Advantages and Disadvantages of Outsourcing: A Case Study of Hewlett Company

This report evaluates the advantages and disadvantages of outsourcing functions to third parties, with a focus on Hewlett Company. It covers reasons for outsourcing, benefits, drawbacks, and impact of outsourcing. The report also emphasizes on the strategies that should be considered so that company can achieve success in the market.

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Table of Contents
Introduction...............................................................................................................1
Project objective........................................................................................................1
Project scope..............................................................................................................1
Literature Review......................................................................................................1
Reasons of outsourcing..............................................................................................2
Benefits of outsourcing..............................................................................................3
Drawbacks of outsourcing.........................................................................................5
Impact of outsourcing................................................................................................6
Conclusion.................................................................................................................6
References.................................................................................................................7
Appendix...................................................................................................................9
Introduction
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Outsourcing is considered as one of the important technique which is considered by many
companies in the present era. By considering this method, the emphasis is given on the overall
cost so that it can be reduced by transferring the functions of the company to the other party. The
organizations outsource the overall services so that efficiency of the employees can be
maintained. By focusing on this strategy, it has been examined that operating costs and also
profits are achieved which impact on the growth of the company (Aubert, Kishore & Iriyama,
2015).
The functions are also outsourced so that it can be simple for the company to manage the
entire activities. When the activities are outsourced it has been seen that overall level of
satisfaction of the customers can be affected. There are any companies who are considering the
outsourcing method as it can help to enhance the overall market share. In the paper the
discussion will be made on the Hewlett Company who focuses on outsourcing the functions.
This report will emphasize on the advantages and disadvantages related to outsourcing a function
to the other company.
Project objective
In this report the focus will be given on evaluating the advantages and disadvantages of
the functions that are given by the company to the third party. The objective is to evaluate the
advantages and disadvantages of Hewlett Company.
Project scope
It has been investigated that outsourcing is one of the important activities that are
considered by the company to manage the overall work. In this report, the Hewlett Company is
selected in context to advantages and disadvantages of outsourcing. The report will also
emphasize on the strategies that should be considered so that company can achieve success in the
market.
Literature Review
According to Plugge & Bouwman 2017, outsourcing is considered as a technique which
is considered by majority of the organizations in the present era. It has been seen that company
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take help from the other company so that activities can be managed and can be completed with
efficiency. It is necessary for the company to focus on this technique as it can help to complete
the activities in an effective manner. By focusing on online and offline medium, the operations
can be outsourced easily. The involvement of the third party is seen and the activities are
transferred to be completed on time. It is necessary for the company to consider this technique as
it can help to achieve large market share.
Hewlett is considered as the biggest companies in the IT sector. Headquarter of the
company is in Palo, California. The operations which take places in the organization are related
to information technology and cloud programming. The company has also emphasized on
outsourcing the functions to the third company so that it can be completed on time with
efficiency (Dhar, 2012).
Reasons of outsourcing
According to González, Gascó & Llopis 2016, the technique of outsourcing is considered
as an internal process of the company and the company decides the third party to outsource the
activities. The overall operations of the company are controlled by thee third party so that it can
be easy to achieve positive outcome. It also emphasizes on minimizing the entire operational
costs. There are many choices that can be taken into consideration so that work efficiency can be
maintained. Hewlett emphasizes on transferring the operations to other company so that it can be
easy to manage and also it reduce the workload of the company. Hewlett is one of the largest
organizations that emphasizes on outsourcing the activities to the third party so that it can be
easy to complete the activities on time with minimization of the operational cost. It can be
investigated that when operations are transferred to the third party and if the third party does not
complete it in a proper manner then it can give adverse impact on the growth of company.
According to Eggert, Böhm & Cramer 2017, the objective to outsource the activities to
third party is related with maintain the overall service quality so that satisfaction level can be
enhanced. It also impacts the opportunities which are concerned with employment in context to
skills and experience. It is important to consider the strategies so that operations can take place
smoothly. The focus should also be given on the strategies that can help the end users to manage
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the internal structure. Hewlett focuses on outsourcing the activities like human resource
management, technical process and service management.
Benefits of outsourcing
According to Rajaeian, Cater-Steel & Lane 2017, Outsourcing is considered as a
function that can help to the company to grow in the competitive market. In the present era, there
are companies who focus on outsourcing the activities so that it can be managed and completed
with proper efficiency. The advantages that can be derived by outsourcing the activities to the
other company are many like.
