IBM Outsourcing Success and Consumer Satisfaction

This assignment explores the success of IBM's outsourcing strategy and its impact on consumer satisfaction. It utilizes qualitative research methods to demonstrate how IBM's outsourcing practices have led to high customer satisfaction rates compared to competitors. The analysis is supported by relevant literature and case studies.

Running head: BENEFITS AND ADVANTAGES OF OUTSOURCING
Benefits and Challenges of Outsourcing Business Function to Third Party Bank
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1BENEFITS AND ADVANTAGES OF OUTSOURCING
Table of Contents
1. Introduction..................................................................................................................................2
2. Project objective..........................................................................................................................2
3. Project Scope...............................................................................................................................3
4. Literature Review........................................................................................................................3
4.1. Concept and Impact of Outsourcing.....................................................................................3
4.2. Benefits of Outsourcing........................................................................................................5
4.3. Limitations of Business Functions Outsourcing...................................................................6
4.4. Research Gap........................................................................................................................7
4.5. Research Hypotheses............................................................................................................8
5. Research questions/hypothesis....................................................................................................8
6. Research design and methodology..............................................................................................9
6.1. Quantitative Research...........................................................................................................9
6.2. Qualitative Research.............................................................................................................9
7. Research Limitations...................................................................................................................9
8. Time schedule............................................................................................................................10
9. Conclusion.................................................................................................................................11
Reference List................................................................................................................................12
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3BENEFITS AND ADVANTAGES OF OUTSOURCING
1. Introduction
Outsourcing can be understood as a process implemented by several companies for
lessening the expenses through transferring all their business parts to the third-party suppliers
rather than carrying it out within the company. Such strategy is implemented by the
organizations for decreasing operating costs (Dhar 2012). This serves as a common procedure
adopted by the technology companies along with several business sectors. Several business
functions including producing parts, information technology, accounting, marketing functions
and human resources. There are several organizations that outsource their business to several
companies like IBM, Kingston and Hewlett Packard. The objective of the research will be to
consider the instance of IBM and analyze the advantages and disadvantages of outsourcing any
business function from other third-party organizations.
2. Project objective
The objective of the research is to realize the advantages and issues associated with the
business function outsourcing from third party organizations (Ellyn 2015). The selected
organization namely, IBM is focused on business outsourcing from another organization. This is
due to the reason that it decrease the operation cost. However, business process and functions
outsourcing comes with several disadvantages as well. The company that is focused on
outsourcing business deals with loss on management control over the outsourcing functions. The
company deals with the risk of a data loss, decreasing consumer satisfaction along with several
labor concerns. The objective of the research is to reveal the benefits and disadvantages related
with the IBM’s business process outsourcing (Epstein 2012).
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4BENEFITS AND ADVANTAGES OF OUTSOURCING
3. Project Scope
The research will be focused on description of outsourcing process of IBM along with the
third party organizations. This paper will be focused on analyzing whether the company has
failed or successful in all its outsourcing functions (Gonzalez, Gasco and Llopis 2014). In
addition, the research will be focused on analyzing the advantages along with limitations that is
faced by the company while outsourcing business functions. The strategies of outsourcing
implemented by IBM Company and the third party companies facilitates in analyzing its
capabilities to attain business success. Moreover, the current report will focus on evaluating
several outsourcing theories offered by several market experts for analyzing the limitations and
rewards (Gorla and Somers 2014).
4. Literature Review
4.1. Concept and Impact of Outsourcing
Gospel and Sako (2014) explained outsourcing as a process of transferring
responsibilities, authority and work to a third party organization. This facilitates several
companies in focusing their attention on their major business aspects in order to attain increased
competitive advantages through decreasing their operation costs. Companies have the capability
to outsource all its business functions or just a single part of its business. According to Han and
Mithas (2013) IBM Company focuses on transferring the supervision management process of an
IT system along with carrying out end-user support process within the company. This facilitates
in increasing on-site employee support.
Hsuan and Mahnke (2011) evidenced that, outsourcing process of IBM Company is centered
on attaining decreased cost of operation along with enhanced quality of consumer services. This
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5BENEFITS AND ADVANTAGES OF OUTSOURCING
facilitates the company in developing temporary or permanent employment provisions, enhanced
product design and efficient workforce. Along with developing such outsourcing strategies, the
company must centre on analyzing the likely aspects of evaluating the areas of business
functions that must be outsourced from third party organizations (IBM. 2013). Any company is
focuses on outsourcing one or all of the below mentioned business functions:
 Technical functions
 Accounting functions
 Human resource management
 Research functions
 Legal processes
 Service management
 Manufacturing functions
Research conducted by Jain, Hasija and Popescu (2013) explained that benefits of
outsourcing the IT service function in the IBM Company. The company has attained success
after outsourcing this business function through implementing new strategies and technology.
The company is focused on improving all its business policies relied on market situation in
several nations from where they outsource all its business functions. Outsourcing process of IBM
Company has been highly effective in offering its consumers with quality services. Consumer
satisfaction rate is drastically high in IBM in comparison to its business rivals because of its
successful outsourcing process.
