A Comprehensive Report on Outsourcing Business Functions: Pros & Cons

This report provides a comprehensive analysis of outsourcing business functions, examining both the advantages and disadvantages for organizations. The study begins by defining outsourcing as the delegation of secondary business activities to third-party companies, allowing organizations to focus on their primary functions and improve efficiency. Advantages discussed include cost reduction through lower labor costs in developing countries, access to specialized expertise, and improved operational efficiency by concentrating on core activities. The report also highlights disadvantages such as lack of control over outsourced processes, risks of data breaches, potential for new competition, and negative impacts on company reputation due to job displacement. Real-world examples, such as IBM and Tesco Plc, are used to illustrate the practical implications of outsourcing strategies, providing a balanced view of its potential benefits and drawbacks.

Running Head: BUSINESS RESEARCH
BUSINESS RESEARCH

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Table of Contents
Introduction...........................................................................................................................................3
Project objective................................................................................................................................3
Project Scope.....................................................................................................................................3
Literature Review..................................................................................................................................4
Introduction.......................................................................................................................................4
To explore the meaning and concept of outsourcing business functions............................................4
To discover advantages of outsourcing business functions................................................................5
To examine disadvantages of outsourcing business functions...........................................................6
Conclusion...........................................................................................................................................10
References...........................................................................................................................................11

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Introduction
Outsourcing is identified as the procedure wherein the company delegates their secondary
business functions to third-party institutes to decline cost and enhance their efficiency. The
handover of the secondary tasks aids organizations to focus on their primary practice that
enhances performance and profitability of the organization. The modern organization could
outsource many business activities that are related to accounting, Information Technology,
call center, data analysis, and legislative. In addition, it is also found that there are certain
advantages of outsourcing such as improvement of service quality, higher consumer
satisfaction, risk distribution, and cost-effective. But at the same time, it is also analyzed that
there are many drawbacks of outsourcing like lack of regulator on the management, data
breach threat, and possibilities of new completions. This report will examine various merits
and drawbacks with respect to the business activity. Moreover, this report supports to
examine many organizations aspect to comprehend pros and cons of outsourcing business
functions. Further, the report will examine various companies’ perspective to understand
disadvantages and benefits of outsourcing.
Project objective
The main aim of this research is to address the advantages and disadvantages of outsourcing
business functions. The following objectives are used by research scholar to attain the
research aim:
 To explore the meaning and concept of outsourcing business functions.
 To discover advantages of outsourcing business functions.
 To examine disadvantages of outsourcing business functions.
Project Scope
This research proposal aid to gain the understanding about the advantages and disadvantages
of outsourcing business functions, Australia. Outsourcing of business function could directly

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influence existing financial performance of the firm. It will motivate research scholar to start
their study on the current research issue. Moreover, it is also addressed that depth
understanding towards of outsourcing business functions aids the organization to improve
their business process and obtain a higher competitive benefit. This research study aids the
researcher to improve their professional skills. It would be imperative if a researcher wants to
make their career in human resource management department. It will also assist the
organization to get higher competitive benefits. In the current business era, organization use
outsources business functions to maintain abilities of the organization. This research support
to make an effective decision in the context of outsourcing business functions.
Literature Review
Introduction
The literature review section supports to collect theoretical information about research matter.
There are certain sources that are considered by the researcher to collect accurate data such as
articles, books, online and offline websites. It will be imperative to attain the research aim
and objectives and obtain a reliable outcome. This literature review supports to critically
analyze the concept of outsourcing business functions. It also discusses the pros and
drawbacks of outsourcing business functions.
To explore the meaning and concept of outsourcing business functions
According to Liu, et al. (2017) Outsourcing is defined as the delegation of secondary business
activities of the firm to third party Company. In addition, organization concentrates on
primary activities to enhance their performance. It is also stated that organization transfers
their activities to effectively operate their business and obtain a reliable outcome. These
business activities are information technology, customers support, legislative, data analysis,
and accounting. In the current business scenario, modern companies use outsourcing to obtain
many advantages like cost effective, expertise service, and risk distribution, and customer

