HI5013 - Managing Across Borders: A Report on Outsourcing in Business

This report examines the practice of outsourcing, which involves hiring external parties to perform business services, aiming to reduce costs and increase profits. It details the advantages, such as cost savings, increased productivity, and focus on core areas, as well as disadvantages, including quality risks and potential data breaches. The report explores the global context of outsourcing, highlighting its role in leveraging technology and increasing competition. Practical examples of companies like Google, Alibaba, Acer, and Whatsapp are provided to illustrate how outsourcing strategies are implemented. The report concludes that outsourcing has become an essential part of business, particularly for companies with international operations.

Running Head: GLOBAL OUTSOURCING 0
Managing Across Borders
Student name
8/17/2019

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Executive Summary:
Outsourcing is an activity in which a contract is created between the external parties and
corporate related to the aspect of services. It is a process of reengineering which helps in
building the enterprise in an effective manner. It is a factor which increases the profitability
of the firm and making it compatible according to the market situation. However, it has some
drawbacks also like maintaining quality as per standards might not meet and there is a risk of
security theft. Therefore, companies have to consider all the above-mentioned points before
making a contract with the outsourced enterprise.

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Contents
Executive Summary:..................................................................................................................1
Introduction:...............................................................................................................................3
Positive and Negative consequences of outsourcing:................................................................3
Advantages:................................................................................................................................3
Disadvantages:...........................................................................................................................4
Outsource in Global Context:.....................................................................................................4
Practical Examples of companies which perform outsourcing:.................................................5
Conclusion:................................................................................................................................6
Bibliography...............................................................................................................................7

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Introduction:
Outsourcing is a practice to hire outside party in order to perform the services which are
required in case of businesses as in previous times it is done by in-house only. It has been
implemented to reduce the cost of business and thereby helps in increasing the profit of the
enterprise (Heric, 2019).
It is an emerging field which creates employment opportunities for the nation as it,
contributes to national income. It is a great technique by which businessmen can focus on
primary objectives and not on secondary and it is that, which provides support to core
functions (Lopez, 2019).
In this report, the discussion is on the advantages and disadvantages of outsourcing and for
explaining its usage in the real-life scenario, popular companies’ example is described here.
Positive and Negative consequences of outsourcing:
Advantages:
 Saves cost: By this consideration, work can be performed without any limitation of
resources.
 Productivity increases: It happens because the corporation which does this activity
from many years which in turn, helps in enhancing the experience and by this, quality
of work is maintained (Verwaal, 2017).
 Focus on core areas: It has been done so to not to waste time on unimportant tasks and
utilize only for the important ones.
 Helps to build the infrastructure and technology base: It is done due to the reason that
transfer of responsibility is made to an outside party and which means, it is the one
who is going to be responsible for all the work and its associated work (Patel, 2019).
 Sharing of risk: With the transfer of responsibility, the risk is shared by both the
parties.
 Cost of recruitment is saved: It helps in meeting the casual demands of the product
and which can be met through by recruiting individuals in the organization.
 Faster service: Work is performed by the other expert therefore goods can be reached
in the market place, very early.
 Operational Control: It means, managing those costs which cannot be controlled by
the company’s efforts.

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 Building a bond of relation: It is made just like friends as well as family members as
because they share a strong bond of relationship. But in the team, it is not happening
as there are chances of conflicts between the team members (Verwaal, 2017).
Disadvantages:
 The risk to preserve quality: It is because once after completion of contract or
agreement, the party is not liable for any fault done in its services.
 Impact on the controlling factor: It is because there is no one to control the external
parties (Schniederjans, 2015).
 Risk of exposing the confidential data: The outsourcing company is an independent
company and deals with many firms in its day-to-day operations so there are chances
of information leakage.
 Costs are not shown fully: This practice is done so to manipulate the buyers and to get
an opportunity to charge extra money without any intimation so, in this way it is a
drawback (Patel, 2019).
 Gives an impact on the morale: It automatically grabs the attention in the mind of
workers as a signal of danger and they started feeling that they are less important for
the corporate’s operations.
 Related with the financial performance of the firm: It is because funds are the life-
blood of a business and every function of business is linked with this. So, the
profitability of outsourcers is also mattered (Heric, 2019).
 Less focus on the task allotted: It happens because the outsourcer company has to do
work of other companies also in the specified time-frame, so they put less effort on
the single task (Patel, 2019).
 Information is not stored by communicating: It happens in the case when the
conversation is done through mobile phones or by e-mail.
Outsource in Global Context:
It occurs due to the changes done in the environment related to technology. Outsourcing is
helpful for taking all the places together and it can be done geographically by manufacturing
the same product in two or more countries specifically (Schniederjans, 2015).
Competition is increased due to the forces of globalization as because there is a free flow of
trade in countries without any barriers. It is by this, consumers get a variety of goods to
choose (Gervais, 2017).