Cost saving
By outsourcing the function of the company it can be simple to minimize the entire
operational cost. According to Gospel & Sako 2010, it has been analyzed that when activities are
outsourced to the third party the company saves cost in context to salary expense, work expenses
and also manufacturing expenses. If countries are developed then it has been evaluated that cost
of giving the facilities is cheap in outside the countries. It also helps the company to attain the
cost advantage and it gives impact on the overall growth of the company.
Emphasize on the business
According to Handley & Angst 2015, by transferring the activities to the third party, it
has been analyzed that company can also manage and consider different aspects which are
beneficial to grow. When outsourcing of the activities are taken into consideration then it has
been seen that resources in the business can be improved and also changes can be made in the
entire function of the company. The organization focuses on manufacturing the hardware and the
data is also given to the third party so that activities can be conducted in a proper manner.
Skill Acquisition
According to Lahiri 2016, the activities which are outsourced help the other companies
to have specialization in a particular sector. It is necessary for the employees to have proper
knowledge and skills so that operations can take place in the right manner. This also helps the
company to manage the entire operations of the company with efficiency.
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According to Ramanathan & Krishnan 2015, there are many companies who rather than
giving training to the employees of the latest technologies they focus on outsourcing the
activities to the third party so that activities can be conducted with efficiency. It also helps the
company in reducing the time and expense of the operations and also helps in achieving the
overall competitive advantage.
Operational efficiency
According to Uluskan, Joines & Godfrey 2016, the function of outsourcing helps the
company in maintaining the quality of the products or services which are offered in the market.
The quality is maintained as activities are outsourced to third party that is beneficial to maintain
efficiency in the workplace. The contract related to outsourcing helps the company to focus on
maintaining the quality with customer’s satisfaction. It has been investigated that outsourcing of
the operations can also help the workers to maintain efficiency towards the organizational
activities. in context to Hewlett it has been seen that company implemented a proper structure in
the organization that assist in accomplish entire objectives in an effective manner.
Sharing of risk
According to Oshri, Kotlarsky & Willcocks 2015, It has been examined that agreement in
context to outsourcing can assist the company to share the risks of the organization with the third
market. When the activities are outsourced then it has been seen that risk is transferred to the
third party. It is the responsibility of the third party to maintain the quality of products and
services which is given by the company. But if they are not able to complete the activities in an
effective manner and also with proper efficiency then the outsourcing company can easily sue or
third party have to compensate the loss faced by the company. This also assists the company to
share the risks and also restrict the company to follow set rules and regulations so that quality
can be maintained.
According to Wuyts, Rindfleisch & Citrin 2015, if quality of the products are maintained
than it can be easy to enhance the satisfaction level of the customers. It has been analyzed that
Hewlett focuses on implementing the policies so that it can be easy to maintain the quality of the
services which are outsourced to the party. It is important to focus on the policies so that
activities can be conducted in a right direction.
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Drawbacks of outsourcing
If there are many benefits then it has been examined that there are also disadvantages at
the time of outsourcing the activities. It has been examined that outsourcing has increased by the
companies and with this issues are also faced by the company.
Forfeiture of managerial control
According to Koo, Lee, Heng & Park 2017, it has been analyzed that when contract of
outsourcing is given to the third party then with that the responsibilities are also transferred
which is important to be followed. The organization has the ownership but the control related to
management is transferred to the third party. It has been analyzed that if outsourcing company is
not able to complete the activities according to the set principles then it can give adverse effect
on the entire activities of the company. In context to Hewlett it has been seen that issue was
faced in their data centers which is in California. Therefore, it is necessary to have control over
the activities so that it can be simple to accomplish objectives and goals.
Hidden expenses
When the activities are outsourced of the company, it has been evaluated that company
has to focus on rules and regulations of the countries in which the activities are conducted.
According to Kerzner 2018, it has been analyzed that outsourcing contract emphasizes on the
overall charges of the services but the organization has many expenses which are hidden. There
are also various legal charges that focus on verification the agreement of outsourcing. It has been
analyzed that change in the rules of the market off the particular country can affect the overall
cost of the company as there are various rules and regulations that should be considered so that
organization structure can be maintained.
Obstacle related to language
According to Gurung & Prater 2017, when the activities are outsourced it can affect the
overall image and quality of the company. If the activity of one center is outsourced to the third
party who is from different country then it can create an obstacle related to language and also
customers can be not satisfied with the services of the company. The customers can feel
frustrated at the time of contacting with the executive who is using a good accent. Hewlett
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outsource the operations to Singapore and there are customers who have different accent which
can enhance the frustration level of the customers to understand.
