Understanding Business Process Outsourcing

This assignment delves into the multifaceted world of business process outsourcing (BPO), examining its motivations, implementation strategies, and potential implications. It requires a thorough analysis of scholarly articles exploring various aspects of BPO, such as decision-making factors, innovation dynamics, global trends, and human resource considerations. Students are expected to synthesize information from diverse sources to gain a comprehensive understanding of this increasingly prevalent business practice.

Running head: BUSINESS RESEARCH
Business Research
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Table of Contents
1.0 Introduction.....................................................................................................................2
2.0 Project Objective..................................................................................................................2
3.0 Project Scope........................................................................................................................2
4.0 Literature Review.................................................................................................................3
4.1 Advantages of Outsourcing Business Functions..............................................................3
4.2 Disadvantages of Outsourcing Business Functions.........................................................5
5.0 Conclusion............................................................................................................................6
6.0 References............................................................................................................................8

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1.0 Introduction
The growth of business across the globe over the past years has lead to a consequent rise of
functional tools. Among the several metrics in the corporate industry, outsourcing is
recognized as one the most influential aspect. In addition to lending a helping hand towards
new firms, the concept has successfully provided direction to well performing enterprises. It
is noted that the multi-dimensional feature along with its several benefits and limitations has
greatly affected decision making process (Mann and Graham, 2016, pp. 530-548). Moreover,
with modernization outsourcing is not only done domestically but also at an international
level. On the other hand, being an integral factor, the tool is referred to be a strategic
approach for organizations.
This particular project takes into consideration the advantages and disadvantages of
outsourcing business functions. Furthermore, the report tends to compare and contrast various
published resources with a motive to understand the notion in a detailed manner. In addition
to a practical approach, various reviewed articles, books, and journals have been utilized to
analyze literature gaps and thereby come to a proper conclusion.
2.0 Project Objective
The major objectives of this report are as follows:
1. To analyze the several advantages gained by outsourcing functions in a business
2. To analyze the several disadvantages gained by outsourcing functions in a business
3.0 Project Scope
Outsourcing of process in an organization is a complex topic that requires detailed analysis
and investigation. The use of secondary sources in this report helps to understand the concept
in a comprehensive manner. Further, a thorough research into the field enables to locate gaps
in the literature. This project tends fill up the pitfalls and evolve with a suitable conclusion.
4.0 Literature Review

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4.1 Advantages of Outsourcing Business Functions
Outsourcing is recognized to act as a support system to business operations. Being a
multifaceted aspect, outsourcing can be divided into several phases. The journal by Lacity
and Willcocks (2014, pp. 66-92) classifies advantages of the feature into the following type:
1. Expert Operations: As compared to inexperienced workers in a company,
outsourcing allows access to expert knowledge and skills. Apart from building up
relationships with professionals in the industry, the tool enables firms to gather and
benefit from their technical know-how. Additionally, Wuyts, Rindfleisch and Citrin
(2015, pp. 40-55) states that outsourcing agencies also take an interest in business
firms by providing them with external investments as well.
2. Enhances Core Business: Outsourcing activities from a firm helps the management
to differentiate between core and non-core functions. An increased concentration on
core processes not only helps to develop competency levels, but also contributes
towards building competitive advantage factors (Gerbl et al., 2015, pp. 505-518).
Moreover, consideration of outsourcing within a firm assists in developing a more
functional strategy for development as well.
3. Cost Reduction: Similar to the journal of Lacity and Willcocks (2014, pp. 66-92), the
book of Szymczak (2013, p. 59) include a detailed insight into the advances of
outsourcing. It is noted that a decrease in expenditure results in a rise of savings.
Moreover, products and services are modernized and fulfil the needs of customers at a
comparatively lower cost. The 20%-30% cost cut-down by external agencies,
significantly help in stabilisation of newly built companies (Chou,
Techatassanasoontorn and Hung, 2015, pp. 30-43).
4. Enhanced Innovation: Outsourcing business processes directly or indirectly aids to
develop a sense of innovation within a firm. An increased focus on core activities

