Operations Management: Outsourcing Function Report for IBM

This report delves into the realm of operations management, specifically focusing on outsourcing. It begins with an introduction to operation management and the role of outsourcing, particularly within companies like IBM. The main body of the report explores the meaning and concept of outsourcing, emphasizing its role in cost reduction and efficiency improvement. It then analyzes the causes for outsourcing, such as reducing costs, increasing skilled resources, saving time, and enhancing revenue. The report also examines the merits and demerits of outsourcing, including focusing on core activities and accessing expertise. The report concludes with an overview of the impact of outsourcing on business operations, highlighting its significance in today's competitive market. The report provides a detailed analysis of outsourcing, covering its functions, benefits, and challenges.

OPERATIONS
MANAGEMENT

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Question 1: Causes for outsourcing........................................................................................3
Question 2: Merits and demerits of outsourcing function......................................................6
Question 3: Impact of Outsourcing........................................................................................8
Conclusion.......................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
The term operation management is concerned with converting good and labour into
product and service. It is that part of management which focuses on delivering high quality of
commodities to the consumer. It works as adding success to the organisation. The company
named 'International Business Machine' of UK is currently focusing on outsourcing function. It's
a global information technology company which is taking various initiatives regarding client
success. The company provide product of services including hardware, software and cloud based
activities. Its deals in various innovative projects due to which its consumer need can be satisfied
(Agrawal 2017). This days company is adopting various offshore activities. The outsourcing is
the term which provides services and preparing task for another company. It gives accesses to
professionalism and provide high quality of service. The main aim behind this function is
minimised the additional cost and avoid wastage in resources. In this project report it has been
addressed to describe the main element of outsourcing that why it is essential to the firm, how it
is working. In addition to this the project report mainly considered on the merits and demerits of
outsourcing function or trying to know the need of outsource in present scenario.
MAIN BODY
Meaning and concept of outsourcing.
Outsourcing- The term outsourcing means preparation of the task for the outside
suppliers rather than working for internal organisation. The term outsourcing is very useful in
eliminating the cost and improve the quality of product and services. The function of the
business enterprise is performing by the third party whether inside or outside the location of the
corporation (Alexander and Plante 2017). The main object behind hiring another company like
IBM or TESCO to provide improvised services to them in a given framework. With high
experience the control on business can be effective. The outside experts mainly focuses on the
business issue. The function outsourcing is very useful in the companies like TESCO and IBM.
Very helpful in cutting cost and improving efficiency. If company wishes to save time and cost
than they should adopt the activity of outsourcing. It helps in free up the key experience team for
more strategic function. This function is adopted by various company whether it is small or
medium size of firm. It has become major trend nowadays. It helps in reducing and controlling
operating cost. The main prominent advantage of this is to save money. Sometimes outsource
activity is not adequate in terms of maximising profits of the firm. The term outsourcing is also

referred as Business Process Outsourcing. There are some features which determine the object of
opting outsourcing function in the business enterprise such are-
 It helps in increasing the cash flow of the IBM by cutting cost.
 This provide services which can increase the firm productivity by eliminating wastage of
resources.
 It works as increasing efficiency in the firm.
 Key experiences personal adds profitability to the IBM and the company like TESCO.
 The outsourcing helps in having success in the world class capabilities.
 There is high quality of service with minimum cost of investment.
 It is very useful in increasing the gross profit of the companies where its expanding this
kind of function.
 It leads to cost saving, provide flexibility and work in the mode of transparency.
 The changes in the growth can be possible with the functioning of outsource it is very
helpful for the functioning for the company like TESCO by exporting their product with
the help of this term.
 It provides flexible working in the organisation with the facility of performing task at
firm or outside the business enterprise (Edvardsson and Durst 2017).
 It works as streamlining the efficiency for time consuming function.
 With the help of outsourcing function a firm can share the risk with partner company.
 Open communication and senior support helps in having the successful outsourcing
function.
 With help of outsourcing the products of TESCO can have worldwide identity or their
business can be expand.
 With the help of outsourcing the need of the consumer can be easily known. The
companies like IBM and TESCO the need of the outsourcing function is needed to
expand the growth opportunities of their business.
There are various companies which get their services outsourced such as social media
marketing services, book keeping services, recruitment services etc. if any company is opting for
social media marketing services than it gives the responsibility of managing social media handles
to other entity so that it can indulge in other important activities of the enterprise. There are
various marketing outsourcing enterprises available such as, 180 Fusion, The education company

etc. QX recruitment services is the leading recruitment outsourcing company which helps other
entities to get right kind of talent at right place. Other companies do not have to worry about the
candidates they are getting recruited in the organization.
Question 1: Causes for outsourcing.
The term outsourcing refers as performing other organisation task, providing services and
manufacturing products for the another organisation or it can be said as the third party of firm.
This main element behind this is cost saving and work in efficient manner so that productivity
can enhanced. With increasing in the workload the company becomes uncontrollable in that time
outsourcing helps in overcome such problems (Goldschmidt and Schmieder 2017). An
organisation can be more successful and ready to challenge the upcoming issues by increasing in
the productivity and efficiency. Such The outsourcing function can be performed in or outside
the working area. In other words it a kind of practice which perform job function for the external
Illustration 1: outsourcing
(Source: Hanafizadeh and et.al., 2017)

