Business Research Report: Outsourcing Benefits and Challenges Analysis

This report provides a comprehensive analysis of business outsourcing, examining its advantages and disadvantages through a literature review. The report explores cost savings, efficiency gains, and the ability to focus on core business areas as key benefits. It also addresses potential drawbacks such as hidden costs, security risks related to data exposure, pricing issues, and challenges in synchronizing deliverables. The analysis includes real-world examples like the partnership between Apple and Foxconn. The report highlights the importance of considering both the positive and negative aspects of outsourcing to make informed business decisions. The study concludes that while outsourcing can be a cost-effective way to improve efficiency, businesses must carefully manage the associated risks.

Running head: BUSINESS RESEARH
Business Research
Name of the Student
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Table of Contents
Introduction................................................................................................................................2
Project Overview........................................................................................................................2
Project Scope..............................................................................................................................2
Literature Review.......................................................................................................................3
Advantages of outsourcing business..........................................................................................3
Cost, efficiency and manufacturing advantages.....................................................................3
Focusing in core area of business...........................................................................................4
Advantages of Time Zone......................................................................................................5
Advantages of recruitment and Human Resource Department..............................................5
Disadvantage of outsourcing business.......................................................................................6
Disadvantage due to hidden cost............................................................................................6
Disadvantage due to security risk of exposing sensitive data................................................6
Issues related to pricing..........................................................................................................7
Issues in synchronisation of deliverables...............................................................................7
Conclusion..................................................................................................................................8
Reference....................................................................................................................................9

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Introduction
Business Outsourcing is the process, where companies hire goods or services from
other third party organisation. Outsourcing business is one of the effective ways that is
believed to reduce the overall expenditure of business. This type of practice is mainly
implemented by large-scale multinational corporations, which enables them to improve the
quality of their product or service. Nevertheless, there are certain negative aspects of the
Outsourcing business process. The aim of the current study is to analyse the existing
literature related to advantages and disadvantages of outsourcing business process.
Project Overview
It is important in the current age of globalisation for all multinational corporations to
have improved rate of production and also bring about innovation in manufacturing process.
Exploring the opportunities of business can also help the business firms to expand in new
market areas. The current report will explore the details of how business Outsourcing can
help the large scale multinational companies to improve upon their brand value. In
subsequent sections the negative aspects of outsourcing business will also be discussed.
Project Scope
The scope of the current project includes all the major relevant literature related to
critical evaluation of business Outsourcing process. All major relevant points related to
positive and negative aspects of business Outsourcing will be discussed that have been
highlighted in the past research work. Some real examples of positive and negative aspects of
business Outsourcing will also be mentioned in the report.
The literature review will be conducted by using the journals and articles of major databases.
The articles that were published on and after 2010 will be selected for the literature review.

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Literature Review
Advantages of outsourcing business
Cost, efficiency and manufacturing advantages
According to Lacity and Willcocks (2013), the most obvious advantages of business
outsourcing is related to savings in the expenditure. It is easily possible for the large-scale
multinational corporations to hire labour at much lower rate from the third party organisation.
It is important to mention in the context that most of the business organisations in the
American and European regions hired workers from Asian and African countries due to the
fact that the labour cost is much lower. Lacity et al. (2010), have mentioned in the context
that the China and India the popular destination for most of the American companies to hire
manufacturing labourers. The low cost of labour in China has also been the result that most of
the electronic companies have set up their manufacturing units in the nation.
Nedbal et al. (2011), have added in the context that it is also possible for the
companies to improve the quality of the product with the help of third party manufacturing
units.
For many companies hiring of Outsourcing business process has helped them to provide
better after sale service. All the issues that are faced by the customers after purchasing of a
certain products, it is possible for the business Processing Unit to provide the warranty
service that is provided by all major manufacturing brands. This will help the company to get
high level of customer satisfaction. This can be achieved by quickly resolving all the issues
encountered by the customers after buying of certain product.
With the help of faster and better service that is obtained from decreasing the lead
time the company can ensure that the demand of the customers are fulfilled properly. It is
also possible to imply the ideas at much faster rate that can bring about innovation well in the

