1OUTSOURCING Executive Summary The purpose of the report is to understand the concept of outsourcing with the associated advantagesanddisadvantages.Thepaperalsopresentedtheroleandcontributionof outsourcing in the global environment/context. After the development of understanding and analysis, it can be deduced that outsourcing is crucial for addressing competition, investment challenges and lack of resources but at the same time risks factors like, data confidentiality, risks of alignment and hidden costs can lead to failure of the outsourcing strategy. The paper also discussed about the positive contribution of outsourcing in global context by assisting withglobalexpansionplansandinstimulatingcompetitiveadvantageoverglobal competitors by addressing changing customer demand. The paper concluded by presenting a summary regarding the concepts discussed under outsourcing.
2OUTSOURCING Table of Contents Introduction................................................................................................................................3 Discussion..................................................................................................................................3 Concept:.................................................................................................................................3 Advantages and Disadvantages of Outsourcing:....................................................................4 Advantages-........................................................................................................................4 Disadvantages-...................................................................................................................5 Role of outsourcing in global context:...................................................................................6 Conclusion..................................................................................................................................7
3OUTSOURCING Introduction Thedecisionofanorganizationforemployinganotherorganizationforthe responsibility of a specific practice or functionality that is planned and/or existing in the workplace is known as Outsourcing. The decision of outsourcing also involves the transfer of assets and employees from an organization to another in some cases like, improvement of internal environment (Ishizakaet al. 2019). The purpose of the paper is to understand the concept of outsourcing through the discussion of advantages and disadvantages. The paper will also present a discussion regarding the role of outsourcing in the global environment. In this paper, the concepts will be backed by the implication of practical examples. The paper will be concluded by presenting a summary of the concepts regarding outsourcing and its contribution in global context. Discussion Concept: The business practicing involving the decision of employing or hiring a third party or another business based on the expertise which is lacking or in need in the hiring organization is known as outsourcing. Outsourcing also represents the procedure of employing help regarding a specific task, which used to be performed internally in the organization by own workforceandresourcesbutpresentlylackstime,financialresourcesand/orhuman resources. The decision of outsourcing is usually adopted as a measure of cutting costs associated with operational or management practices (Globerman and Vining 2017). In the year 1989, the concept of outsourcing was considered as business strategy. In 1990s, the strategy of outsourcing became significantly important in the field of business economics. The decision of outsourcing usually includes the business processes like claim processing, payroll processing, non-core functions, operational functions like facility management, call
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4OUTSOURCING centre and manufacturing process. Outsourcing also involves the concepts of offshoring, which is the term used for relocating specific functions of business in distant country or neighbouring regions. The organizations that decides on employing outsourcing providers from overseas is considered as the phenomenon of offshoring. The application of outsourcing can be both domestic and international. The reasons behind the decision of outsourcing can be a strategy of lowering costs, for gaining speed and for the improvement in efficiencies. Another major reason for outsourcing reflects the principle of seeking assistance from other businesses for specific functionalities and directing the complete focus on the core business practices. Another significant reason can be the need for innovation through the expertise of outsourcing providers. Advantages and Disadvantages of Outsourcing: Advantages- Application of outsourcing can direct complete concentration of organization into the core competencies of the business, leading to the outcome of improved offerings and competitive advantage. Another advantage can be the specific expertise of the outsourcing providers (Fontana, Aragão and Morais 2019). The outsourcing providers specializes in specific or a set of skills, which helps in a faster and affordable option of operating a task. Outsourcing can majorly contribute in the strategy of cost saving as it results in lowering the costofproduction,operationandminimizesthelabourcost(Vaxevanouand Konstantopoulos2015).Outsourcingalsoassistinovercomingchallengesthatare operationally uncontrollable by the hiring organization. Outsourcing helps in increasing the efficiency and effectiveness of the overall process by incorporating focussed efforts and innovation. Increased productivity results in the organizational preparedness for changing businessenvironmentandmarketchallengeswithstreamlinedcashoutflow.Itassist
