Global Outsourcing and Performance Management

This report delves into global outsourcing and performance management, discussing the challenges and opportunities businesses face in a globalized environment. It highlights key factors for managers to consider when developing outsourcing strategies and differentiates between outsourcing and near sourcing. The report concludes with reflections on the importance of effective management and the potential benefits of outsourcing.

Global Outsourcing and
Performance Management
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TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
ASSIGNMENT 2 PART A..............................................................................................................3
1. Global outsourcing.......................................................................................................................3
Challenges and opportunities of global outsourcing in an increasingly globalized business
environment.................................................................................................................................3
Key factors that business managers need to be aware while considering global outsourcing
strategies......................................................................................................................................6
Difference between outsourcing and emergence of near sourcing strategies..............................7
ASSIGNMENT 2 PART B..............................................................................................................8
Reflection.....................................................................................................................................8
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9
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INTRODUCTION
Global outsourcing is referred to conducting the business activities without obstructions
in borderless world. It is no longer considered short term quick fix that assists in achieving cost
reduction. Global outsourcing utilizes the mix of onsite, offshore and near shore outsourcing
solutions that assists the firm in attaining its strategic business objectives for outsourcing firm.
Outsourcing includes contracting out of business processes to another party (Quinn and Strategy,
2013). Further, performance management is referred to as the process with which manager and
employees work together in order to plan, monitor as well as review work objectives of
employees and their contribution to the firm. Present report entails to understand the challenges
and opportunities of global outsourcing. In addition to this, it involves evolution of performance
management for the workforce in 21st century.
ASSIGNMENT 2 PART A
1. GLOBAL OUTSOURCING
Challenges and opportunities of global outsourcing in an increasingly globalized business
environment
In present business as well as economic discussion, global outsourcing has received
greater attention. The firms across several industries increasingly look at other countries not only
as source of materials, products and sub systems, but also as supplier of blue and white collar
labor. With the increase in customer demand, enhancement in the intensity of competition as
well as shrink in product life cycle huge pressure has emerged on operating profit margins.
Through cross border business there has been increasing complexity and number of challenges as
the firm is trying harder so as to stay profitable and innovative (Ågerfalk and Fitzgerald, 2008).
It is essential that business processes are made flexible and adaptable so that people can respond
faster to the changing needs of the organization. The alignment of business goals with the
outsourcing of services is essential rather than been viewed as technique of enhancing
operational efficiencies. There is existence of various challenges and opportunities of global
outsourcing which are enumerated in the manner below:
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Challenges of global outsourcing
Changes in outsourcing laws: This is considered as the major challenge that has potential to
affect global outsourcing business. Crisis in the economy and political factors may force
changes to the laws of outsourcing in different countries (Lacity and Hirschheim, 2012). Thus,
outsources has to keep a track on the changes as it is important for them to comply with the law
in an effective manner.
Understanding new participating economies: With the emergence of more and more new
economies, it becomes important for the client’s company to understand the work culture, living
standards, government policies, tax issues, political stability as well as work experience of the
outsourcing company (Kathawala, Zhang and Shao, 2005). This acts as a major challenge in case
of global outsourcing business.
To outsource or not in the interest of nationality: This has resulted in occurrence of another
major challenge which is related with whether to outsource or to near shore. Such relies majorly
on two factors. This includes upkeeping the national interest as well as economy by near shoring
that possess cultural and geographic benefit for the organization (Edgell, Meister and Stamp,
2008). In addition to this another factor relates with continuation of outsourcing at cheaper costs
and competitiveness due which greater challenges are being faced. This is faced by Asian
economies and Euro Zone as well.
Opportunities of global outsourcing
Growing diversity of firms: Global outsourcing possess major opportunity in terms of increase in
diversity (Oshri, Kotlarsky and Willcocks, 2007). This has greater role in developing the image
of the brand in international market. With the assistance of global outsourcing organization can
effectively diversify it functions in various areas. This provides chance to the business in terms
of increasing its sales and profitability in an effective manner.
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Competitive market: This is regarded as major benefit for the firm. Global outsourcing helps the
client company in establishing position of the business (Katz, 2015). Further, this assists in
gaining the competitive advantage in market for long run due to course of time.