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manufacturing unit. Product can also have better value added proposition, which is achieved
with the help of faster delivery service.
Hiring workers from third party organisation it is possible to get extra performance
from the workers as they do not demand high of extra wages. They can also purchase new
ideas from workers at much lower rate. There are also no risks of violating the laws related to
intellectual property and patent as they implement innovative ideas from BPO units. Foster of
innovation is also one of the major advantages that are gained with improved level of
efficiency through business processing outsource (Javalgi 2011).
Outsourcing can also eliminate the high amount of investment that is needed to set up
the infrastructure Technology implication. It is the duty of the Outsourcing partners to
provide the infrastructure that is needed to invest upon the technology.
One of the major examples in this context can be given from the partnership of Apple
Inc. and Foxconn, which is the manufacturing partner for the Smartphones of Apple. The
manufacturing contract between the two companies has helped Apple to increase the rate of
production of iPhone. With the help of this increased production Apple has able to establish a
firm market in the smartphone industry in most of the Asian countries.
There are also examples of Samsung and Toyota, which have able to provide better customer
care support with the help of the workers from the BPO unit. Most of the after Sales Service
of Samsung that includes repair of smartphone within warranty period is also done with the
help of third party organisations.
Focusing in core area of business
There are various secondary activities related to implementing business plan. For
example in case of marketing research that is the primary step of making a business plan
includes collection of huge amount of raw data. This can have the company updated with

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latest trends of the fast changing consumer market. The large scale companies can set up
partnership with other third party business firms, who will be able to conduct the marketing
research work and provide valuable information from the external market environment. With
the help of this information it is possible for the company to improve upon their marketing
plan and brand value. It is also possible for the management to focus on core areas of
business that includes improving the quality of the product and raising the brand value among
target group of customers (Bustinza et al. 2010). Companies can also focus upon sustainable
development which is an essential requirement in the current business scenario.
Advantages of Time Zone
Besides the advantages of cost reduction and improve of the working efficiency
Carnahan and Somaya (2013), have suggested about the advantage related to the time zone
that one of the major aspects of the outsourcing business process. It is possible for the
companies to hire workers from different time zones as they are recruiting from all around
the globe with the help of outsourcing process. Hence, it is possible for them to continue the
business operational process for 24 hours.
It is important to mention in the context that due to the effect of globalisation it is
important for all major business organisations to work with clients in different time zones.
With the help of business Outsourcing process it is possible to communicate with the clients
in any time of the day.
Advantages of recruitment and Human Resource Department
Recruitment process is one of the key challenges that are encountered by the large
scale multinational corporations. In order to resolve this issue the companies can outsource
third party organisations like consultancy agency, which can help the companies in the
overall recruitment process. The Outsourcing companies have special selection procedure
that can help to ensure only best candidates are being selected in recruitment. Hence, large

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scale companies do not have to face crisis due to shortage of skilled workers (Lacity and
Willcocks).
Disadvantage of outsourcing business
Disadvantage due to hidden cost
It is evident that one of the main causes of organisations to hire outsourcing is to
reduce the overall expenditure of operational activities. Nevertheless, Böhm et al. (2011),
have highlighted upon few of the negative aspects that are involved you too hidden cost in
Outsourcing business. In many occasions, it is essential for the mother Business Company to
have and legal contract with Outsourcing organisation. There is huge expenditure in
preparing the business contract with the third party organisation. Companies also need to
hire, Legal Experts in order to avoid any complications in Outsourcing process. These extra
expenses are often overlooked and are not included in the financial report. Nevertheless,
these extra expenses are one of the most negative aspects of outsourcing business.
Disadvantage due to security risk of exposing sensitive data
In the top competitive business world, it is essential for all companies to classify the
business plan in order to make maximum profit. High level of security is also essential in the
process. Mani, et al. (2010), have mentioned that it is essential for the mother company to
share whiten relevant information to the Outsourcing companies in order to get maximum
possible benefit from their activities. It is also important for them to share the future plan of
the company with Outsourcing firms. In this regards they are exposing the sensitive data to
external agents thereby the risk of data exposed to the public domain is increased. Moreover,
there is also the risk of the third party organisation to misuse the data they are by
compromising upon the business plan implementation process (Massini and Miozzo 2012).

