Business Development Report: Pros and Cons of Outsourcing Strategies

This report provides a comprehensive overview of outsourcing, a business practice where companies contract external parties to perform services or tasks previously handled internally. The report delves into the merits of outsourcing, such as enhanced capacity, cost savings, risk sharing, operational efficiency, and quicker product delivery. It also addresses the demerits, including security risks, lack of price transparency, potential quality issues, and workforce concerns. The report further explores the role of global outsourcing and its impact on both businesses and consumers, supported by real-world examples like AppSumo, Klout, and JM Family Enterprises. The conclusion emphasizes the benefits of outsourcing for business competitiveness, particularly for small and medium-sized enterprises with limited resources. The report is well-structured and includes a bibliography of relevant sources.

Running Head: PROS AND CONS OF OUTSOURCING
0
Managing across borders
Student name
8/23/2019

PROS AND CONS OF OUTSOURCING 1
Executive summary:
Outsourcing is basically a contract which is formed in the case of two parties and for business
operations it is done, by corporate to outsourcers. It is related to perform a particular task or
activity assigned by the corporate and it is done to gain a competitive advantage and for the
purpose to save the cost of enterprise hiring of specialists is done. The disadvantage is also
noted down before taking the final decision to hire.

PROS AND CONS OF OUTSOURCING 2
Contents
Executive summary:...................................................................................................................1
Introduction:...............................................................................................................................3
Merits of outsourcing:................................................................................................................3
Demerits of outsourcing:............................................................................................................4
Role of global outsourcing in the global context:......................................................................4
Examples:...................................................................................................................................4
AppSumo:..................................................................................................................................4
Klout:..........................................................................................................................................5
JM Family Enterprises:..............................................................................................................5
Conclusion:................................................................................................................................5
Bibliography...............................................................................................................................6

PROS AND CONS OF OUTSOURCING 3
Introduction:
Outsourcing is done in businesses in which external party is recruited to perform the services
which are required in the case of operations of the business and it is that which is done
previously by enterprise at its own. It is not only limited to manufacturing but concerned with
other tasks as well. This service is performed by organizations as well as by individuals. It is
by this specialized resources can be obtained attained easily, so to take advantage in the
operations of business (Crize, 2014). The report focuses on the concept of outsourcing and its
pros and cons as well as on practical examples.
Merits of outsourcing:
a. Helps in enhancing the capacity level: With the use of experts in the operation of the
business.
b. Helps to save the expenditure: It is because the project is done without any
obstruction related to finance or machinery.
c. Risk sharing: It happens due to both parties are come to form a contract in which one
party is a receiver and the other is taker of service so automatically this formed a
relation (Varajao, 2017).
d. Operational and Recruitment cost control: It is not only concerned with the only cost
but, it is a wider term which includes the concept of uncontrollable cost as well as the
cost which company spends while hiring the candidates in the enterprise and it is
possible with the deployment of outsourcers (Dolui, 2013).
e. Quicker delivery of products: It is made because company fixes the specific time to
undertake that facility and due to this, goods made prompt and which in turn
ultimately, helps in gaining competitive advantage in the marketplace (Agburu, 2017).
f. Made simple the relationships: By hiring the candidates from outside lead to reduce
the clash which occurs in the employees who are working in the firm.
g. Important matters get more focus: It is because time is a limiting factor as it cannot
stop for anyone whether it is a firm or person. So, requirement is to utilize it properly
and that’s also the main reason to conduct the outsourcing activity. It is by this
company can focus on primary motives and not waste its time on secondary, which is
also considered as insignificant objective.

