Business Research: A Comprehensive Analysis of Outsourcing Strategies

This business research report critically analyzes the advantages and disadvantages of outsourcing in the globalized world. It defines outsourcing, highlighting its benefits like cost savings, increased efficiency, access to skilled resources, and time zone advantages, while also addressing potential drawbacks such as data security risks, lack of managerial control, hidden costs, and quality assurance concerns. The report emphasizes outsourcing's strategic importance for companies like Google, Unilever, and others, while also examining how improper planning and execution can lead to failures, as seen with companies like J.P. Morgan and IBM. The project objective is to explain why outsourcing is a significant business strategy and how companies can create value, while also assessing the potential pitfalls. The literature review covers outsourcing and cost advantages, enabling organizations to concentrate on core processes, increased business efficiency, access to skilled resources, and time zone advantages. The report also explores the risks of exposing sensitive data, absence of managerial control, hidden costs, and lack of quality assurance, concluding with a comprehensive overview of the scope and limitations of outsourcing in the business world.

Running head: BUSINESS RESEARCH
Business Research
Name of the Student:
Name of the University:
Author note:

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Table of Contents
Introduction:....................................................................................................................................2
Project Objective:............................................................................................................................2
Project Scope:..................................................................................................................................3
Literature Review............................................................................................................................4
Advantages of Outsourcing in Business..........................................................................................4
Outsourcing and Cost Advantage in Business.............................................................................4
Enables an Organization to Concentrate on the Core Processes.................................................5
Increased Efficiency in Business.................................................................................................6
Access to Skilled Resources........................................................................................................6
Time Zone Advantage in Outsourcing........................................................................................6
Disadvantages of Outsourcing in Business..................................................................................7
Exposure of Sensitive Data..........................................................................................................7
Absence of Managerial Control...................................................................................................7
Risk of Hidden Costs that cannot be anticipated before..............................................................8
Lack of Quality Assurance..........................................................................................................8
Conclusion.......................................................................................................................................8
Reference List................................................................................................................................10

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Introduction:
The importance of outsourcing in business organizations operating in today’s global
world cannot be overstated. Outsourcing is defined as a strategic action of an organization
whereby the outside resources are being utilized by a company for accomplishing its business
activities that are otherwise handled by the internal staffs and resources of the company. Many
companies have been able to benefit immensely by outsourcing their business activities.
Companies such as Google, Unilever, Alibaba, Acer, and others have been able to boost their
business growth by outsourcing their activities only (McIvor 2016). The organizational
flexibility that a company can achieve is the most important advantage of outsourcing business,
and yet there are potential drawbacks such as security threat as well. Many companies are
recently outsourcing their business activities as it lets them work with global talents, and helps a
company focus on the core functions of business. Considering the importance of outsourcing of
business operations, the paper intends to investigate and critically analyse the advantages as well
as disadvantages of outsourcing business activities in the globalized world of today.
Project Objective:
In the era of globalizations, most of the companies believe in working in an integrated
way, in order to simplify its job as well as to reduce the cost. The cost and quality conscious
companies prefer to outsource most of the non-core business works to the Asian countries like
India, Malaysia and Singapore to ensure that it can focus on the core functions like business
administration. This is why, a large part of the business functions such as payroll, inventory
management as well as transaction processing, are being outsourced the external vendors. While
cost effectiveness, and wide access to skilled resources are indeed two important benefits a

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company can derive through this, there are many companies that have not been able to manage
outsourcing in a proper way and have met with failure. Companies like J.P Morgan and IBM met
with disastrous failure while outsourcing their business activities. Hence, in this connection, it is
important to take note of the benefits as well as challenges a company is likely to encounter if it
intends to outsource its business activities (Gerbl et al. 2016). This research project will help in
explaining why outsourcing has emerged to be a significant business strategy and how today’s
companies can create and sustain value by outsourcing their business activities. At the same
time, it is important to assess and analyse how in case outsourcing plan is not executed and
planned, a company can also meet with failure. Thus, the company will also enlighten on how
some companies met with disastrous failure owing to the numerous and unforeseen challenges
associated with outsourcing activities.
Project Scope:
The present project intends to critically analyse and examine the benefits as well as
limitations of outsourcing in today’s highly competitive world. Often certain business operations
of a company are operationally uncontrollable, in such situations, outsourcing can largely help a
company. Outsourcing also benefits a company by enhancing its productivity and adds to the
organizational success. It is a well-known fact that when a company outsources its business
needs to an outsourcing partner like Flatworld Solutions, the outsourcing partner can easily bring
in years of vast experience in business practices and expertise that helps it deliver complex
outsourcing projects. Hence, it is important to know how and in what way exactly outsourcing
contributes to organizational success, in a company. This research project will also help in
throwing light on the pre-requisites of successful outsourcing program such as vendor selection,