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6BENEFITS AND ADVANTAGES OF OUTSOURCING
4.2. Benefits of Outsourcing
According to McIvor (2013) outsourcing services can be used in a business that can offer
considerable advantages to the business along with facilitating them to attain a great competitive
edge. In the recent era, there are several organizations that have implemented outsourcing
function as a major aspect of their business process. The list of outsourcing benefits that are
attained by IBM Company are explained below:
 Focus on Core Business: Outsourcing business functions facilitates IBM in focusing on
the major aspects of its business. It also facilitates the company in implementing all its
resources within its major business operation and improves it further. The company
outsources manufacturing of computer hardware and transfers IT services to third party
organizations to attaining advantage of improved quality and efficiency of its hardware
(Miozzo and Grimshaw 2011).
 Cost Saving: IBM has attained the benefit of decreasing its operational cost through
business function outsourcing including workplace expenses, expenses of employee
salary and expenses of offering manufacturing place to staff. The company has attained
cost advantage over its competitors through offering such facilities in cheap prices in
comparison to other nations.
 Operational Effectiveness: Business function outsourcing provides a company with
capability of third parties that makes sure of increase efficiency within workplace. IBM
Company has maintained an effective organizational structure that facilitates it to focus
on major activities rather than secondary business operations like daily data centre
supervision (Mohr, Sengupta and Slater 2011).
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7BENEFITS AND ADVANTAGES OF OUTSOURCING
 Consumer Satisfaction: Outsourcing advantages includes increased level of consumer
satisfaction as outsourced work is accomplished by experts. This facilitates the company
to offer continuous service to all its consumers efficiently. Outsourcing offers benefit to
IBM in ensuring increased consumer satisfaction through attaining support from data
centers (Sparrow 2012).
4.3. Limitations of Business Functions Outsourcing
Along with several benefits, there are certain limitations associated with business function
outsourcing. Outsourcing popularity has generated several administrative issues that are dealt by
the companies in their business outsourcing. These include:
 Quality risk: Sparrow (2012) stated that business function outsourcing can decrease
standard and quality reputation of a company. For instance, if a vehicle is damaged
because of inefficient vehicle part manufacturing, then the vehicle company might face
damaged reputation risk. The company might charge the outsourcing third party company
certain expenses for such damage but reputation loss will remain with the firm.
 Confidentiality and security: A company’s secured data and information serves as vital
aspects for the company and its loss might adversely affect a company’s revenue.
Outsourcing data maintenance center might bring confidentiality treat of its data (Gospel
and Sako 2014). Faulty regulation of a company’s outsourced data maintenance center
might leak confidential information to its consumers that can adversely impact
company’s performance.
 Easy replication: Business function outsourcing process is quite easy to replicate by
companies. A company might attain competitive edge through outsourcing by its business
rivals that can implement the similar strategy within the business model of the company.
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8BENEFITS AND ADVANTAGES OF OUTSOURCING
For instance, IBM Company might deacrese its expenses through its IT services function
outsourcing process. However, its business rivals like Hewlett-Packard and Dell has
attained the similar advantages through outsourcing (Han and Mithas 2013).
 Hidden costs: At the time of business functions outsourcing, a company needs to manage
rules and regulations of several companies and nations. Numerous outsourcing contracts
come with service charges but the company might have to deal with numerous hidden
expenses (Gospel and Sako 2014). Certain market regulation changes in India might
impact IBM costs as they require following several rules and implement the same within
the company structure.
4.4. Research Gap
Analysis of literature review revealed that there exist certain research gaps in previous
researchers that are to be addressed in the current research. It was gathered that previous
researches failed to explain the great advantages of outsourcing IT services from third party
organizations in attaining competitive advantages. Addressing such gap, the current research will
take an example of IBM Company and this study will conclude that there is an association
between IT services outsourcing and improvement of a company’s core business functions (Han
and Mithas 2013). Previous researches also failed to explain that IT services outsourcing serves
as an efficient management strategy that can be used by the companies in making its business
performance highly efficient. Such gap will also be addressed in the current research through
explaining competitive advantages attained by IBM Company after outsourcing IT service
functions.
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4.5. Research Hypotheses
The research hypotheses that are gathered from conducting the literature review and those are
to be tested in this research are explained under:
 H0: There are negative impacts related with the IBM’s business process outsourcing
functions
 H1: There are positive impacts related with the IBM’s business process outsourcing
functions
5. Research questions/hypothesis
Primary Question: The major research question that is to be answered through
accomplishment of the current research is:
 What are the advantages and issues associated with the business function outsourcing
from a third party organizations?
Secondary Questions: The secondary research questions that are to be answered through
accomplishment of the current research are:
 What are the advantages and disadvantages of outsourcing attained by IBM on any
business function from other third-party organizations?
 What are several outsourcing theories offered by several market experts for analyzing the
limitations and benefits of outsourcing functions on IBM?
