Outsourcing Business Functions: Advantages and Disadvantages

This assignment examines the practice of outsourcing business functions within organizations. It delves into the motivations behind outsourcing, highlighting the need to focus on core competencies and access specialized expertise. The research explores both the benefits and drawbacks of outsourcing, emphasizing the importance of careful selection of outsourcing partners and well-defined terms and conditions. Real-life examples are used to illustrate the impact of outsourcing decisions on businesses.

RUNNING HEAD: Business Research
Business Research
Advantages and Disadvantages of Outsourcing Business Functions

Table of Contents
Introduction...........................................................................................................................................3
Project Objective...................................................................................................................................3
Project Scope.........................................................................................................................................3
Literature Review..................................................................................................................................3
Research Questions...............................................................................................................................5
Research Design and Methodology.......................................................................................................6
Research Methods.............................................................................................................................6
Research approach............................................................................................................................6
Collection of data..............................................................................................................................6
Technique of sampling.......................................................................................................................6
Reliability and Validity.......................................................................................................................7
Ethical Consideration.........................................................................................................................7
Research Limitations.............................................................................................................................7
Research Schedule (Research Plan).......................................................................................................7
Gantt chart........................................................................................................................................9
Conclusion.............................................................................................................................................9
References...........................................................................................................................................11

Introduction
The research report is based on the topic ‘Advantages and Disadvantages of Outsourcing
Business Functions’ and this section of the report will contain the details of the research data
collection and methods undertaken to complete the research. Outsourcing can be understood
as the process where the business organisations transfers their business functions to other
companies to get them completed by paying a fee or price for it. It means that the business
functions can be completed by the outsiders rather than completing them by internal teams.
This process is helpful in reducing costs of the business and brings expertise in the business
functions (Pratap, 2014). The research will highlight the advantages and disadvantages of
such process by collecting reliable data from different sources. This research report will also
include the methods adopted for conducting the research.
Project Objective
The main objective of this research is to identify the advantages and disadvantages of
outsourcing business functions. This objective will be achieved by going through various
research papers, journal articles, books and many other web sources of information. The
objective is to determine whether the businesses should outsource their business functions or
not.
Project Scope
The scope of the research is wide as Outsourcing business functions is one of the significant
decisions which is taken by the companies. Different reviews and opinions given by various
authors will be discussed in order to know whether it is beneficial to outsource business
functions or it is harmful for the privacy concerns of the company.
Literature Review
Outsourcing of business functions is a commonly used method nowadays by the business
organisations. It is a significant tool for the companies through which the businesses can get
their work done in reduced costs and with better perfection. It helps in deriving the
competitive advantage for the businesses. There are several advantages of outsourcing the

business functions and also some of the disadvantages. Various authors have different
opinion about the same.
It has been opined by Krstic and Kahrovic (2015) that Outsourcing of business functions lead
to several advantages like building core competency, flexibility, reduction of costs and
reduction in the required capital investment. Another opinion was given by Iqbal & Dad
(2013) who said that the companies handover their functions to other companies to seek
perfection and to focus on their core functions. This leads to the global advantages to the
companies by letting them compete with the other organisations. The main reasons why
businesses decides to outsource their functions includes improvement in the flow of cash,
payments, staffing and in the whole business performance. Outsourcing is adopted by the
business to get competitive advantage at a global level. Because of the use of technology
accessed from different parts of the world, the business is able to provide better services and
products to the customers. This also enhances customer satisfaction and also enlarges the
scope of the companies and their growth in the industry (Marvin, 2011).
In contrast to the above views there are some of the authors which are against outsourcing the
business functions. In their view, outsourcing of the business functions can lead to the threat
to privacy and confidentially of business functions of the company. It also includes some
hidden costs which increases the overall cost of operations of the business. It also creates
some of the quality issues with the functions which affect the customer satisfaction.
Outsourcing can also lead to the loss of managerial control which creates a threat to the
privacy of the organisations. It can create issues between the parties and also the response and
communication between the parties can slow down. In the views of Brcar (2011), outsourcing
industry will rise in future.
Outsourcing of business functions can bring competitiveness in the organisations. There are
many examples which prove that outsourcing of the business functions can be advantageous
as well as disadvantageous. According to Cowley (2004), the biggest example of failure of
outsourcing is the case of cancellation of an outsourcing contract between JP Morgan and
IBM where the contract of $5 billion was cancelled by JP Morgan and they started their in-
house production facilities which was much more profitable for them. Another example
shows the success story of outsourcing the business functions. The example is of P&G which
outsourced its Research and Development activities which ultimately increased the overall
revenue of the company.