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enables the workforce to work in a proficient manner. Further, a rise of creativity also
tends to strengthen work relationships along with increasing productivity levels.
However, Auksztol and Chomuszko (2013, pp. 131-144) considers this factor to be
not happening in the real world.
5. Time Management: According to Verma, Singh and Gupta (2013, p. 125),
businesses are built upon the foundation of uncountable operations. Every activity
requires time and attention by the employees. Moreover, peak seasons also lead to a
rise of demands that need to be taken care of by firms. Stanfield and Thompson
(2014, pp. 189-209) emphasises on the fact that outsourcing helps to lower pressure
and handle activities effectively along with timely delivery.
However, apart from the five major advantages mentioned in the work of Lacity and
Willcocks (2014, pp. 66-92), outsourcing tends to offer a few other benefits as well.
Moreover, the journal does not take into consideration the modernized facet of outsourcing.
As stated by Smogavec and Peljhan (2016, pp. 410-423), the various ways in which the tool
helps an organization as the following:
1. Outsourcing helps the management to join hand with specialized agencies that guide
towards escaping risks and dangerous situations.
2. The growth of social and digital media enables firms to contact freelancers at any
corner of the world to perform overseas outsourcing.
3. It is noted that creation of contractual agreements in the process helps to lower
informal relationships and communication within an organization.
4. Outsourcing activities not only simplifies management of projects, but also ensures
timely delivery and increased customer satisfaction.
4.2 Disadvantages of Outsourcing Business Functions

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According to Cromie and Zott (2013, p. 131), outsourcing of business processes tends to
possess various drawbacks that severely limit its effectiveness. However, Mol and Brewster
(2014, pp. 201-234) mentions that the various difficulties can be controlled with proper
planning and coordination between a company and an external agency.
The four principle disadvantages stated in the work of Mosca and Bordelon (2017, pp. 170-
198) are the following:
1. Internal De-motivation: An increase of outsourcing functions might make the
internal employees de-motivated. Further, the increase of dependency on external
professionals would also result in a growth of incapability among the workforce as
well. On the contrary, Parlour (2016, p. 439) declares that outsourcing human
resources and its several phases would develop capacities.
2. Lowered Managerial Control: Outsourcing a process from the company makes its
beyond the reach and governance of the management. An increase of dependence on
external firms also leads to loss of individuality. In addition to a collapse of
administrative control, outsourcing tends to limit creation of competitive advantage
factors (Lacity and Willcocks, 2015, p. 147). Also, there is a rise of informal and
casual behaviour with lowering control of the supervisors or departmental managers.
3. Planning Risks: Successive planning for the future is one of the most crucial aspects
for growth of business. It is noted that outsourcing of activities at times result in low
outputs, which limits the capability of a firm. On the other hand, external
professionals who have no idea about the motives of a compact add up liabilities. As
mentioned by Peck (2017, p. 373), it is the appropriate balance of interior and exterior
workmen that ensure fulfilment of targets.
4. Information Risks: In addition to intellectual capital risks, excess outsourcing tends
to build up confidentiality issues for an organization. As per Oshri, Kotlarsky and

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Willcocks (2015, p. 439), the increase of reliability on agencies put necessary
information at risk. On the other hand, stealing of private data is another issue that
confronts outsourcing. Moreover, the creation of such a situation along with leading
to loss for any firm also significantly affects its relationship with big third parties.
However, in addition to the four major drawbacks stated by Mosca and Bordelon (2017, pp.
170-198), the work of Bowman (2016, pp. 195-201) reconsiders disadvantages of
outsourcing. Apart for the above mentioned limitations, Hill (2015, p. 489) list down a few
more which are as follows:
1. Despite of outsourcing being considered as a cheaper option, there exists few hidden
cost that greatly affect budget of a firm.
2. Like every organization, external agencies consider outsourcing to be a form of
business (Molinelli and Paccagnella, 2013, pp. 417-428). It is noted that being
financially attached to any outsourcing company leads to a rise in risk levels.
3. Outsourcing incorporates various moral issues. Customers without a preference for
this aspect tend to disregard any organization that involves in these activities.
4. Lastly, exchange of complex data that governs business activities is an inflexible task.
Based on the idea of Garrigos-Simon, Gil-Pechuán and Estelles-Miguel (2015, p.
129), it can be stated that problems like this arise in the case of overseas outsourcing.
5.0 Conclusion
Based on the above project it can be inferred that the concept of outsourcing hold quite a few
advantages and disadvantages that greatly impact its smooth functioning. Further, it can be
understood that with a growth of the corporate world and the aspect within it, there has been a
rise of external agencies as well. Concerning benefits of outsourcing, expert operations, cost
reduction, enhanced innovation, time management and a focus on core business tend to be the
most contributing factors. On the contrary, dynamics like internal de-motivation, lowered