 What are the strategies of outsourcing implemented by IBM Company and the third party
companies in analyzing its capabilities to attain business success?
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6. Research design and methodology
6.1. Quantitative Research
The researcher in this research has considered gathering relevant primary data from the
managers of the IBM Company. In carrying out the research, the researcher has considered
developing a questionnaire that will encompass both open as well as close ended uestions. For
this reason, in order to collect relevant quantitative data, survey method is deemed to be the best
option that will facilitate the researcher in collecting significant data from a selected sample
(Epstein 2012). In the recent research, a survey questionnaire will be prepared relied in research
objects for gathering important information for the research. The researcher selected the
outsourcing managers of IBM Company for getting response on the questionnaire by means of
social media platform. Primary data is also collected by the researcher through sending
questionnaire to target participants by e-mail (Hsuan and Mahnke 2011).
6.2. Qualitative Research
Qualitative data in the research of “advantages and issues associated with the business
function outsourcing from a third party organizations” will be gathered from several reliable
sources such as journals, previous research papers, websites and books associated with business
function outsourcing (Epstein 2012). In the recent paper, literature review section was described
through collecting numerous secondary data in order to associate research findings with study
objectives.
7. Research Limitations
The primary data regarding the research topic “advantages and issues associated with the
business function outsourcing from third party organizations” will be collected for the current
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research. Reliability and actuality the collected primary data serves as a key aspect that might
generate a hurdle between the outcomes of research and attainment of study objectives. The
researchers are deemed to have an intention of offering a constructive image of the selected
outsourcing third party companies and IBM through not disclosing the major concerns associated
with the selected companies (Hsuan and Mahnke 2011). For such reasons, the researcher might
deal with issues regarding problem identification along with offering accurate recommendations
to address the same. It is also gathered that another limitation ion collection of secondary for this
research includes manipulation of such data to an extent that can gradually impact the research
quality as well as the research findings.
8. Time schedule
Task Week
1
Week
2
Week
3
Week
4
Week
5
Week
6
Week
7
Week
8
Week
9
Selection of topic
and search for
justification
Constructing
literature
Selecting
appropriate
methods
Data collection
Data analysis and
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12BENEFITS AND ADVANTAGES OF OUTSOURCING
representation
Reviewing the
outcomes
Conclusions and
recommendations
Submitting draft
of the project
Printing and final
submission
9. Conclusion
The objective of the research will be to consider the instance of IBM and analyze the
advantages and disadvantages of outsourcing any business function from other third-party
organizations. The objective of the research is to realize the advantages and issues associated
with the business function outsourcing from third party organizations. It was gathered that
Outsourcing can be understood as a process implemented by several companies for lessening the
expenses through transferring all their business parts to the third-party suppliers rather than
carrying it out within the company. Such strategy is implemented by the organizations for
decreasing operating costs. Moreover, both quantitative and qualitative research will be
conducted in revealing that the outsourcing process of IBM Company has been highly effective
in offering its consumers with quality services. Consumer satisfaction rate is drastically high in
IBM in comparison to its business rivals because of its successful outsourcing process.
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Reference List
Dhar, S., 2012. From outsourcing to Cloud computing: evolution of IT services. Management
Research Review, 35(8), pp.664-675.
Ellyn, B., 2015. New IBM Research Quantifies the Long-Term Impact of IT Outsourcing on Three Business
Metrics. Outsourcing center. Retrieved from < http://www.outsourcing-center.com/2005-12-new-
ibm-research-quantifies-the-long-term-impact-of-it-outsourcing-on-three-business-metrics-
article-37692.html >
Epstein, W.N., 2012. Contract theory and the failures of public-private contracting. Cardozo L.
Rev., 34, p.2211.
Gonzalez, R., Gasco, J. and Llopis, J., 2014. Information systems outsourcing reasons and risks:
a new assessment. Industrial Management & Data Systems, 110(2), pp.284-303.
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., 2014. 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.
Han, K. and Mithas, S., 2013. Information technology outsourcing and non-IT operating costs:
An empirical investigation. Mis Quarterly, 37(1).
Hsuan, J. and Mahnke, V., 2011. Outsourcing R&D: a review, model, and research agenda. R&d
Management, 41(1), pp.1-7.
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IBM., 2013. 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 >
Jain, N., Hasija, S. and Popescu, D.G., 2013. Optimal contracts for outsourcing of repair and
restoration services. Operations Research, 61(6), pp.1295-1311.
McIvor, R., 2013. Global services outsourcing. Cambridge University Press.
Miozzo, M. and Grimshaw, D., 2011. Capabilities of large services outsourcing firms: the
“outsourcing plus staff transfer model” in EDS and IBM. Industrial and Corporate
Change, 20(3), pp.909-940.
Mohr, J.J., Sengupta, S. and Slater, S.F., 2011. Mapping the outsourcing landscape. Journal of
Business Strategy, 32(1), pp.42-50.
Sparrow, E., 2012. Successful IT outsourcing: from choosing a provider to managing the project.
Springer Science & Business Media.
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