Time to focus on core business: One of the major advantages related with outsourcing is that with
this firm can concentrate on its core business. This acts as major opportunity of the firm in terms
that it allows the organization in outsourcing less crucial tasks to other companies and can pay
more attention towards critical business activities. This allows the firm to enhance its sales and
profitability in an effective manner. Through outsourcing there is greater decline in the time
spent on non core areas as it offers owners sufficient time to devote on core functions. This
implies that less time is required to be spent towards monitoring outsourcing vendor (Liu and
Nagurney, 2013). It is the responsibility of the vendor to attain the agreed upon outcomes with
greater efficiency.
Reduction in business liability: There is presence of several functional areas in an organization
that performs with a certain amount of liability. This includes proper filing of certain state as
well as federal tax return and reports. Other areas of function rely on business that might have
exposure of liability depending on the risk of the activity. With the outsourcing of function there
is greater reduction in the exposure of liability and costs of insurance (Quinn and Strategy,
2013). This acts as major opportunity for the firm as with this it can reduce its liability which can
prove to be beneficial for the organization in long run course of time. There is greater need in
discussing the liability details with the vendor in advance before making any agreement. In
addition to the economic benefit outsourcing assist in empowering business with improved
operations, increased knowledge, quality compliance, timeliness, market advantage, technical
superiority as well as possible limitations of liability (Garofolo and Garofolo, 2010). Further it
has major benefit in terms of gaining competitive advantage in an effective manner.
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Key factors that business managers need to be aware while considering global outsourcing
strategies
There is existence of certain key factors that business manager needs to be aware while
considering global outsourcing strategies. These have been enumerated in the manner below:
Cost savings: It is important to check that outsourcing needs to increase bottom line profits to
reduce the operating expenses (Amiti and Wei, 2005). In addition to the reduction in cost, it is
important for the business manager to consider quality of services received while taking global
outsourcing strategies into account.
Technology and human resources of Vendor: The decision regarding outsourcing needs to
involve analysis of the vendor's technology as well as human resources. It is important to make
determination on whether or not vendor is capable of handling outsourced needs of the
organization in a particular area (Wadhwa and Ravindran, 2007). For instance, if the technology
and resources of vendor cannot be handle well then, demand of outsourced function and the
purpose for which outsourcing is being done would defeat. Thus, one has to take the same into
account while developing strategies for global outsourcing.
Quality and timeliness: Both quality and timelessness are significant factors. In situation, when
vendor fails to make delivery on time without quality work then such would affect the operation
of the business (6 Outsourcing Factors for Small Businesses to Consider, 2015). Thus, such
needs to be considered by business manager while designing strategies related with global
outsourcing. It is determined that an organization cannot run the risk of having its operations
interrupted as a reason of vendor's problem.
Competitive advantage factor: It is important for the business manager to consider the
competitive advantage factor while taking global outsourcing strategies into account. This is
because; it is the only means that would build stronger business position in market.
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Global events: It is with the outsourcing the organization is able to get 24/7 global presence. But
there is certain risk associated with this such as occurrence of natural disasters, political events as
well as other disruption that might occur at work. It is important for business performing at off
shores to possess business continuity and fail over plans as such assist the organization in
carrying out its operation while occurrence of such global events (Carmel and Tjia, 2005). There
is greater need for the business manager to take such factor into account while making
development of global outsourcing strategies.
Difference between outsourcing and emergence of near sourcing strategies
Outsourcing and near sourcing are different ways through which firm can deal with the
products. The services of near sourcing reduce the entire cost of employees to the organization
by eliminating extra cost including insurance and paid time off. Firm can save greater amount of
money that can occur as a result of shipping costs through manufacturing products closer to the
headquarters (Carmel and Tjia, 2005). In contrast to this, outsourcing results in involvement of
huge cost. This is because under outsourcing the sourcing of labor is done in nation which is far
from Headquarter. The emergence of near sourcing has acted as a boon in reducing the cost of
operations of the business.
Another major difference is in relation with culture. In case of near outsourcing, the
cultural alignment with the business is readily available as a reason of similarities among the
cultures in which the business is located and in which the sub contraction of services is done.
Thus, this assists in performance of operations in an effective manner (Williamson, 2008). On
the contrary, in case of outsourcing, there is huge difference among the cultures where the firm is
situated and where the services are sub contracted. Thus, it becomes important to develop
strategies taking into account such factor. This requires developing the better understanding of
the cultures in order to succeed through outsourcing.