Impact of outsourcing
It has been seen that there is a connection between the IT services which are outsourced
and also improvisation of the function of business, it is important to have effective management
system so that performance can be increased. In figure 1 the cities are reflected India and Brazil.
According to the research, it has been analyzed that there are benefits of outsourcing
which have affected the various factors of the business.
 Selling, general and administrative costs: By focusing on outsourcing the activities it has
been seen that companies have slow growth. The cost related to SG&A was not more
than 4.2 points if comparison is made with the competitors (Gorla & Somers, 2014).
 Income before interest and taxes: it has been examined that companies have evaluated the
growth in income if comparison is made with the competitors. Therefore, company has
attained success in the process of outsourcing.
Conclusion
By focusing on the entire report, it has been analyzed that there are companies who
emphasizes on outsourcing the activities of the company. The advantages are many like
reduction in cost, flexibility and also customer’s services enhancement. There are also many
organizations that face the problems which are concerned to hidden cost, layoffs and risk quality.
Therefore, outsourcing the activities has created a clear and proper guideline that assist in the
entire process of outsourcing.
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References
Aubert, B. A., Kishore, R., & Iriyama, A. (2015). Exploring and managing the “innovation
through outsourcing” paradox. The Journal of Strategic Information Systems, 24(4),
255-269.
Dhar, S. (2012). From outsourcing to Cloud computing: evolution of IT
services. Management Research Review, 35(8), 664-675.
Eggert, A., Böhm, E., & Cramer, C. (2017). Business service outsourcing in manufacturing
firms: an event study. Journal of Service Management, 28(3), 476-498.
González, R., Gascó, J., & Llopis, J. (2016). Information systems outsourcing reasons and
risks: review and evolution. Journal of Global Information Technology
Management, 19(4), 223-249.
Gorla, N., & Somers, T. M. (2014). The impact of IT outsourcing on information systems
success. Information & Management, 51(3), 320-335.
Gospel, H., & Sako, M. (2010). The unbundling of corporate functions: the evolution of
shared services and outsourcing in human resource management. Industrial and
Corporate Change, 19(5), 1367-1396.
Goyello. (2018). Outsourcing Companies . [Online] Goyello. Retrieved from: <
https://blog.goyello.com/2010/11/17/tholons-top-100-outsourcing/ >
Gurung, A., & Prater, E. (2017). A research framework for the impact of cultural differences
on IT outsourcing. In Global Sourcing of Services: Strategies, Issues and
Challenges (pp. 49-82).
Handley, S. M., & Angst, C. M. (2015). The impact of culture on the relationship between
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Journal, 36(9), 1412-1434.
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Kerzner, H. (2018). Project management best practices: Achieving global excellence. John
Wiley & Sons.
Lahiri, S. (2016). Does outsourcing really improve firm performance? Empirical evidence
and research agenda. International Journal of Management Reviews, 18(4), 464-497.
Oshri, I., Kotlarsky, J., & Willcocks, L. P. (2015). The Handbook of Global Outsourcing and
Offshoring 3rd Edition. Springer.
Plugge, A., & Bouwman, H. (2017, February). Understanding the Modularization of
Business Services: The Maturity of Firms in Bundling Services. In International
Workshop on Global Sourcing of Information Technology and Business
Processes (pp. 65-80). Springer, Cham.
Rajaeian, M. M., Cater-Steel, A., & Lane, M. (2017). A systematic literature review and
critical assessment of model-driven decision support for IT outsourcing. Decision
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Ramanathan, L., & Krishnan, S. (2015). An empirical investigation into the adoption of open
source software in Information Technology outsourcing organizations. Journal of
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Uluskan, M., Joines, J. A., & Godfrey, A. B. (2016). Comprehensive insight into supplier
quality and the impact of quality strategies of suppliers on outsourcing
decisions. Supply Chain Management: An International Journal, 21(1), 92-102.
Wuyts, S., Rindfleisch, A., & Citrin, A. (2015). Outsourcing customer support: The role of
provider customer focus. Journal of Operations Management, 35, 40-55.
Koo, Y., Lee, J. N., Heng, C. S., & Park, J. (2017). Effect of multi-vendor outsourcing on
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Appendix
Figure 1: Top outsourcing cities
(Source:Goyello, 2018)
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