PROS AND CONS OF OUTSOURCING 4
Demerits of outsourcing:
a. Security risk: It happens due to the fact that the business of outsourcing firm is to help
the business concerns and their operations are larger, as they came into contact with
many enterprises and that’s why there is a risk that they might share private
information data of company to rival enterprises.
b. Prices which are incurred are not disclosed: It happens mostly in the cases to make a
profit and it is done in this situation because the sole purpose of businesses is to make
profit, outsourcing is also a business (Mboga, 2015).
c. Emphasis is not put on a particular work: It is a drawback for the organization point of
view as if it does work solely then, this could not be done as it focuses on single task.
d. Liked with the financial performance of the outsourcer: It is connected with the firm
as if the outsourcing firm is not capable to meet all the resources which are required to
do the task then this task be compromised with the specifications (Dolui, 2013).
e. The risk relating to quality maintenance: It arises as there is no individual to control
its operations and that is the reason they can do whatever they wanted to.
f. Decreases the attitude of the workforce: It is because when workers hear the rumours
of entry of outsourcers in the organization then they lose their confidence.
g. The interaction is done through indirect modes than direct: It is a limitation because
parties who are contracting are not able to make understand easily the instructions.
Role of global outsourcing in the global context:
Outsourcing activity has been expanded at an international level for supporting the domestic
businesses to take their firms at global level and to enjoy the economies of scale in their
operations (Babin, 2012). It also opens up the opportunity for not only enterprises but, for
also for the consumers as, it is by this good quality of commodities obtained and due to this,
buyers get the worth of every rupee spent on products.
Examples:
AppSumo: It was launched in the year 2010 by Noah Kagan. It is a website which provides
discounted software which is of very much costly (Johnson, 2011). Its turnover reaches $ 2
million amount. Previously, it was nothing but just an entertainment blog and it is achieved
success due to taking of services from PayPal integration, remote developer and in today also,
AppSumo taking its services for its operations and paying it $ 50 for this (Givy, 2016).

PROS AND CONS OF OUTSOURCING 5
Klout: It is a social media, founded by Joe Fernandez. This idea is converted into reality only
with the outsourcing. This app is developed in the country Singapore with the help of
developer coach and it is done so to remove the distractions (Agburu, 2017).
JM Family Enterprises: It is an automotive company and provides various types of the
facility such as distributing the vehicle, financing services, and technology-related offerings
to the consumer (Johnson, 2011). It does outsourcing of its main core business that is
software, hardware, as well as operations to other company and it, is done to not to undertake
loss as it has been done in previously the month reaches down to 8.2$ (jmfamily, 2019)
Conclusion:
In conclusion, it can be said that outsourcing is a facility which helps the firms to be
compatible in the market place and helps the micro and medium firms to compete with the
bigger brands easily if there is shortage of resources.

PROS AND CONS OF OUTSOURCING 6
Bibliography
Agburu, J.I., 2017. Effect of outsourcing strategies on the performance of small and medium
scale enterprises (SMEs). Journal of Global Entrepreneurship Research, 7, pp.1-34.
Babin, R., 2012. Sustainable Global Outsourcing: Achieving Social and Environmental
Responsibility in Global IT and Business Process Outsourcing. Springer.
Crize, T., 2014. What Is Outsourcing? Createspace Independent Pub.
Dolui, A., 2013. Outsourcing: definitions and analysis. International Journal of Production
Research, 51(23-24), pp.6769-77.
Givy, 2016. 6 Famous Tech Startups that Outsourced Development. [Online] Available at:
https://medium.com/@trygigvy/6-famous-tech-startups-that-outsourced-development-
be52bcd3addf [Accessed 23 August 2019].
jmfamily, 2019. About Us. [Online] Available at: https://www.jmfamily.com/about-
us#WhoWeAre [Accessed 23 August 2019].
Johnson, G., 2011. Exploring Strategy. Financial Times Prentice Hall.
Mboga, J., 2015. Factors Influencing Corporations to Outsource: A Case Analysis of MBE
Corporation. International Journal of Innovation and Scientific Research , 19(2), pp.284-89.
Varajao, J., 2017. IT/IS Outsourcing in Large Companies – Motivations and Risks. Procedia
Computer Science, 121, pp.1047-61.