Outsourcing Analysis: Advantages, Disadvantages, and Decision

This report delves into the practice of outsourcing, defining it as the strategic hiring of external parties to perform services or produce goods previously handled internally. It highlights outsourcing's role in cost-cutting and its significant impact across various business functions. The report references Peter Drucker's perspective, illustrating how companies like Google can benefit by outsourcing non-core functions such as cafeteria services. The advantages of outsourcing discussed include improved risk management, increased efficiency, and cost reduction, particularly in the digital age. The report also acknowledges the risks associated with outsourcing, such as loss of control, potential long-term costs, and challenges related to exit strategies. It then presents a scenario where a company must choose between outsourcing to a Canadian or an Indian firm, ultimately advocating for the Indian company based on cost and geographical advantages, which can lead to both cost savings and access to skilled labor. The report concludes by emphasizing the strategic importance of outsourcing in today's business environment.

Running head: OUTSOURCING
Outsourcing
Name of the student:
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Authors note:

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Outsourcing is a practice of business in which hiring of party or employees take place
outside the company in order to perform services and good which was earlier performed in house
by the own employee of the company and staffs (Gunasekaran et al. 2015). This practice is
usually undertaken by the company as a measure of cost-cutting. It has an extensive impact,
which ranges from customer support in order to manufacture in the back office. In the year 1989,
outsourcing became an important part of business strategy and became an integral portion of the
economy throughout the 1990s.
The father of modern management Peter Drucker has said, "Your backroom is someone
else's front room' (Gurung & Prater, 2017). For instance, in a maximum of the companies and
organization running a cafeteria is not a matter of utmost importance for the success of the
business. Therefore for the employees, it is the 'backroom' Google one of the reputed company
and have the aim to be the global leader in mobile computing hardware and application is all
supported by the increased revenue. It does not want to be famous or gain reputation how it is
running their cafeterias . Therefore using Drucker's view it can be said that Google should hire
another company for running the cafeterias in simple word outsourcing the workforce. This is
because of the food service of a company whose service is a 'front room,' which is better suitable
for Google management ( Kuek et al. 2015). Therefore by doing this, Google can focus on their
work rather than on running a cafeteria.
Outsourcing has a great advantage for the company. It will allow the company to better
risk better management as the outsourcing partners will reduce the burden. For example, a
competent outsourcing partner will reduce the organization involved in one of the tasks in the
house, especially competent in the field. Another major advantage is that it will reduce the in
house efficiency after allocating the outsourcing partner as they share the workload of other

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employees in the internal task force. Outsourcing has also resulted in cost-cutting as it is an
important factor, especially in the case of the digitalized world (Moe et al. 2014). The developed
countries especially want to outsource from third world countries like Africa and India. It is one
of the most cost-effective strategies which should be undertaken by the organization.
Outsourcing of the work always gets work done by the other government and in a more efficient
way. There is a huge wage gap between these countries, which is always gain by encashing on
the cheap labor. The kind of this work is done at a high price, which creates a lot of difference in
the wage and makes the company earn more.
There is also a high risk which is associated with outsourcing. One of them is the loss of
control. The mangers have complained about the loss of control in the process, and the
consequences can be severe in the process. It should be noted that if the company loses control
over the organization, then the quality of production may suffer, the schedule of production may
be disrupted, and the contractual development may be disrupted (Larcker, McCall & Ormazabal,
2015). Another disadvantage that is associated with outsourcing is long terms cost. For example,
iPhone outsources from the south Asian countries; however, the benefit of outsourcing is
associated with foreign companies, and they started replicating; therefore, the idea of hidden cost
cropped in. The exit strategy of outsourcing is also cropped in. There are three concepts firstly,
contract agreement, contract termination, which is essential. Several cases are associated with
these, and the companies face a lot of problems while exiting from the same.
It is always better for an organization to outsource labor from the developing nations as
the cost is very much lower in comparison to the developing nation as it can be observed from
the bid also. Therefore, I would grant the bid of the Indian company and give them the contract.
Another factor that hs motivated my decision is the geographical factor. Firstly geographical

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factors can act as a disadvantage; however, it is actually a boom because it allows remote or the
outsourced workers to outperform the house as the reliable and the most efficient (Oshri,
Kotlarsky & Willcocks, 2015). therefore it can be said the company will gain in two ways it will
earn profit by lower cost and also get skilled workers, and that will generate productivity.

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References
Gunasekaran, A., Irani, Z., Choy, K. L., Filippi, L., & Papadopoulos, T. (2015). Performance
measures and metrics in outsourcing decisions: A review for research and
applications. International Journal of Production Economics, 161, 153-166.
Gurung, A., & Prater, E. (2017). A research framework for the impact of cultural differences on
IT outsourcing. In Global sourcing of services: strategies, issues and challenges (pp. 49-
82).
Kuek, S. C., Paradi-Guilford, C., Fayomi, T., Imaizumi, S., Ipeirotis, P., Pina, P., & Singh, M.
(2015). The global opportunity in online outsourcing.
Larcker, D. F., McCall, A. L., & Ormazabal, G. (2015). Outsourcing shareholder voting to proxy
advisory firms. The Journal of Law and Economics, 58(1), 173-204.
Moe, N. B., Šmite, D., Hanssen, G. K., & Barney, H. (2014). From offshore outsourcing to
insourcing and partnerships: four failed outsourcing attempts. Empirical Software
Engineering, 19(5), 1225-1258.
Oshri, I., Kotlarsky, J., & Willcocks, L. P. (2015). The Handbook of Global Outsourcing and
Offshoring 3rd Edition. Springer.