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managerial control, planning and information risks are considered to be most adversely
affecting elements. However, there do exist a few more facets that acts as a benefit or
challenge to business firms. Also, analyzing the literature in the field it can be inferred that
there lies gaps that need to be filled. Furthermore, it can be concluded that with development
of effective plans and coordination with the management, a business organization will be able
to control the various negatives and enjoy the benefits of outsourcing.

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6.0 References
Auksztol, J., and Chomuszko, M. (2013). Business processes outsourcing: Origin and
development. Zarządzanie I Finanse, pp. 131-144.
Bowman, A. (2016). What a waste: Outsourcing and how it goes wrong.Manchester:
Manchester University Press, pp. 195-201.
Chou, S. W., Techatassanasoontorn, A. A., and Hung, I. H. (January 01, 2015).
Understanding commitment in business process outsourcing relationships. Information and
Management, 52, 1, 30-43.
Cromie, J. and Zott, L. M. (2013). Outsourcing. Detroit: Greenhaven Press, p. 131.
Garrigos-Simon, F. J., Gil-Pechuán, I., and Estelles-Miguel, S. (2015). Advances in
crowdsourcing. Cham: Springer, p. 129
Gerbl, M., McIvor, R., Loane, S. and Humphreys, P., (2015). A multi-theory approach to
understanding the business process outsourcing decision. Journal of World Business, 50(3),
pp.505-518.
Hill, C. W. L. (2015). International business: Competing in the global marketplace.New
York, NY: McGraw Hill Education, p. 489.
Lacity, M. and Willcocks, L., (2014). Business process outsourcing and dynamic
innovation. Strategic Outsourcing: An International Journal, 7(1), pp.66-92.
Lacity, M. C., and Willcocks, L. (2015). Nine keys to world-class business process
outsourcing. London: Bloomsbury, p. 147.
Mann, L. and Graham, M., (2016). The Domestic Turn: Business Process Outsourcing and
the Growing Automation of Kenyan Organisations. The Journal of Development
Studies, 52(4), pp.530-548.
Mol, M.J. and Brewster, C., (2014). The outsourcing strategy of local and multinational
firms: a supply base perspective. Global Strategy Journal, 4(1), pp. 201-234.

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Molinelli, F. E., and Paccagnella, L. S. (2013). Economics of regulation and outsourcing.
New York: Nova Science Publishers, pp. 417-428.
Mosca, J.B. and Bordelon, G.R., (2017). Human Resource Managers Detect Management and
Legal Disadvantages to Outsourcing. Business, Management and Economics Research, 3(2),
pp.170-198.
Oshri, I., Kotlarsky, J., and Willcocks, L. P. (2015). The Handbook of Global Outsourcing
and Offshoring: The Definitive Guide to Strategy and Operations. Palgrave Macmillan UK,
p. 439.
Parlour, D. (2016). Successful outsourcing and multi-sourcing. London: Routledge, p. 439.
Peck, J. (2017). Offshore: Exploring the worlds of global outsourcing. Oxford: Oxford
University Press, p. 373.
Smogavec, T., and Peljhan, D. (January 01, 2016). Satisfaction with outsourcing: Empirical
analysis on the case of SMEs. Corporate Governance, pp. 410-423.
Stanfield, K., and Thompson, S. (January 01, 2014). Outsourcing. Biall Handbook of Legal
Information Management. Farnham : Ashgate, pp. 189-209.
Szymczak, M. (2013). Managing towards supply chain maturity: Business process
outsourcing and offshoring. Houndmills, Basingstoke, Hampshire; New York, NY : Palgrave
Macmillan, p. 59.
Verma, S. B., Singh, S. K., and Gupta, S. K. (2013). Business process outsourcing. New
Delhi: Shree Publishers and Distributors, p. 125.
Wuyts, S., Rindfleisch, A. and Citrin, A., (2015). Outsourcing customer support: The role of
provider customer focus. Journal of Operations Management, 35, pp.40-55.