Benefits and Limitations of Outsourcing Models for SCP Ltd.

This report discusses the benefits and limitations of different outsourcing models for SCP Ltd. in relation to IT, HR, and administration projects. It also explores the legal and environmental issues in the UK and proposed offshoring countries. Recommendations are provided for choosing the right country for offshore outsourcing.

Professional Issues and
Practice

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Overview................................................................................................................................1
Benefits and Limitations of different outsourcing models in relation to three specific projects 2
Legal and environmental issues to the organisation in relation to UK and proposed offshoring
countries along with recommendatory changes in legal and quality process.........................5
Requirements that affect choice of country for offshore outsourcing in relation to each three
projects and justification while using more than one country................................................5
Recommendations..................................................................................................................6
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................8
.........................................................................................................................................................8

INTRODUCTION
Outsourcing is the activity which includes hiring of someone other for the performance
an organisational functions in expertise manner. These third parties are responsible for the
completion of work in accordance to the standards and requirements of an organisation.
Outsourcing is also of two types onshore and offshore (Bass and et. al., 2018). Both are different
from each other on the basis of their functioning and nature of existence. Onshore outsourcing
includes hiring of third party by an organisation for performance of functions that has actual
existence in same nation. On the other hand, Offshoring is totally different where third part hired
by an organisation exists in some other nation i.e. different from one where organisation has
operations. The organisation considered for carrying tasks is named as SCP Ltd. This
organisation is a manufacturer and retailer of many modern design products. The main objective
of this report is about understanding the contribution of an outsourcing models in development of
an organisational operations.
The aspects which are covered in this report includes advantages and disadvantages
associated with application of different outsourcing models, legal and environmental issues
required to be consider by an organisation in UK & other offshoring counties and different
requirements that have impact over the selection of nation in case of offshore outsourcing. Also,
recommendations are provided regarding one nation for carrying all three projects and separate
country for performing functions in relation to each of the three different projects.
MAIN BODY
Overview
SCP Ltd. has business operations in both type of functions, manufacturing and retailing.
The main purpose of the organisation is to build long lasting image in society through
manufacturing and retailing modern design products. In actual, this organisation was founded in
1985. While performing the functions, motto carried on by the employees and management is
make and sell designed products which are beautiful, functional and durable in nature. The
product range in which this organisation deals is wide in nature and includes Furniture, lighting,
Accessories, Textiles etc. They have majorly two main stores in London from where they operate
their official business operations.
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In general, success of an organisation depends over its IT, Human resource and
administrative system. All the three different aspects are backbone for any type of organisation
and supports in functioning of organisational operations in appropriate manner (Gerogiannis,
Zimmermann and Wilson, 2017). This will brings an obligation over the management is to
ensure the qualitative functioning of these three different departments. The function performed
by IT structure within an organisation is related to collection, dissemination, analysis, integration
and evaluation of data related to different activities at one place for the purpose of effective
decision making. The system of Human resource within an organisation is main for the purpose
of carrying routine business activities. This has work related to workforce planning along with
creating positive working environment that contributes in optimised performance by employees
of an organisation in attainment of pre determined goals. In last, Administrative system of an
organisation has function related to performing back-end activities that aligned the work of each
other towards creating successive path of business operations. They also performs the work
related to assignment of duties and objectives to employees along with their appraisal for further
motivation in direction to improvement of their performances.
To improve the business functions, SCP Ltd. is also required to focus over improvement
of these three different areas IT, HR and administrative. Currently, their internal experts have
duty to handle all the aspects. To made more improvements, organisation has an option to avail
the benefits of Outsourcing. This organisation does not have ant experience in offshore
outsourcing. In respect to Onshore outsourcing, they have some experience but not in relation to
the main three aspects defined above i.e. IT, HR and administration. The field where they
attained experience was payroll and business maintenance (Hummels, Munch and Xiang, 2018).
The contribution of these aspects in growth of business activities is not direct. So, before to the
application of this concept, organisation is required to do proper research and understand the
associated benefits, limitations and risks.
