HI6008 Business Research: A Report on Business Outsourcing

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HI6008
BUSINESS RESEARCH

Contents
Introduction........................................................................................................................................3
Literature Review..............................................................................................................................4
Conclusion.........................................................................................................................................8
References.........................................................................................................................................9

Introduction
Business outsourcing has become a serious trend in human resources from many
times. This is basically the practice in which certain jobs have to send outside of the
company instead of maintaining them in the same place. Most of the company, while
they are large or small, are now turn into outsourcing because it is the way to grow
and also governing payroll and other upward costs. One of the options of
outsourcing is to hire contractors who are independent. The independent contractors
are flexible and also they are lower in the matter of costs. While outsourcing firms
are able to take high costs for outsourcing. Here in this section, the discussion
continues goes on in literature review. The literature review is an explanation that
what is to be published on the topic of the authorized scholars and the researchers.
The main work of the literature review is to convey the ideas and knowledge that is
already established in the topic to the reader who wants to read the literature review.
The literature review is the guiding concept and it is also defined like that. In the
literature review, it identifies the areas of argument in the literature.

Literature Review
According to the Duan, et. al., 2014, business outsourcing has recently developed
and important. But the academic research on this experience is inadequate. The
outsourcing business has normally used the TCE (transaction cost economics) lens.
The transaction cost economics help to provide a useful framework and it also
emphasizes the structures of governance that shows the relationships between the
market and their hierarchies. The outsourcing generally involves hiring outside
service providers to perform the operation of the company on behalf of the business
owner. The distribution of outsourcing is like payroll processing, accounts payable,
and bookkeeping like work. The outsourcing of the business does affect the internal
business cycle but it also determines the particular business performance in the
different phases of the business cycle. There are several investments plan for
business outsourcing to get the benefit in the market without taking the risks.
The outsourcing business basically reduces the costs of the operations, at the time
when economic decline. The meaning of outsourcing is "to grow the business as
when there is a need, without any major investment". It actually saves money and
also time. The business person can definitely realize the reduction of the costs by
the improvement in the internal process and also with the reduced costs. Product
distribution and also the management of the customer care cuts down the cost of the
operations automatically. Business outsourcing makes the economic sense because
it requires huge investments if they try to set up new things. Such as if the business
person wants to open the warehouse near the port for this it is better to outsource
the warehouse for their business instead of taking land and constructing the new
warehouse this takes lots of investment and time. If the business person reduced the
spending on in house investment capitals than it also down the breakeven points and
this is the point where the business is not in any profit or nor in the loss. In the
business environment, the risks come particularly any time when the cycle of
business takes the turn (Duan, et. al., 2015). It is the benefit of the outsourcing that it
provides the opportunity through which a business person can transfer their risks to
the outsourcing service providers in the business. The outsourcing service always
stands to take the risks of the business as by factors such as technological changes
rapidly and also changes in the government regulations.
The main features of the outsourcing business are:
Streamline chains of supply: there are unified system are maintained and created
advance touch points in between the front, middle and back offices of the industry.
The work is divided into the front, middle and back offices and due to this, it
maintains the flow in the work and forced to complete the work on time.
Refresh the customer’s experience: its main work is to personalize through
experiences and empower the people that they serve.
Digitize Enterprise processes: it transforms the business model by redesigning the
process of the organization from the inside or from the outside.
Digital workplace service: it helps to enhance the mobility of the enterprise with the
latest technologies and creative models.
Multi-vendor support system: this is the system support services that can help IT
support management through multiple streamline and vendors and they contract with

the single vendor that helps to care for the technology that supports the needs of the
organization.
The outsourcing requires moderation and the cautious approaches for the
implementation of the outsourcing. For example if there is a recession comes in the
business and it causes to terminate many of the employees and then outsource of
the business operations. But this is a great loss because it affects the company and
the loss of many experienced employees. So for this always balance the insourcing
and outsourcing strategies to maximize the profit and value creation (Shan, et. al.,
2015). There are some of the advantages of outsourcing in the business and that is:
The advantage in the overall costs: it reduces the need to hire the persons for the
in-house therefore many operational cost and recruitment cost get reduced to a great
extent. This also helps to reduce the time and efforts that are to be done on the
training and also save training costs. For example if any company wants to hire the
professionals for maintaining their customers service but it will cost too high for the
company and in comparison for this the outsourcing industry already have their
professional which has the experience of many years to handle the project and
outsourcing industry takes the project at the fixed costs that and also the costs is
less than to hire the new one in the company and also invests money and time for
the training for the new members.
Manpower cost gets low: the cost of the manpower get much lower as compared
to the host country. Suppose if there are too many educated people in the country
but there is no work so this causes the low cost of the labor. For example in India
there are many people who are educated but they are unemployed only because of
fewer jobs in India so many small and medium outsourcing company gain maximum
profit from there and also the labor costs are low so it will be more profitable for the
outsourcing industry and also to the organization who assigned the work to the
outsourcing industry (Sako, 2014).
Employment, Exports and Stimulates Entrepreneurship: outsourcing also affects
Entrepreneurship, exports, and employment in the country where actually
outsourcing is done for an example in India there are many educated unemployed
people so for that there are many profits for outsourcing in this place.
Access to Professional: most of the tasks in outsourcing is given to the person who
is skilled in a particular field. This helps to provide better service and less number of
errors and also the misjudgment. For example if an organization hired a new
employee for their work then it will effect in the costs because the costs of the
training is also to be managed but the outsourcing have their own professionals with
skills to handle the project and complete the task on time, so it will be more
beneficial for the organization to give the project to the outsourcing company.
The requirement of Investments are reduced: the most of the organization try to
save the investment on the new technologies, software and other infrastructure
because these all are handled by the outsourcing partners (Gerbl, et. al., 2016). The
outsourcing partners have their own software's and also have the latest technology
system to manage the work of the organization. So this will again reduce the costs of
the organization to purchase the new technologies software and infrastructure.
Sharing of Knowledge: the outsourcing helps the organization for sharing the
knowledge and also the best practice in between both organization and outsourcing.