Along with this, another point of difference among outsourcing and near sourcing is in
relation with communication. The constraints that are being imposed by time zones can result in
making communication through labor intense process (Cooke, Shen and McBride, 2005). Near
sourcing strategies is effective in providing solutions for assisting in communication through
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elimination of constraints related with time zone. However, such is not possible in case of
outsourcing as it is time consuming process.
ASSIGNMENT 2 PART B
Reflection
By carrying out the present research I have gained knowledge regarding the ways in
which research can be conducted with respect to different fields of investigation. Further it has
built my ability to carry out analysis of the different aspect that is relevant with the subject
matter under investigation. With this I was able to gain insight to the differences existing
between near sourcing and out sourcing. The role of analytical skills is significant in completion
of my work with effectiveness. This would help me in carrying out investigation in future with
effectiveness. By carrying out the present investigation on global outsourcing and performance
management I am able to gain insight to the ways in which firm can effectively perform in the
present competitive environment. This has developed my skills in an effective manner. The
present research has assisted me in developing my skills related with writing as in order to
accomplish the project this was one of the crucial part. From the analysis of the topic I have
learned challenges and opportunities related with outsourcing. This has developed better
understanding in me with respect to subject matter under investigation. Further my ability to
carry out research has enhanced to a greater extent.
CONCLUSION
It can be concluded from the study that both management as well as outsourcing are
important aspect that assist the business in attaining its long term goals. There is existence of
several challenges such as change in laws and understanding the economies in case of
outsourcing. However there is certain opportunities attached when business get engaged into
outsourcing operation. This is in relation with reduction in cost. Further the role of outsourcing
has been greatly viewed towards increasing the quality of work as such the team of expertise
people is involved in completion of task when the work is being outsourced. There is huge
difference between outsourcing and near sourcing in terms of cultural and geographic benefit.
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REFERENCES
Journals and Books
Ågerfalk, P. J. and Fitzgerald, B., 2008. Outsourcing to an Unknown Workforce: Exploring
Opensurcing as a Global Sourcing Strategy. MIS quarterly. pp.385-409.
Amiti, M. and Wei, S. J., 2005. Fear of service outsourcing: is it justified?. Economic policy.
20(42). pp.308-347.
Carmel, E. and Tjia, P., 2005. Offshoring information technology: Sourcing and outsourcing to a
global workforce. Cambridge University Press.
Cooke, F. L., Shen, J. and McBride, A., 2005. Outsourcing HR as a competitive strategy? A
literature review and an assessment of implications.Human Resource Management. 44(4).
pp.413-432.
Edgell, J., Meister, G. E. and Stamp, N., 2008. Global sourcing trends in 2008. Strategic
Outsourcing: An International Journal. 1(2). pp.173-180.
Garofolo, W. and Garofolo, F., 2010. Global outsourcing. Bioanalysis. 2(2). pp.149-152.
Kathawala, Y., Zhang, R. and Shao, J., 2005. Global outsourcing and its impacts on
organisations: problems and issues. International Journal of Services and Operations
Management. 1(2). pp.185-202.
Lacity, M. C. and Hirschheim, R., 2012. The information systems outsourcing bandwagon.
Sloan management review. 34.
Liu, Z. and Nagurney, A., 2013. Supply chain networks with global outsourcing and quick-
response production under demand and cost uncertainty. Annals of Operations Research.
208(1). pp.251-289.
Oshri, I., Kotlarsky, J. and Willcocks, L. P., 2007. Managing dispersed expertise in IT offshore
outsourcing, lessons from Tata consultancy services. MIS Quarterly Executive. 6(2). pp.53-65.
Quinn, J. B. and Strategy, E. S., 2013. Strategic outsourcing: leveraging knowledge capabilities.
Image. 34.
Wadhwa, V. and Ravindran, A. R., 2007. Vendor selection in outsourcing. Computers &
operations research. 34(12). pp.3725-3737.
Williamson, O. E., 2008. Outsourcing: Transaction cost economics and supply chain
management. Journal of supply chain management. 44(2). pp.5-16.
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Online
6 Outsourcing Factors for Small Businesses to Consider. 2015. [Online]. Available through:
<http://www.allbusiness.com/6-outsourcing-factors-small-businesses-consider-16879-
1.html>. [Accessed on 16th January 2016].
Katz, L., 2015. Global outsourcing: Challenges and opportunities [Pdf]. Available through:
<http://www.leadershipcrossroads.com/mat/Global%20Outsourcing.pdf>. [Accessed on 16th
January 2016].
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