Outsourcing in a Global Context: Advantages, Disadvantages, and Role

This report provides a comprehensive analysis of outsourcing, a crucial business practice in today's globalized world. It begins by defining outsourcing and then delves into its various advantages, such as cost reduction, increased productivity, and access to specialized resources. The report also acknowledges the disadvantages, including potential communication barriers, security concerns, and the impact on local employment. Furthermore, it explores the significant role outsourcing plays in different industries, emphasizing its importance for innovation, competitiveness, and adapting to changing market conditions. Practical examples, such as Alibaba.com and Apple, are used to illustrate the concepts and show how companies leverage outsourcing to achieve their strategic goals. The report concludes by highlighting the importance of data management and strategic planning for successful outsourcing implementation, emphasizing the benefits and drawbacks to help companies make informed decisions.

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Executive Summary
Outsourcing is important for reducing workforce costs and gaining profits and productivity.
Nowadays, every company uses outsourcing as a tool for development and maintaining
relationship with customers and hold in market. In this report, the aim is to know the
importance of outsourcing in today’s generation and its role with benefits and drawbacks it
provides to the company for constant growth.

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Contents
Introduction................................................................................................................................3
Advantages.................................................................................................................................3
Disadvantages............................................................................................................................4
Role of Outsourcing...................................................................................................................4
Practical Examples.....................................................................................................................5
Conclusion..................................................................................................................................5
Bibliography...............................................................................................................................6

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Introduction
The practice of procuring goods and services from foreign suppliers is termed as outsourcing.
This term is mainly concerned with the industries where the cost of the workforce is high or
there is a shortage of workforce in particular positions like software developers or designers.
The company who functions to provide support in day-to-day operations, there the
outsourcing is for positioning (Overby, 2017). Outsourcing is a scope of opportunities for the
company with the rise in the technology sector and the start-up environment to gain and
maintain development talent and teams as the supply of developers is not enough to meet the
demand. The business decision of the companies, outsource to reduce the overhead to
produce a product that helps in increasing their profit margins (Damanpour, et al., 2019).
This report is to discuss the role of outsourcing to know the benefits and drawbacks of using
this practice in the business shown through practical examples.
Advantages
Outsourcing helps in reducing costs; helps in increasing productivity; flexible size for
maximum production; helps in focusing on increasing core competencies; more access to
resources; increase flexibility to meet changing conditions in the business. Also, quicken time
to market and lower the constant investment in infrastructure internally; allow access to
innovation, rational property and leadership and make cash inflow possible which results in
the transfer of assets to the new provider are the main benefits of outsourcing (Franco, 2018).
This practice can free up cash, employees, facilities and time resources which results in cost
savings from reducing workforce cost, taxes, efforts costs, and production costs. The
company can also provide outsourcing strategies to save costs in order to focus on business
core competencies that allow the company to improve productivity and increase
competitiveness by making it less time consuming to reduce operational costs. It also helps in
improving the management functions to provide benefits in the business through non-core
functions outside the company. It helps in avoiding the government environmental or safety
regulations and requirements in the company (Gray, 2019).
The example, which can justify the outsourcing benefits, in the US, manufacturers have
outsourced the jobs to workers in countries like China and Bangladesh, where they involved
the third party in the country to save workforce costs (Bucki, 2018).

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Disadvantages
After looking at the benefits, there are some risks as well; outsourcing slowdowns the
improvement time, due to this there is a lack of knowledge about the business areas, barriers
of language and culture, the difference in time zones and lack of control in business activities.
The management of relations with other party is through assigning & authorizing agreements
that consume time & involves the legal guidance of the company with day-to-day
communication within the company and with the outsourced work (Hui, et al., 2019). The
important factor of outsourcing includes security that affects the third party involvement as
they have access to delicate business data, trade secrets, and confidential information to
perform functions assigned in the contract. The impact of outsourcing that affects a large
portion of work for employees in their local population can result in loss of negative public
relations (Dahalan, et al., 2018).
Considering the example of Apple, when the products designed in the US, the company
purchased many products from third-party vendors (Lopez, 2017). In IT services, cloud
computing and SaaS (software-as-a-service) offered companies entrance to computer
facilities and tools managed in-house by IT departments of the company (Spacey, 2018).
Role of Outsourcing
Outsourcing is now a trend used in every company other than the changes in the regulatory
environment. Customers expect innovative services managed by service providers. Now, it is
more concerned about value rather than a cost for growth by making innovation as a key
element. Technology is an essential element in innovation, which is vast in the field and
increased the growth of competition (Nujen, et al., 2018). The new technologies have made
the setting more competitive with the close competitor but competing with the other
manufacturing companies that operates in the same field with experience globally. To ease
the pressure on production cycle, outsourcing provides the strategic solution and allows
company to use skills of Contract Development and Manufacturing Organisations (CDMOs)
which help to respond the pressure of increasing competition and achieve their own
company’s goals. In the companies, outsourcing considered as a cost-cutting strategy and
now used for expanding innovation and business productivity (Cook, et al., 2018). The start-
ups offering services and products in the manufacturing areas by adjusting business models
for being active through which the companies can compete and attract customers globally.

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Outsourcing is beneficial as a positive solution to overcome from infrastructure issues and to
focus on core business functions. The creation of quality and qualified materials is important
for production in overall supply chain and outsource the production of specific components
(Hirschheim & Dibbern, 2009).
Practical Examples
The companies forced outsourcing is Alibaba.com where the founder of the company
outsourced the website development to a US firm. Basecamp outsourced to remote
developers to improve cost opportunity expansion. Expensify outsourced with international
software house take care of back-end systems to concentrate on front-end development for
business expansion. GitHub outsourced in development consultancy, and Google outsourced
staff, as the company is strong enough to take care of various projects. Many companies do
outsourcing for their own benefits knowing about the risks it carries (Duò, 2017).
Conclusion
To conclude, technology keeps on changing to meet the demands of the companies that are
determined and advanced looking to compete globally to maintain a well-structured and
trustworthy network. To start outsourcing, companies need data management solutions to add
into their operations in the process to improve the value. Outsourcing is a helpful for
company’s profit and productivity increment with benefits and drawbacks.
Bibliography

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Available at: https://www.thebalancesmb.com/what-is-outsourcing-2533662
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Entrepreneurial Mindset Among Students of Technical and Vocational Education and
Training (TVET) Institutions in Malaysia,. The Journal of Social Sciences Research, 4(11),
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organizational activities: the role of outsourcing process mechanisms. Public Management
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Duò, M., 2017. 14 Multi-Million Companies Who Were Built Leveraging Outsourced And
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Hirschheim, R. & Dibbern, J., 2009. Outsourcing in a Global Economy: Traditional
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Hui, K.-L., Ke, P. F., Yao, Y. & Yue, W. T., 2019. Bilateral Liability-Based Contracts in
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