the advantages of outsourcing in businesses in details. It will help us to understand some of the major benefits which have resulted from outsourcing in businesses. It will also highlight some of the challenges and disadvantages facing the businesses which engage in outsourcing. The research will also compare the advantages and disadvantages of outsourcing in businesses, and this will help us to make a conclusive statement about outsourcing in businesses.

In the modern world, most businesses have adopted the use of outsourcing to enjoy the numerous benefits associated with outsourcing. As we discussed earlier, outsourcing involves contracting of activities between companies or businesses in the same country or between companies in different countries (Ellram, Tate, and Billington, 2008, pp.148-163). Outsourcing has very many benefits to the companies involved, and these benefits have attracted many companies to the outsourcing activities. Some of the major advantages which result from outsourcing include the following:

Outsourcing helps to increase the profits of the businesses. One of the major reasons why most businesses outsource their activities is to increase their profits. Outsourcing helps to improve the profits of the businesses in various ways, for instance, outsourcing helps to improve the quality of the services offered by the businesses, and this helps to attract more customers to the business, and this increases the profits of the business (Varadarajan, 2009, pp. 1165-1172).

Disadvantages of Outsourcing

Reducing the overall cost of production. Outsourcing helps to reduce the overall cost of production in companies. The companies always outsource the activities or services from the companies which have specialized in providing the outsourced activities or services, and therefore, charge amount which is less compared to the amount which could have been used by the parent companies to do those activities on their own. This will help the companies to reduce the overall cost of production (Gorg, Hanley, and Strobl, 2008, pp.670-688).

High-quality of the outsourced services. The companies will outsource the activities or services from some other companies which have specialized in delivering the outsourced services (Willcocks and Leslie, 2008). Therefore, they offer high-quality services which could have not been met easily by the outsourcing company.

Outsourcing helps the businesses to concentrate on their core activities. In most cases, the businesses outsource some secondary activities which are not in line with their primary or core activities. This will give the businesses an ample time to concentrate on their core activities rather than the secondary activities.

Outsourcing helps in sharing of risks between the two contracting companies. In outsourcing, when some risks appear the two contracting companies are responsible for the risks and share the risks accordingly. It is also good to note that companies outsource their activities from experts who have handled such activities before, and therefore, they have better ways to mitigate some risks which can appear in those activities (Tsai, Lai, and Lloyd, 2012, pp.178-189).

Outsourcing helps in improving the customers’ satisfaction. The outsourced activities or services are done by highl-skilled experts who provide high-quality services to the parent company. The customers of the parent company will benefit from the high-quality outsourced activities or services, and this will help to improve the satisfaction of the customers.

Outsourcing also helps to improve the competitiveness of businesses. The businesses which outsource their activities or services get high-quality services which improve the satisfaction of their customers (Hill, 2008). This will improve the popularity of the business as compared to the competitors and will automatically earn more customers to the business. This will help the business to become more successful as compared to those who don’t outsource activities.

Outsourcing has many other benefits to the companies involved. However, it also comes with some challenges and disadvantages to the companies. It is good for the companies to try and address the challenges which can be avoided (Lacity, Willcocks, and Rottman, 2008, pp.13-34). Some of the major disadvantages of outsourcing include:

Conclusion

The risks associated with sharing of some confidential information between the contracting companies. The transacting companies share much of their information which may include some confidential information which increases the vulnerability of the companies to security attacks.

Another disadvantage associated with outsourcing is some hidden charges which may incurred by the outsourcing company. When the companies are contracting, they sign various documents concerning payment of the contract, but later some other hidden charges such as legal procedures charges or expenses on online documents verification may emerge which makes the parent company incur some unexpected extra charges (Williamson, 2008).

We may also have some administrative limitations especially when outsourcing involves companies in different countries. We have some countries which have very strict rules about businesses, and this makes the outsourcing process to be very difficult.

As we have discussed, outsourcing has very many advantages which outweigh the disadvantages, therefore all the businesses should adopt outsourcing in their operations. Problems and challenges faced by businesses which engage in outsourcing. They also seek to make a conclusive statement of whether businesses should engage in outsourcing or not.

Qualitative research is a research design which involves collection and analysis of non-numerical data (Liamputtong, 2013). In this research design, the data is normally collected in some forms like texts, photos, videos, sound recordings or many other non-numerical forms. The main steps followed in qualitative research are:

Decide on the research topic and formulate the research questions and objectives. This is usually the first step in qualitative research. In our case, our main topic of research is advantages and disadvantages of outsourcing in businesses.