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support. Organization effectively use outsourcing approaches to obtain higher competitive
benefits.
To discover advantages of outsourcing business functions
In support of this, Solli-Sæther and Gottschalk (2015) explained that a company could
decline their operating cost by outsourcing their non-core activities to third-party
organizations. The expenses of business activities are related to supervision, training, and
recruitment. Hence, the company transfers their uses in emergent countries to enhance their
cost. It is also stated that India, China, Indonesia, and Malaysia are the cheapest country as
compared to the Singapore, United States, and the United Kingdom for labor cost.
According to Oshri, et al. (2015) the material cost of a developed country is higher as
compared to the developing countries that influence firm efficiency. The outsourcing strategy
is used by IBM to decline their operational cost of customer support. Through this strategy,
the organization is capable to obtain higher competitive benefits. In addition, it is also found
that the organization improves their performance by using outsourcing. Organizations hire an
expert to outsource their business functions as it could be effective for getting the higher
competitive benefit. It is also found that a large number of organization appoint specialist for
their service as it could be effective for enhancing the growth of the company in the least
time and cost. It will also facilitate organization to decline their additional cost of the
business process and obtain higher success.
In oppose to this, Patil and Wongsurawat (2015) stated that it is complicated for the
developing country to spend more cost on improving the skills of employee hence they
outsource their business function in developed countries and obtain a positive outcome. The
developed country organization facilitate the organization to provide the expert quality
service in the least time and cost as it could be effective for an organization to gain their
efficiency and obtain a reliable outcome. Tesco Plc is the best illustration of business

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outsourcing to decline their operational cost as it would aid them to gain their competitive
benefit. It is also addressed that IBM also uses outsourcing to enhance the quality of
consumer support services as it ensures the customers receive premium quality services.
In support of this, Chou, et al. (2015) explained that outsourcing of secondary activity enable
the company to more concentrate on primary actions and improves the quality of primary
activities. It will support to improve the effectiveness of the organization. It is also stated that
the organizations have the opportunity to enhance their operational efficiency by outsourcing
their non-core acts to other organizations.
Runar Edvardsson and Durst, (2014) argued that large organization classified their business
activities into two parts like primary and secondary as it would support company to
accomplish their organizational task and obtain a reliable outcome. It is complicated for the
company to keep a higher level of effectiveness in each section. The main objective of
outsourcing is to decline workload of secondary activity and improve primary activity
quality. Infosys is mainly concentrating on manufacturing hardware and software component
hence organization select outsourcing methods to improve the quality of their customers
support activities. It will enable the company to obtain higher profit. In addition, it is found
that the outsourcing of business functions could support organization to easily decline their
operational cost and improve their quality.
To examine disadvantages of outsourcing business functions.
In support of this, Uygun, et al. (2015) stated that outsourcing is effective but it is there is
also some disadvantages of out sousing of business functions. The organization faces many
cons from outsourcing that could negatively influence the growth of the firm. The
outsourcing issues are associated with lack of control of the company on the overall business
process, the risk of new competitions, reputation, lack of data security, and language barrier.

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In support of this, Gerbl, et al. (2015) stated that multinational companies outsource their
activities to third-party organizations that are located in the developing countries because the
labor cost is cheaper in the developing country for reducing their operating cost. But, at the
same time, it can be said that management has not another option to manage their daily
operation of organizations that are situated in another country. The organization face
complication in implementing new policies into outsourcing organizations that makes it
complicated for them to operate their all function. The multinational organization is known
for their quality services hence they prefer to outsource their activity for attaining their
objectives but due to lack of overall control, it is complicated for the organization to manage
the business activities and effectively operate it. Moreover, it is also found that IBM faces
many issues at the time of outsources their business functions in developing countries due to
different government regulations. The organization is not capable to mandate outsourcing
firm to operate in their own way. The government of developing countries does not allow for
using strict regulations. Hence, organizations do not desire to outsource their functions as it
would lose their managerial capability on its secondary functions.
On the other side, Schniederjans, et al. (2015) stated that risk of new competition could also
be a major issue for the organization at the time of outsources their business in other country
and obtain a higher competitive benefit. In the current business scenario, many organizations
use the outsourcing strategy for their firm to decline their cost and improve the quality their
services. It is also examined that outsourcing organization develops new competition level in
the marketplace because many organizations prefer to enhance their competitive benefits by
implementing the outsourcing approaches. For illustration, HP and Dell are major
competitors of IBM. These companies use strategies to the outsourcing of business functions
and obtain a higher benefit. It would create higher competition level in the marketplace. The