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Practical Examples of companies which perform outsourcing:
Google: It is one of the famous companies which are well-known for their culture and
workers. Its headquarters are located in California, Mountain View. It is utilizing an
outsourcing facility for the purpose of taking advantage of IT experts, developers, and hire
visual assistants (Schniederjans, 2015).
However, it has faced various types of allegations relating to outsourcing, but it remains
successful. It hires a lot of people on the basis of contracts to gain knowledge of the specialist
in the work (Sparrow, 2012).
Positive is seen in the case of Ad words which is made up from mostly those individuals and
earned revenue of $ 110.8 billion in the year 2017 (Tech, 2019).
Alibaba: It is a Start-up Company launched by Jack Maa. Nowadays, it comes in the list of
the largest e-commerce website in the world. Outsourcing idea comes into force when there is
a shortage of workers in China, so its strategy is to make such products in China, recruit
people from India and from the Philippines (Mcdonald, 2019).
It also hires web developers from the U.S. so to build its website successfully. It becomes the
largest initial public offering in the year 2014, with 25$ billion (Mcdonald, 2019).
Acer: It is a company which manufactures PCs and related products. It earns a competitive
advantage in the market by using manufacturing outsourcing in its business.
It is done by the company to give focus on the best part that is performing the task of
branding as well as the marketing of goods and the weak part is manufacturing given to such
party who perform this activity (Tsotra, 2011).
It is by this, sales and market share of the firm increased.
Whatsapp: It is a popularly known as chatting app and is most commonly found in the apps
in mobile phones of every individual. It is a company in which previously, 35 employees are
working and the proportion of part-time labourers is 5 out of them (Gans, 2016).
It has been downloaded by 50 million customers from all over the world in only 3 years of
launching. However, it is sold to Facebook Company in the year 2014 for $ 19 billion (Tech,
2019).

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It does outsourcing, to reduce the operational cost and for this, it came into contact with
Russia Company, for taking the advantage of efficient engineers and the remaining work is
done by its own employees. With the progress of the business, the contract is transferred to
the USA (Gans, 2016).
Conclusion:
In brief, it can be said that outsourcing has become an essential part of the companies and
particularly for those companies, who established their businesses abroad. Therefore, it is a
great facility.
Bibliography

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Gans, J., 2016. The Disruption Dilemma. MIT Press.
Gervais, R., 2017. Global Outsourcing Strategies: An International Reference on Effective
Outsourcing Relationships. Routledge.
Heric, M., 2019. Outsourcing Can Do Much More Than Just Cut Costs. [Online] Available
at: https://www.forbes.com/2010/06/15/outsourcing-capability-sourcing-leadership-
managing-bain.html#19e40503718b [Accessed 20 August 2019].
Lopez, J., 2019. What is outsourcing? What does it mean for companies? [Online] Available
at: https://medium.com/coderslink/what-is-outsourcing-what-does-it-mean-for-companies-
eff73fe60372 [Accessed 20 Aug 2019].
Mcdonald, J., 2019. Here's The Story Of Alibaba's Rise. [Online] Available at:
https://www.businessinsider.com/here-is-the-story-of-alibabas-rise-2014-5?IR=T [Accessed
20 August 2019].
Patel, D., 2019. The Pros And Cons Of Outsourcing. [Online] Available at:
https://www.forbes.com/sites/deeppatel/2017/07/17/the-pros-and-cons-of-outsourcing-and-
the-effect-on-company-culture/#3816793b562d [Accessed 20 August 2019].
Schniederjans, M.J., 2015. Outsourcing and Insourcing in an International Context.
Routledge.
Sparrow, E., 2012. Successful IT Outsourcing: From Choosing a Provider to Managing the
Project. Springer Science & Business Media.
Tech, D., 2019. WHY SUCCESSFUL COMPANIES LIKE GOOGLE OUTSOURCE: 5 USE
CASES YOU CAN LEARN FROM. [Online] Available at:
https://medium.com/@distillerytech/why-successful-companies-like-google-outsource-5-use-
cases-you-can-learn-from-660f1fe242b3 [Accessed 20 August 2019].
Tsotra, D., 2011. Cultural Emergence in Global IS/IT Outsourcing. International Workshop
on Global Sourcing of Information Technology and Business Processes, 91, pp.99-114.
Verwaal, E., 2017. Global outsourcing, explorative innovation and firm financial
performance: A knowledge-exchange based perspective. Journal of World Business, 52(1),
pp.17-27.