5OUTSOURCING organizations from investing in infrastructure, human resources and technology (Vance and Paik 2015). Outsourcing contributes positively in an organization by offering flexibility in manpowermanagement,staffingandsavingcostswiththeassociationofeffective specialized services. The decision of outsourcing also helps in the production of new skill sets and capabilities for gaining competitive advantages. Disadvantages- Along with numerous advantages and positive contribution, Outsourcing also exerts risks in the business. Outsourcing can incorporate risks regarding uncovering of confidential data as the organization outsourcing another organization for Payroll, Recruitment services andHRpurposeswillshareinternalrequirementsandinformationtoathirdparty. Outsourcing also leads to dependency on the outsourcing provider, any wrong decision during third party selection or involvement will lead to the gap in quality between desired and actual results (Yeo and Saboori-Deilami 2017). Outsourcing practices/strategies are usually cost effective but can include hidden costs after the initiation of contract, especially in a contract with international organizations. The focus and the customer satisfaction approach of the outsourcing provider may be diverted due to the responsibilities of numerous hiring organization. Role of outsourcing in global context: Outsourcing plays a significant role in the business planning to or operating in global scenario.Withthechangingbusinessenvironmentandincreasingtechnological advancement,theexpectationsofthecustomersarealsoincreasing.Theincreasing expectation of customers marks the continual need for innovation in the product and service offerings of organization. The changing needs of organization leads to the decision of seeking assistance from specialized third parties or outsourcing providers. The increasing competition in the global scale in the field of Robotics, 3D, Augmented Reality, Robotics and the Internet
6OUTSOURCING signifies the need for optimum efficiency and effectiveness in the final outcome of the offerings.Thisisoneofthereasons,organizationsarereachingoutforspecialized outsourcing services for incorporating expertized skills and contribution as the competition level in the 21stcentury is not limited to national scale but has become global. Outsourcing strategy in global context can minimize the labour costs due to the Global labour arbitrage with varying labour rates. The decision of outsourcing can also be linked with the planning of market expansion (White and James 2017). The effective budget control and flexibility throughtheapplicationofoutsourcingcanpositivelyimpacttheexecutionofglobal expansion strategy as the outsourcing providers are well aware of the available resources and market in the international market. The awareness regarding workforce in a foreign country andplanningofexpensescanbeaddressedbyoutsourcingservicesforthehiring organization (Mishraet al. 2018). The risk of failure in global context of business can be reduced by the application if outsourcing strategy. For instance the organization likeVirtual HQ of Australiaspecializes in offering virtualofficesolutionforthesmallandmediumbusinessesbyreceptionistservices, transferringcallsandclientattainmentforbasicneedslikecompanyinformation (Virtualheadquarters.com.au 2019).Tata Consultancy servicesoffer technical and backend services for international and national organizations likeJaguar Land Rover, reflecting the concept of offshoring (international outsourcing) (Szmajser, Andrzejewski and Kędzior 2018). These were few examples of outsourcing service provider. One of the major examples of outsourcing employer can beAlibaba. Alibaba.com is an ecommerce site, which started from scratch by Jack Ma (Musteen 2016). The reason for growth of Alibaba was its outsourcing decision, which was marked by the need of transforming the accessibility features of hiring remote workers from USA (Parvatiyar, Donthu and Gruen 2018). The need
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7OUTSOURCING was converted into the decision of hiring web developers from USA and the decision paid off towards development of the company. Conclusion Therefore, it can be concluded by the paper that outsourcing is one of the most significant strategies in 21stcentury. The reasons can be cost effectiveness, specialized expertise and provision of focussing on core competencies. However, the strategy should include the assessment of the outsourcing providers, cost transparency and align the functions with organizational objectives for accomplishing desired results. For strategies like global expansion and offshoring, outsourcing is very crucial.
8OUTSOURCING References: Fontana,M.E.,Aragão,J.P.S.andMorais,D.C.,2019.Decisionsupportsystemfor outsourcing strategies.Production Engineering, pp.1-9. Globerman, S. and Vining, A.R., 2017. The outsourcing decision: A strategic framework. In Global outsourcing strategies(pp. 27-40). Routledge. Ishizaka,A.,Bhattacharya,A.,Gunasekaran,A.,Dekkers,R.andPereira,V.,2019. Outsourcing and offshoring decision making. Mishra, D., Kumar, S., Sharma, R.R.K. and Dubey, R., 2018. Outsourcing decision: do strategy and structure really matter?.Journal of Organizational Change Management,31(1), pp.26-46. Musteen, M., 2016. Behavioral factors in offshoring decisions: A qualitative analysis. Journal of Business Research,69(9), pp.3439-3446. Parvatiyar,A.,Donthu,N.andGruen,T.W.,2018.ValueofOutsourcingSalesand Marketing by CPG Companies in the Age of Retail Disruptions.Handbook of Advances in Marketing in an Era of Disruptions: Essays in Honour of Jagdish N. Sheth, p.256. Szmajser, R., Andrzejewski, M. and Kędzior, M., 2018. Profitability Determinants of Polish Outsourcing Service Enterprises from the Point of View of Top and Middle Management. European Financial Systems 2018, p.764. Vance, C.M. and Paik, Y., 2015.Managing a global workforce. Routledge.
9OUTSOURCING Vaxevanou,A.andKonstantopoulos,N.,2015.Basicprinciplesthephilosophyof outsourcing.Procedia-Social and Behavioral Sciences,175, pp.567-571. Virtualheadquarters.com.au 2019.Virtual HQ - Telephone Answering Service, Virtual Office ReceptionistService|AustraliaWide.[Online]Availableat: https://www.virtualheadquarters.com.au/ White, R. and James, B., 2017.The outsourcing manual. Routledge. Yeo, C. and Saboori-Deilami, V., 2017. Strategic challenges of outsourcing innovation in global market.Asia Pacific Journal of Innovation and Entrepreneurship,11(1), pp.5-16.