It definitely helps to develop the goodwill between the industries. If both the industry
shares the reliable and trustworthy things in between them then it will help to make
the bond and also if the outsourcing company maintain their work on time and
provide the actual knowledge to the organization and do the guaranteed work then it
will help to build the trust and more will be assigned in the future by the organisation.
There is also a disadvantage of outsourcing and that is:
Lack of customer focus: the outsourcing industry may handle the work of any
organization at a time, it that situation the vendors may not be able to focus on any
individual organization's tasks. Due to this the reputation of the organization get
down or may suffer (Liu, et. al., 2015). The outsourcing always take the work from
much other organization and handle their work in parallel and the vendors not able to
pay the full attention to one work and lose the focus of the customers but this will not
harm the outsourcing but this definitely harm the organization and they lose their
valuable customers and also get bad feedback.
Threat of Security: the personal or inside news may be leaked to any third party for
any bad sake. That is why there are security issues while working with outsourcing.
The information that is leaked may cause losses of the company and also it gives
advantages to the competitors to rise up. Culprits are found anywhere it due to earn
extra money or to take the revenge, this is the reason why organization does not
trust on the outsourcing company for some time because from their some sensitive
data get leaked by someone and in result it will affect the organization and also give
the chance to the competitors rise up and comes on the top in the market (Eggert, et.
al., 2017).
Ethical issues: the main ethical issue is that taking employment from another
country instead of hiring employees in their own country and it gets outsourced to
another country. If the organization hired the employees from the same country then
unemployment will be reduced but the organization assigns the work to the
outsourcing of other countries and this increase in unemployment in the country.
There is also the misunderstanding with the contract and also lack of
communication, delayed services and also poor quality. The outsourcing is mostly
used as an effective business strategy that may help to reduce the cost and also
bring better software to access. But there are also many risks that can affect the
business and the project. There are some of the common risks that have to be
discussed now:
Loss of control: loss of control over the outsourcing of the project is the biggest
risks that affect the CIOs. It is due to lack of communication and also due to slow
responses. The best way to move out from these risks is to manage equally by the
company and the vendor. It will be a cure if communication is improved with the
outsourcing team and also confirms that the in-house team will also understand how
to handle the project (Rekik, et. al., 2017).
Language Problem: communication is the most important factor in business
outsourcing. If the team will not be able to speak the language in which all are
communicating it get falter. For avoiding such risks one have to carefully choose the
country from where the outsourcing is done. Choose the service provider which
guarantees that the team will definitely communicate in the preferred language.

Hidden costs: the outsourcing is the cost-effective idea but it is not only the solution
for the business because if anybody can see the success in the outsourcing
relationship for that one will need to acquire the costs such as the pay of the project
manager or the other cost like transitioning. The key way to maintain this problem is
too aware of the hidden costs for outsourcing. From this idea, an individual will have
clear knowledge about the actual costs and reductions that outsourcing business
brings to the company.
Data security: the most important task for the organization is that to select the
reliable service provider for outsourcing and to avoid the data security risks. This is
important at that time when the project involves highly sensitive information. In this
type of situations and individuals have to find out the information about the
outsourcing industry that earlier they handle this type of sensitive data or not (Lacity,
et. al., 2016). And also ask the industry how they manage the sensitive data
information in the past.
Quality control: the end of the result is to ensure the project that is going to be
delivered is of international quality standards. The working software products are
received only to find and out the bugs to the very next day, after that the service
provider is not responsible for any type of risks. Also to maintain the quality of the
project a professional is hired of certified quality assurance to access the quality of
the project (Ding, et. al., 2018).

Conclusion
Business outsourcing is the process of hiring another industry and individual from
domestic or from international level to handle the business activities. Now it has
become common in most of the company, the company is small or medium in size
and their business is also small so for this type of company it is difficult to develop
because of the financial or lack of manpower. The outsourcing company helps to
handle the work for this type of companies and also for the big organization in which
the count of the customers are too much that they enable to handle it. The
outsourcing company handles the project of the companies which lack resources
and budgets to manage their project themselves.

References
 Cui, Z., 2017. The Impact of Switching Costs on the Outsourcing of
Knowledge‐Intensive Business Processes. Decision Sciences, 48(1), pp.71–
107.
 Ding, Huang & Tang, 2018. Sustainable supply chain collaboration with
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Production, 186, pp.215–228.
 Duan, C. et al., 2014. Firm valuation effects of the decision to adopt
relationally governed business process outsourcing arrangements.
International Journal of Production Research, 52(15), p.4673.
 Eggert, A., Böhm, E. & Cramer, C., 2017. Business service outsourcing in
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 Lacity, M., Khan, S. & Carmel, E., 2016. Employing U.S. Military Families to
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 Liu, S. & Deng, Zhaohua, 2015. Understanding knowledge management
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 Rekik, M., Boukadi, K. & Ben-Abdallah, H., 2017. An end-to-end framework
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 Sako, Mari, 2014. The business of the state.(government business process
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 Shan Liu & Zhaohua Deng, 2015. Understanding knowledge management
capability in business process outsourcing: A cluster analysis. Management
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