Benefits and Limitations of different outsourcing models in relation to three specific projects
SCP Ltd. is manufacturer and retailer of different modern design products. This
organisation has two different stores in London. Currently, organisation operates function
properly but wants to made changes in the operating structure to attain competitive advantage
and earning higher profitability (Schniederjans, Schniederjans and Schniederjans, 2015). The
three management aspects identified by an organisation for improving business functions
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includes IT, Human resource and Administration. IT systems are used in this organisation for
multiple purposes. They use it for building proper connection between different functions along
with demand for products in market. Here, with the help of IT systems every information was
integrated at single place for decision making. This is expensive for an organisation along with
not able to attain expertise due to lack of resources. Human resource system exist in organisation
has limited scope towards the attraction of talented candidates. This restricts the innovative
growth of an organisation. Lastly, administration works properly to handle the activities but
takes time in completion and decision making. This has negative impact over organisational
ability to adopt effective strategies on time in accordance to market requirements.
Now, organisation wants to use offshore outsourcing for these three different projects in
their completion on time along with attainment of expertise in actions. Offshore outsourcing is
the method which includes hiring of third party outside from the nation for the purpose of
performing some particular business functions (Liu and Aron, 2015). There are many models or
types which exists in this method of offshore outsourcing. These can be used by the organisation
to hire third parties on the basis their working nature and size of business. Each and every model
has its own way of operation on the basis of the nature of project. Also, in accordance to same,
they attached with with benefits and limitations which are required to consider by management
for selecting best alternative.
The different offshore outsourcing models that can be used by SCL Ltd. for performance
of their projects i.e. IT, HR and Administration are presented below along their benefits and
limitations;
Joint venture offshoring as global shared services: This is the method that includes
ties up with the local organisation exists in other country. This organisation has expertise in
performance of particular business functions which organisation wants to perform in appropriate
manner. While establishing joint venture, they sign agreement with each other that clears out the
term and conditions. Here, this can be used by SCL Ltd. By entering into the agreement with
local organisation in other nation for the performance of their different functions like IT, Human
resource and administration. There are number of benefits and limitations that can be associated
with the actual application of this model (Sako, 2015). Both of these in respect to SCL Ltd. are
defined below:
Benefits
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 This will creates the benefit in form of using the strength of other organisation having
expertise in performance of functions like IT, Human resource and administration.
 Saves the cost as no need to build separate infrastructure along with hiring of
professionals. Also, their performance is accurate in nature that reduces the chance of
error and provides the opportunity to get maximum returns.
 High profitability will attained through the successive operations of other organisation in
respect to IT, human resource and administration. Profound IT functions help to improve
decision making. Hiring of professional candidates help in turning out the results along
with optimum utilisation of resources in integration with improved decision making (Paz-
Aparicio and et. al., 2018). Improved administration build effective interrelation within
different organisational functions. All these activities have direct influence over the
functioning ability of an organisation that contributes in earning higher amount of profits.
 Risk will be reduced regarding the impact of external factors as the operation are carried
on by third parties exists in different nation. Also, they have an obligation to deliver the
results in accordance to the standards upon which they agreed with the organisation in
contract
Limitations
 No control over the operations of other organisation. This will sometimes result into
occurrence of fraud that have direct negative impact over the image of an organisation
along with monetary loss (Smite and et. al., 2019).
 Over dependency on other organisation. This will lowers down the capacity of an
organisation in terms of flexibility. Also, that other organisation established in another
nation not able to deliver the results accordance to the situations present at actual
workplace.
Multi sourcing model: This is the model where organisation enters into the parallel
agreement with different number of suppliers and vendors present in another nation. This can be
used by SCL Ltd. as providing contract of IT, HR and administration to three different parties
that have individual expertise in these fields (Radlo, 2016). Benefits and limitations in relation to
SCL Ltd due to application of this model of outsourcing is presented below:
Benefits
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 Separate contract provides more expertise along with removes the dependency over one
supplier.
 Provides flexibility and help in performance of more competitive business functions
which are distinct from other.
Limitations
 Requires investment of higher cost in contracting three different experts.
 Reduces the profit margin and diminishes the interrelation in business functions.
Legal and environmental issues to the organisation in relation to UK and proposed offshoring
countries along with recommendatory changes in legal and quality process
Legal and environmental issues in UK
 Fine due to non consideration of new laws occurred after exist of UK from EU
 Cancellation of agreement due non fulfilment of standards and requirements in
accordance to the existing or new specified laws
 Job transfer due to use of offshore outsourcing does not have direct environmental impact
but leads in reduction of job that has negative impact over creation of employment
opportunities (Willcocks, Lacity and Sauer, 2017).