Also, the statistics shows that outsourcing has become famous in the last two decades and it
brought an increase of savings in the savings of the companies from 10 to 15%. The countries
nowadays are investing huge amounts on the development of outsourcing functions. United
States contributed $172 billion in the industry in 2009. There are around 145 organisations
from United Kingdom and United States which was surveyed in which 23% of the
organisations experienced benefits of costs. The companies which uses outsourcing services
the most are Information technology, web designs, recruitment services and more. The
multinational companies are taking it seriously and this has been proved by looking at the
statistics. In the views of Sharma & Loh (2009), There will be tough competition in the
industry and the number of o0utsourcing companies have been doubled between the years
2005- 2008 and 605 out of them are showing their interest in expanding their services. The
companies have saved 3.5 times than their actual savings.
It is finally advised to the companies that before outsourcing the business activities, the
companies should consider the type of services, reviews for the outsourcing partner, costs,
etc. there should also be effective communication which boosts up the business and also its
performance. Optimum planning should be done before executing them so that results can be
effective. Long term relationships are needed to be developed for so that the benefits for both
the parties can be maximised (Garland, 2015).
The sources used for collecting information in the research are good in quality. It improves
the quality of the research and also makes it a valid one. Also, the sources referred are of the
year 2004 and later which shows that only the latest information is referred to conduct the
research. Most of the research papers are of the year 2012 and above which shows that the
data and information are recent.
Research Questions
These are the following research questions which are needed to be answered through
research:
1. What does outsourcing of business functions mean?
2. What are the possible advantages of outsourcing business functions?
3. What are the disadvantages of outsourcing business functions?

Research Design and Methodology
This section is one of the major sections of the research report because in this section, the
details about the methods adopted for conducting research and for data collection will be
discussed.
Research Methods
There are different research methods through which the research can be conducted. One such
method is mixed method of research which is followed for this research. In this method, both
qualitative and quantitative form of data is collected through many sources of data like
primary or secondary sources. Both the forms of data together form mixed method of
research which is adopted for this research (Zikmund, et al., 2010).
Research approach
Both quantitative and qualitative approach has been adopted for completing the research.
Qualitative approach have been used for collecting the data in the form of opinions,
descriptions and different views while quantitative approach is used for collecting the data in
form of numbers. These approaches have contributed in maintaining the quality of the
research and in gaining various insights for the topic (Wilson, 2016).
Collection of data
Data collection is the process in which the information and knowledge is gained from various
sources in order to answer the research questions. Data is collected from primary and
secondary sources so that proper understanding can be made on the topic of the research.
Primary sources of data are those which help in collecting the first hand data whereas
secondary sources of data are those which provide the second hand data which is already in
use by others. On the topic of the research both the sources of information are used. Primary
source of data is survey questionnaire while the secondary source of data is journals, articles,
books and other web sources (Mackey and Gass, 2015).
Technique of sampling
Sampling can be understood as the process of choosing the subset of population from the
whole population. In this research, simple random sampling technique is used where every
element has same chances of getting selected without any bias. In this survey, different

businesses in Australia are surveyed which deals in many business functions. They are asked
whether they outsource their business functions or not and what are the possible harms and
benefits of the same. The size of the sample is 10. Ten businesses will be selected randomly
to answer the survey questions. It will help the researcher to decide whether outsourcing is
advantageous or disadvantageous (Flick, 2015).
Reliability and Validity
The research is reliable as all the sources used for collecting the information are genuine and
recent. The content of research report is referenced in order to prove their authenticity. The
information is valid as the special permissions are taken from the relevant authorities to
conduct the survey and to access the information from library. Strong passwords are used to
secure the data collected so that the genuineness of the data can be maintained.
Ethical Consideration
Ethics are the principles which decide between the right and wrong. Ethics have been
followed while taking up the research by maintaining the confidentiality of the survey
respondents. The responses given by the respondents are not modified. Even the data
collected from secondary sources have not been misinterpreted.
Research Limitations
The limitations of the research can be understood as the factors which affect the process of
research and its results. Time was one of the main limitations because only limited time was
available to conduct the research program. The sample of the survey to collect the data is
selected randomly which might affect the quality of the data. Also, the sample size is small
which might hamper the results of the research. There was also shortage of resources. This
shortage might affect the quality of the research.
Research Schedule (Research Plan)
Research Plan can be understood as the blueprint for conducting the research step by step. It
is planning of events to carry out the research in given time successfully. The plan for this
research is made and is given below:

S.
No.
Research
Plans
Beginning
date
End date Time
duration
(weeks)
Details
A Research
Planning
1
September
2017
7
September
2017
1 Week This is the beginning of research
where the plans are made for the
further research project. Here the
plans will be made as to how the
data should be collected and what
all sources are available for the
same.
B Execution
of plans
08
September
2017
14
September
2017
1 week The next step after planning is
execution. At this stage, the plans
are executed so that the research
can be followed as per the plans
made.
C Collection
of data
15
September
2017
28
September
2017
2 weeks Data and information for this
research is been collected from
various sources which can be
primary or secondary. In this
research both the sources are
used so that complete
information can be gained to
solve the purpose of the research
(Bryman and Bell, 2015).
D Analysis of
data
29
September
2017
5 October
2017
2 weeks The data collected from various
sources will be arranged
systematically and then will be
analysed so that the results can be

derived.
E Discussion
of findings
6 October
2017
12 October
2017
1 week After collecting and analysing
the data, it is now the next step
which is discussion of the
findings generated from the
analysis. These findings are
discussed to make the
conclusions of the research.
F Conclusion 12 October
2017
18 October
2017
1 week After the analysis of the data and
discussion of the findings,
conclusions are made for the
research.
Gantt chart
Gantt chart can be referred to the graphical representation of the action plan which shows
how the research has been carried out step by step.
Activities 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
A
B
C
D
E
F
September 17' October 17'
Panneerselvam (2014)
Conclusion
It can be concluded from the research project that Outsourcing of business functions is now
practiced by many organisations. It is because it is the need of the hour. The business
organisations nowadays have so many functions to perform in a single go that they are not
able to focus on their core functions which reduce their capabilities. For solving this issue,
they outsource their functions in order to access expertise and to make themselves able to
focus on their core functions. It is clear from the research that before outsourcing the

functions, the companies need to ensures the quality of work of the outsourcing partner and
should go through its reviews. The terms and conditions should be built on which the whole
process can take place. The research clears that it has several advantages and disadvantages
but it depends on the companies, outsourcing partner and level of communication between
them. The research is been completed by taking primary and secondary sources into
consideration. The real life examples of the corporates also discussed to show how it really
affects the companies. It shows that it depends on various factors that the business functions
should be outsourced or in house facilities should be developed.

References
Brcar, F 2011, ‘The Perspective of Business Process Outsourcing in Slovenian
Organizations’, Organizacija, Volume 44.
Bryman, A and Bell, E 2015, Business research methods. Oxford University Press, USA.
Cowley, S 2004, ‘ Update: J.P. Morgan cancels $5B IBM outsourcing deal’. [Online]
Available at:
http://www.computerworld.com/s/article/95933/Update_J.P._Morgan_cancels_5B_IBM_outs
ourcing_dea l. (Accessed 17 August 2017).
Flick, U, 2015, Introducing research methodology: A beginner's guide to doing a research
project, Sage.
Garland, A 2015, ‘Five of the biggest outsourcing failures’, ITproPortal.
Iqbal, Z & Dad, A M 2013, ‘Outsourcing: A Review of Trends, Winners & Losers and Future
Directions’, International Journal of Business and Social Science, Vol. 4 No. 8.
Krstic, B. and Kahrovic, E., 2015. Business process outsourcing as a tool for improving
enterprise efficiency. Ekonomika, 61(3), p.31.
Mackey, A and Gass, S M, 2015,Second language research: Methodology and design,
Routledge.
Marvin, K T 2011, ‘Global Trends in Outsourcing and their Impact (Doctoral dissertation,
Worcester Polytechnic Institute)’.
Panneerselvam, R, 2014,Research methodology, PHI Learning Pvt. Ltd..
Pratap, S, 2014, ‘Towards a framework for performing outsourcing capability’, Strategic
Outsourcing: An International Journal, 7(3), pp.226-252.
Sharma, A & Loh, P 2009, ‘Emerging Trends in Sourcing of business services’. Business
Process Management Journal., Vol. 15 No. 2.

Wilson, V 2016, ‘Research Methods: Mixed Methods Research’, Evidence Based Library
and Information Practice, 11, 56-59.
Zikmund, W G, Babin, B J, Carr, J C & Griffin, M 2010, Business research methods, 8th edn,
South-Western Cengage Learning, Mason, Ohio.