Conducting a literature review. This is where the researcher caries an extensive analysis on the available systems. The knowledge of the available systems is very vital in any research as it will always be used as references. We have already carried the literature review of our research in the section of literature review.

Sampling and sample size. This step involves choosing the best sampling technique and sample size of the research. In our research, we’ll take a sample size of a hundred different businesses selected randomly which engage in outsourcing to do our research.

The data collection method. This is the step which involves the collection of data needed for the research to be completed. We have various methods which can be used in collecting the required data. In our research, we shall use questionnaire method to collect the data of advantages and disadvantages of outsourcing in the selected businesses. To increase the chances of getting more reliable and more valid data, we should make sure we prepare good questionnaires which will be favorable to the respondents. (A questionnaire form which can be used in data collection is shown on the appendix section)

Qualitative Research

Variable specifications and data analysis. After collecting the data, we should specify all the variables accordingly before we start analyzing the data. After variable specifications, we should carry out an extensive data analysis which will help us to get the solution to our research questions. After doing the data analysis, we can now draw the conclusions of our research.

Preparation of the final research project. This is the last step in qualitative research and involves preparing a detailed report which summarizes all the findings of the research (Bowen, 2009, pp.27-40).

In quantitative research, data is collected and analyzed in numerical form. The analysis of simple data is normally done manually, but in cases where the data is very complex, some mathematical devices or software such as Excel or SPSS are employed in the data analysis process (Muijs, 2011). The main steps used in quantitative research are:

Definition of the main problem or topic of research. Like in qualitative research, the first step used in quantitative research involves defining the main topic of research and stating all the research questions and objectives.

Doing a literature review. This involves analyzing the available systems which is very necessary in any research.

Sampling and sample size. This step is undertaken to determine the best sampling technique and the best sample size which will help us to get the best results out of our research.

Preparation of the research instruments. The research instruments are some tools which are used in research. Such tools include the questionnaire forms used in data collection and the computers used in data analysis (Hardre, Crowson, and Xie, 2010).

Data collection. After preparing the research instruments, the researchers go to the field to collect the required data. The researchers should use all the posssible means to make sure they get valid and reliable data.

Data analysis. After collecting the required data, we should specify all the variables accordingly and do a detailed analysis of the collected data. The analysis will help us to answer our research questions and make the conclusion.

Preparation of the final report. Like in qualitative analysis, the final step of quantitative analysis is preparing a detailed report which summarizes the whole research process.

Our research has some limitations. Some of the major limitations facing our research include:

The accuracy or correctness of the data collected. Sometimes, some respondents may give wrong data either knowingly or unknowingly. This leads to the analysis of the wrong data which leads to wrong results.

Unwillingness of some respondents to give information. Some respondents just take the questionnaire forms but refuse to fill the forms, and this will automatically affect our research negatively.

The cost of research is also a limitation to our research. For us to obtain very accurate results, we should carry our research in very many businesses, but this is limited by the capital available for the research.

The results obtained from the research are not 100% accurate but are just a good approximation of the real-life situations based on the sample size used (Neuman, 2014).

Research Activity	Proposed Start Date	Proposed Duration (weeks)	Proposed End Date
Deciding on the topic of research	18TH September 2017	1	24TH September 2017
Doing a literature review	25TH September 2017	1	1ST October 2017
Preparation of the initial business research proposal	2ND October 2017	2	16TH October 2017
Preparation of the research instruments	17TH October 2017	1	23RD October 2017
Collection and analysis of the data	24TH  October 2017	3	15TH November 2017
Preparation of the final business report	16TH November 2017	2	30TH November 2018

Conclusion

In our research, we have discussed outsourcing in details. We have seen the numerous advantages associated with outsourcing in businesses. Outsourcing also comes with some problems and challenges, and it’s the responsibilities of the businesses to addresses these challenges for them to enjoy the numerous benefits of outsourcing maximumly. As we have seen in our research, the advantages of outsourcing overweigh the disadvantages, and therefore, many businesses should embrace outsourcing for them to enjoy the many benefits.

References

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Willcocks, L. L. (2008). Information systems and outsourcing: studies in theory and practice. Springer.

Williamson, O. (2008). Outsourcing: Transaction Cost Economics and Supply Chain Management. Journal of Supply Chain Management, 44(2), 5-16.