Legal and environment issues in China
 Fine, if not able to fulfil all legal requirements
 Cancellation due to non fulfilment of China standards and signed agreement terms
 Fine, if having contribution towards carbon emission above to the permissible limit
Legal and environment issues in India
 Fine in case of non fulfilment of laws and standards
 Cancellation due to non fulfilment of mentioned terms and conditions in agreement
 Cancellation of an agreement or fine due to having negative impact on environment in
case of excessive carbon emission
Requirements that affect choice of country for offshore outsourcing in relation to each three
projects and justification while using more than one country
IT systems
 Existence of technological environment
 Freedom of working on the basis policies, laws and legislation (Specific to project nature)
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 Presence of high knowledgeable personnels
 Persistence of IT organisations
Human resource systems
 Presence of expert level organisations
 Past record towards developing good workforce of any organisation
 Existing of policies, laws and legislations related to outsourcing (Specific to project
nature)
 Investment cost along with availability of talented personnels
Administrative system
 Persistence of laws and legislations (Specific to project nature)
 Total cost of investment
 Dependency
 Persistence of knowledgeable personnels
 Positive working culture environment
Recommendations
The preferred single country for the purpose of carrying all the three project will be
China. The reason is existence of high technological environment, diversified business activities
related to human resource and administration and cost efficient in nature due to presence of high
amount of employees.
While recommending separately, China for IT due to persistence of high technological
environment, India for administrative functions because cost efficient in nature due to presence
of high amount of labour and US for HR systems due to existence of highly competent
organisations in strategical and tactical form.
CONCLUSION
It has been concluded from the above report that offshore outsourcing is better as lots of
advantages will be attained in for expertise, reduced cost, high profitability etc. China will be the
perfect nation to outsource as highly developed in IT. Also, easy to identify other sector
organisations due to existence of diversified nature of business activities. Multi channel
outsourcing will be the best in future as provides flexibility with expertise that contributes in
attainment of predetermined objectives in appropriate manner.
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REFERENCES
Books and Journals
Bass, J.M. and et. al., 2018, May. Employee retention and turnover in global software
development: comparing in-house offshoring and offshore outsourcing. In 2018
IEEE/ACM 13th International Conference on Global Software Engineering
(ICGSE) (pp. 77-86). IEEE.
Gerogiannis, I., Zimmermann, A. and Wilson, A., 2017, February. Services offshoring: a
microfoundations perspective. In International Workshop on Global Sourcing of
Information Technology and Business Processes (pp. 1-18). Springer, Cham.
Hummels, D., Munch, J.R. and Xiang, C., 2018. Offshoring and labor markets. Journal of
Economic Literature. 56(3). pp.981-1028.
Liu, Y. and Aron, R., 2015. Organizational control, incentive contracts, and knowledge transfer
in offshore business process outsourcing. Information Systems Research. 26(1). pp.81-99.
Paz-Aparicio, C. and et. al., 2018. Selecting the governance mode when offshoring knowledge-
intensive activities. Journal of Purchasing and Supply Management, 24(4), pp.275-287.
Radlo, M.J., 2016. Offshoring, Outsourcing, Production Fragmentation: Definitions, Measures
and Origin of the Research. In Offshoring, Outsourcing and Production
Fragmentation (pp. 8-40). Palgrave Macmillan, London.
Sako, M., 2015. Outsourcing and offshoring of professional services. The Oxford Handbook of
Professional Service Firms. pp.327-347.
Schniederjans, M.J., Schniederjans, A.M. and Schniederjans, D.G., 2015. Outsourcing and
insourcing in an international context. Routledge.
Smite, D. and et. al., 2019, May. Offshore outsourcing costs: known or still hidden?. In 2019
ACM/IEEE 14th International Conference on Global Software Engineering (ICGSE) (pp.
40-47). IEEE.
Willcocks, L.P., Lacity, M.C. and Sauer, C. eds., 2017. Outsourcing and offshoring business
services. Springer.
Online
What Is Offshoring? What Is Outsourcing? Are They Different?. 2017. [Online] Available
Through:< https://www.forbes.com/sites/jwebb/2017/07/28/what-is-offshoring-what-is-
outsourcing-are-they-different/#61a4da802a2e>.
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