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relationship management, and clarity of organizational goals and objectives. Thus, the research
will help in ensuing that the companies in future can properly utilize outsourcing activities in
business. Many companies spend much time, energy and money on outsourcing their business
activities. Hence, it is imperative for them to stay aware of the risks associated with outsourcing
as well. This research will help in creating awareness amongst the business managers about the
possible risks such as loss of sensitive data, hidden cost and legal problems as well as loss of
managerial control in business that can also impede future business growth as well. In a nutshell,
the project intends to enlighten business organizations about the scope and limitations of
outsourcing in business.
Literature Review:
Advantages of Outsourcing in Business:
Outsourcing and Cost Advantage in Business:
One of the most obvious advantages of outsourcing is the cost savings that outsourcing
activities brings to an organization. There is no gain stating the fact that often a company will
outsource its business functions to a third world country where there is cheap availability of
labour. Consequently, often business organizations in the European countries outsource their
works to South East Asian countries where the employees agree to serve the company at a much
cheaper cost. In fact, research reports suggest that a company by outsourcing its business to India
can save up to 60% of the total cost (Lacity and Willcocks 2017). Thus, this also adds to the
competitive advantage of the company. The lower cost of operation and labour, and reduction in
overhead costs makes it attractive to outsource. The reduction in the manpower cost is one of the

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most important reasons why an organization decides to outsource its business. There is no point
stating the fact that IT is becoming ever more critical to conducting businesses today. In many
cases, whether public or a private company, an organization more than often lacks the scale or
technical buying power to get “best in class” IT all the time. In such situations, by simply
outsourcing IT functions, a company can easily have a predictable budget (Vaidhyanathan et al.
2013).
Enables an Organization to Concentrate on the Core Processes:
A chief advantage of outsourcing is that it enables an organization focus on the most
important aspects of business that merit organizational attention. Often the companies end up
investing so much time and energy in the non-core business activities, that the main core
business activities start suffering. By outsourcing the less significant business activities to other
companies, an organization can easily concentrate on brand building activities, conduct research
and development programs that help the organization provide higher value added services. In
fact, it is important to note that outsourcing has turned up to be a smart and economic leadership
tactic for those the small and emerging business organizations (Schniederjans et al. 2015). Often
these companies assign more than one job to an employee, that not only affects employee
productivity but also employee motivation. This is why, outsourcing the basic business functions
such as web development, copywriting, taxes and payroll as well as IT related works, an
organization can easily focus on the core business processes rather than the supporting ones
(Gerbl et al. 2015). It should be remembered that core competencies of a business determines its
sustainability, and hence the core competencies should be strengthened within an organization

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and it is clearly evident that productive outsource can always simplify the workload of a
company.
Increased Efficiency in Business:
Though it is a less acknowledged fact, it should be remembered that most of the times
outsourcing results in nothing short of increased efficiency in business, and helps in raising the
productivity level. An organization outsources its business to other vendors only when they
possess the required technical expertise as well as specific equipments necessary for the smooth
completion of the task. As a result, as and when a task is being allocated to an external party, the
tasks are usually accomplished faster and with far better quality output (Jackson 2014).
However, while outsourcing, it is important to ensure that the outsourcing partner is not a new
and emerging one, but rather a reliable one such as Flatworld Solutions, that can deliver complex
outsourcing projects with the help of their years of experience in business practices.
Access to Skilled Resources:
One of the biggest challenges of recruiting and training existent workforce in order to
develop and enhance the skills and expertise they otherwise do not possess. However, by
outsourcing business to a third party, an organization does not need to hire or groom individuals
in-house (Sun et al. 2014); hence the recruitment as well as the operational costs can be
minimized to a considerable extent. This is one of the major advantages of offshore outsourcing
that the work in which the existent employees lack expertise can be outsourced to other
companies.
Time Zone Advantage in Outsourcing:

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A very important advantage of outsourcing business function is the time zone advantage.
More than often the countries in the West outsource their business activities to the countries in
the East. As a result, due to the difference in time resulting from difference in location, it is
easily possible to get the job done while the outsourcing company is closed for the day so that it
can easily wake up to the service being delivered the next morning. As a result, outsourcing
helps in providing round-the-clock service to the company (Fogarty and Bell 2014).
Disadvantages of Outsourcing in Business:
Exposure of Sensitive Data:
Despite its multiple benefits, outsourcing offers an organization, it is one of the chief
disadvantages of outsourcing is that it carries the risk of exposing confidential data to a third
party. The threat to security and confidentiality is a major drawback of business process
outsourcing. As and when a company decides to outsource its payroll, medical records or other
vital HR documents to a third party organization, there is a moderate chance that the
confidentiality of the outsourcing company will get compromised (Gummerus et al. 2016). This
is the reason why companies are always better advised to choose the outsourcing partner with
much discretion, as otherwise sharing of valuable company information such as proprietary data
can prove to be highly detrimental to a company.
Absence of Managerial Control:
Outsourcing business process can create potential difficulty for a business organization.
This is because the moment an organization entrusts its duty and function of a specific
department to another company, it is shifting the management and control of that department to

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another company as well. As a result, the outsourcing company may encounter difficulty in
managing the offshore provider. The company will lose its power of determining how it will
make profit in business, and its profit will be determined by how the outsourcing partner chooses
to manage its business.
Risk of Hidden Costs that cannot be anticipated before:
Although while outsourcing business process to an external vendor, an organization will
ask the outsourcing partner to sign a contract which will contain the terms of the agreement as
well as the details of the expenses, some expenses may not be specified in the agreement.
Anything that is not being specified in the contract such as legal fees for retaining a lawyer,
travelling expenses or expenses involved in creating infrastructure for the smooth operation of
the outsourced activities are difficult to be predicted beforehand (Caruth et al. 2013).
Consequently, those companies which do not plan properly often encounter financial trouble.
Lack of Quality Assurance:
There is no gain stating the fact that in most of the cases, an outsourcing company is
driven by profit, and hence cares not much about the quality of work being delivered. Once a
contract is entered upon, the total price they can get for the accomplishment of the task will be
fixed (Vaxevanou and Konstantopoulos 2015). As a result, these companies will try to reduce
their expense while trying to increase the profit. This can lead to low quality service being
delivered as the outsourcing partner will not prioritize any company and its profit, while
handling too many companies at the same time.
Conclusion:

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In the globalized era, the advent of advanced technology has simplified business
conducting process for organizations. It has become easier for companies to choose an external
service provider for the accomplishment of the tasks that it cannot otherwise cannot complete,
owing to shortage of time and scarcity of skills and expertise. However, nevertheless, it is
undeniable here that the security threats and risks, quality problem and hidden cost, as well as
dependence on other company, are some of the potential weaknesses of business outsourcing
process. Hence, it is recommended that when an organization decides to outsource its business
activities, it must ensure the selection of right service provider and effective, periodical
supervision of the outsourced business activity.

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Reference List:
Caruth, D.L., Haden, S.S.P. and Caruth, G.D., 2013. Critical factors in human resource
outsourcing. Journal of Management Research, 13(3), p.1.
Fogarty, D. and Bell, P.C., 2014. Should you outsource analytics?. MIT Sloan Management
Review, 55(2), p.41.
Gerbl, M., Gerbl, M., McIvor, R., McIvor, R., Humphreys, P. and Humphreys, P., 2016. Making
the business process outsourcing decision: why distance matters. International Journal of
Operations & Production Management, 36(9), pp.1037-1064.
Gerbl, M., McIvor, R., Loane, S. and Humphreys, P., 2015. A multi-theory approach to
understanding the business process outsourcing decision. Journal of World Business, 50(3),
pp.505-518.
Gummerus, A., Airaksinen, M., Bengtström, M. and Juppo, A., 2016. Values and Disadvantages
of Outsourcing the Regulatory Affairs Tasks in the Pharmaceutical Industry in EU
Countries. Pharmaceut Reg Affairs, 5(161), p.2.
Jackson, N., 2014. How to build a better business with outsourcing.
Lacity, M. and Willcocks, L., 2017. Conflict resolution in business services outsourcing
relationships. The Journal of Strategic Information Systems, 26(2), pp.80-100.
McIvor, R., 2016. An analysis of the application of process improvement techniques in business
process outsourcing. International Journal of Quality & Reliability Management, 33(3), pp.321-
343.
Schniederjans, M.J., Schniederjans, A.M. and Schniederjans, D.G., 2015. Outsourcing and
insourcing in an international context. Routledge.