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enhancement in the competition enhances the rate of outsourcing that resulted in developing
competitive atmosphere wherein only large company can survive.
In support of this, Kasemsap (2016) explained that outsourcing of business functions could be
harmful to the company reputations and their domestic marketplace. A Large number of
organizations could not support to outsourcing approach because outsourcing organizations
are offering local jobs to foreign enterprises. In addition, it is also found that outsourcing is a
process that leads to enhancing unemployment level as it would negatively influence the
economic condition. In the current business scenario, the unemployment rate of the country is
increased while outsourcing offers the opportunity for an outsourcing firm. Hence, consumers
and association complain about the company that outsources its business activities to the
foreign country. Consequently, it will decline the reputation of the organization in the
marketplace. A huge number of consumer protest the organization by boycott product and
services of the organization as it would decline financial growth of the company. Thus, it is
analyzed that organization avoids outsource due to a higher chance of failure.
In the view of, Hunter and Saunders (2017) when an organization outsources their secondary
activities then they deal with many regulations of different countries. The organization could
deal with many regulations that are associated with the labor, employment, management
regulations for ensuring that they did not exploit their labors. In addition, it is also found that
rapidly modification in the market situation of developing countries could also a significant
impact on the outsourcing business activities. Moreover, it is stated that any substantial
modification in the environmental, economic, and social could influence the growth of the
business. Hence, the organization is needed to assess many laws that demonstrate they do not
a negative impact on the society. For illustration, any substantial modification in the political
parties could close outsourcing business function of a foreign company in India because a
new party may disapprove the outsourcing regulations. It is found the enhancement in the tax

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rate could directly influence the operating cost of outsourcing firm hence it can be said that
the outsourcing could decline the actual growth of the company. In developing countries, the
economy is continually changing that also influence organization that outsources their
business activities in the developing countries. Hence, outsourcing firm critically understands
rules and regulations of developing countries due to safety outsource their business activities
and obtain a positive outcome.
In oppose to this, Albertoni, et al. (2017) explained that outsource process mandate
organization to share their confidential data to the third party that could create the
possibilities of data leakage as it would negatively impact on the organizational performance.
The organizations share their sensitive information with third-party organizations that are
associated with the financial records, accounting, customer details, and legislation, and other
information. In addition, it is also analyzed that it is complicated for organizations to detest
their information by the external breach due to the lack of organizational control on the whole
process of outsourcing.
In support of this, Asatiani, et al. (2014) illustrated that, In the outsourcing, the possibilities
of data breach risk and data leak issues are increasing on the daily basis that could be a major
problem for the organization. It is also stated that Apple outsources their business activities in
the china together with implementing strict regulation to confirm that employees did not leak
any confidential data of Apple. But, it is found that the protocol of apple leaked in the
marketplace each year due to lack of control of the company on the whole process of
outsourcing firm activity. It is also found that the language barrier could be a complicated
problem for the organization or manager to use effective strategy and obtain positive
feedback. IBM primarily operates their business in the US but it outsources their secondary
activities in India and Malaysia for obtaining higher success. When the consumers of US can
call on the given helpline number of IBM then they could be frustrated by the accent of

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customers support department as it would negatively impact on the image of the company.
The administrator also faces complication at the time of talking with employees who work in
the outsourcing firm because they are failed to understand the instructions of companies (del–
Río–Ortegaet al., 2015).
Conclusion
With respect to the above observation, it can be summarized that modern organization could
take a huge amount of advantages from the secondary activities to third-party organizations.
It can also be concluded that the major advantages from the outsourcing like expertise work,
efficiency in functions, primary tasks, quality of customer support and reducing in operating
cost. The multinational organization uses the outsourcing strategies at the time of outsourcing
practices as it would be beneficial to get the higher competitive benefit. It is also illustrated
that organization also faces many disadvantages at the time of application of outsourcing like
employees dismissals, higher competition in the outsourcing industry, lack of administrative
control, language barrier, and data risk. It is also analyzed that organization should imply the
modern techniques for eliminating outsourcing issues. Through this, an organization would
be capable to sustain their position in the marketplace and obtain a higher competitive benefit
in the least time and cost.

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References
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