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The partnership between Apple and Foxconn can be provided in order to understand
how the data exposure can cause risk. Smartphone companies like Apple often do not reveal
the features of the upcoming phone model to the public before they are being launched
officially. However they have to share the design of the upcoming phone to Foxconn so that
they are able to manufacture the iPhone. Hence, there is a high risk that the blueprint of the
upcoming smartphone of Apple maybe revealed to the public even before it is being
launched. This can provide an unfair competitive advantage to all the rivals of Apple.
Issues related to pricing
Outsourcing process of business involves hiring of raw materials from third party
organisation. Nevertheless as mentioned by Nadkarni and Herrmann (2010), in most of the
occasions the companies cannot have control over the pricing that they have to pay to the
Outsourcing unit in order to gather the required raw materials. Hence, the overall expenditure
of the company is not fixed due to the variation of the pricing that are demanded by
Outsourcing business units.
Issues in synchronisation of deliverables
For large-scale multinational corporations one of the essential challenges is to select
the correct partner for outsourcing business. In many occasions, the companies face challenge
due to the fact that the Outsourcing business unit are not able to synchronise their activities,
with their business plans. It is also not possible for the managers of the organisation to have
complete control over the operational activities of the third party organisation or outsourcing
vendors. The workers under the control of outsourcing vendor may not why full level of
commitment in order to fulfil the business plan of the mother organisation. Bharadwaj et al.
(2010), have added that there can be cultural conflict within the organisations that can
compromise upon the overall working performance capability. This is more evident due to

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the fact that in many occasions, business organisation hired workers from other nations
where, people from foreign culture may not be able to follow the same business protocol.
Conclusion
Hence it can be concluded that lowering of the overall expenditure of large scale
companies are one of the biggest advantages of outsourcing business. It is believed to be one
of the cost effective ways of improving the overall efficiency of business operation. On the
other hand, Outsourcing business involves few of the hidden costs that are generally
overlooked. This includes the cost of repairing official business contract with Outsourcing
vendors.
Outsourcing business can help the companies to focus on core business operation, as
all the secondary functions related to marketing research are conducted by the Outsourcing
vendors. There is also the advantage related to time zone where the companies can initiate the
business process 24 hours in a day as they are able to recruit workers from all around the
globe.
On the other hand, the major risks that are associated with Outsourcing business is
due to the fact that there is a chance of sensitive data being leaked to public domain. This can
compromise on the business performance and also provide unfair advantage to the Rival
organisations.
The current literature has been able to critically evaluate both the positive and
negative aspects of outsourcing business. Nevertheless it is essential in future to formulate
better business process in order to resolve the negative aspects of outsourcing business.

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Reference
Bharadwaj, S.S., Saxena, K.B.C. and Halemane, M.D., 2010. Building a successful
relationship in business process outsourcing: an exploratory study. European Journal of
Information Systems, 19(2), pp.168-180.
Böhm, M., Leimeister, S., Riedl, C. and Krcmar, H., 2011. Cloud Computing–
Outsourcing 2.0 or a new business model for IT provisioning?. Application management,
pp.31-56.
Bustinza, O.F., Arias-Aranda, D. and Gutierrez-Gutierrez, L., 2010. Outsourcing,
competitive capabilities and performance: an empirical study in service firms.
International Journal of Production Economics, 126(2), pp.276-288.
Carnahan, S. and Somaya, D., 2013. Alumni effects and relational advantage: the impact
on outsourcing when a buyer hires employees from a supplier's competitors. Academy of
Management Journal, 56(6), pp.1578-1600.
Javalgi, R.R.G., Gross, A.C., Benoy Joseph, W. and Granot, E., 2011. Assessing
competitive advantage of emerging markets in knowledge intensive business services.
Journal of Business & Industrial Marketing, 26(3), pp.171-180.
Lacity, M. and Willcocks, L., 2012. Outsourcing business and IT services: the evidence
of success, robust practices and contractual challenges. Legal Information Management,
12(1), pp.2-8.
Lacity, M.C. and Willcocks, L.P., 2013. Outsourcing business processes for innovation.
MIT Sloan management review, 54(3), p.63.
Lacity, M.C., Khan, S., Yan, A. and Willcocks, L.P., 2010. A review of the IT
outsourcing empirical literature and future research directions. Journal of Information
technology, 25(4), pp.395-433.

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Mani, D., Barua, A. and Whinston, A., 2010. An empirical analysis of the impact of
information capabilities design on business process outsourcing performance. Mis
Quarterly, pp.39-62.
Massini, S. and Miozzo, M., 2012. Outsourcing and offshoring of business services:
challenges to theory, management and geography of innovation. Regional Studies, 46(9),
pp.1219-1242.
Nadkarni, S. and Herrmann, P.O.L., 2010. CEO personality, strategic flexibility, and firm
performance: The case of the Indian business process outsourcing industry. Academy of
Management Journal, 53(5), pp.1050-1073.
Nedbal, D., Wetzlinger, W., Auinger, A. and Wagner, G., 2011, August. Sustainable IS
Initialization Through Outsourcing: A Theory-Based Approach. In AMCIS.