company instead of internal firm. It has become major trend as it leads to cost saving. The main
strategy of 'International Business Machine' is to formulating the task for another company
which have to be performed in stipulated time in effective manner. With this approach the
productive of the organisation can grow in this highly competitive market. The productivity in
the leads to challenging the overcome issue, Hence, outsource activity has become major trend in
present scenario.
Reason for outsourcing- Every term has it owns objective besides taking this function in the firm
the profit maximization with adequate quality is the min reason of taking it. There are many
other reason behind opting outsourcing function in the business enterprise such are as-
1.Helps in reducing cost- Every business organisation aims to save the cost and wants to
perform in effective and efficient manner. The firm 'International Business Machine' has adopted
this function to reduce the cost of expenses. It has become the crucial factor in order to improve
the financial data of the company. Helps in eliminating the cost is the basic reason behind
electing outsource function (Graham and Daniel 2017). With the both external and internal
function leading to the business enterprise in achieving higher growth of the firm. It provides
services which work as reducing and controlling operating price. Cost optimisation is the main
cause of handling outsource functioning. To have quality product in the lower value is an
important objective of every business enterprise. It helps as free up the cash flow of the
company.
Increasing of skilled resources- with the help of this the company tend to have more
number of skill personnel. Firm don't have to focus toward the function of training, recruiting
and selection process. With this approach companies like QX recruitment services and education
company need to focus on the quality of project delivery and such submission of work is on
appropriate time or not. With this approach organisation have more expert person at lower cost
of amount. Effective and efficient team brings maximum productivity to the organisation
(Hanafizadeh and et.al., 2017). The outsourcing helps in having access to the creditability and
skill of a firm. The professional team in the organisation helps in balancing the cost and profit
functioning which is the most essential part of the firm.
Helps in saving time- Due to division of work in internal and external part of the
business tends to eliminating the time required. They have such expertise team who provide
services as getting work done even before the deadline without reducing the quality of matter.

Reducing time with decreasing cost helps in achieving the maximum contribution in the business
enterprise. Time function should be the key object in every firm which arises the need of the
outsourcing is generally realised. The company must have to take efforts in maintaining
equilibrium between the cost and time (Lee and et.al., 2017). Managing in time helps to
managing the overall performance in the organisation.
Helps in increasing revenue- An organisation can have more amount of profit if they
have adequate number of key personal. With the quality of product of services helps in raising
the profitability of the firm. This approach provides high output of work and experience project
mangers which leads to have success in the business enterprise. Increase in firm revenue leads to
gain in the goodwill of the business enterprise.
Faster and improvise services- with better and advanced technology and latest
innovation in the firm are bound to execute best services in stipulated time. It works as adding
the better goodwill to the firm. It helps in adding prosperity and brand identity in the
organisation. The delay in work leads to effect on working of the organisation or it can also
affect the brand image of the company (Lee 2017). The work should be analysed and
improvement must have it is required by the organisation in time to time manner.
More focuses on important activities- The outsourcing function helps to reduce extra
time so that more time can have emphases on the searching activity. It helps in reducing the
operational work. More diversification at the work area brings less productivity in the firm which
is a major drawback (Liu and Tyagi 2017). With division of work under different unit bring
flexibility in the organisation. The work activity should get divided according to the essentialism
of such work.
Retentiveness- Expertise management have the ability to holding customer in the
organisation for the more period. The customer action is an opportunity to increase satisfaction
and enhancing their trust on brand loyalty. With their effective work company provide them high
incentive which retain them for the long time in the business enterprise. The adequate facilities in
the working area always helps in retain their employees in the organisation for maximum period.
Retention activity also depend on the behaviour of business enterprise.
Helps on increasing efficiency and flexibility- The main aim behind this is provided
wide range of key experienced personnel in the organisation which work in highly professional
manner in effective and efficient manner. They work in the manner of avoiding extra cost and

provide good quality of the work (Ostermann and Hyatt 2017). It leads to have success in the
organisation. Experienced team always ready to involve in day to day activities and provide
quality of work in the organisation. Flexibility provide smooth working floor in the business
enterprise.
But sometimes such reason are not enough to implement an organisation success for the
longer period.
Question 2: Merits and demerits of outsourcing function.
Some Advantages of outsourcing:
 Focus on core activities: It very important for computer manufacturing company to focus
on core activities like monitoring back office operations, increase in human and financial
resources had given fair advantage to outsourcing companies in running successful
business operations. Outsourcing helps the company in evaluating the back office
performance of activities, it is very important for the firm to look over quality and service
in back office department.
For instance, Fusion180 lands a big contract which will further increase its volume of
purchase in short time span is outsourcing purchasing (Tan, 2017). It helps in giving primary
focus on the key objective of the business enterprise. Reduced Overhead: The cost of back office overhead is very high like for example if the
company needs space for office and locations are not available at affordable prices and
the firm do not have spare room to continue its back office activities, outsourcing
minimize the need for space and outbound data entry and telemarketing (Tate and et.al.,
2017.). Operational Control: When the organisational functions are running out of control and
back office activities are hard to manage, outsourcing firm can help in better management
of IBM. For example, if the department has too many projects and the company do not
have enough skilled labourers and cost is running out of control then the contract can be
outsourced. Further, this will force management to bring back control in the department
(Wright Forster and Beale 2017). Cost and efficiency savings: When back office functions is performed which are complex
in nature, outsourcing is the option which helps the company in carrying out its activities

smoothly and at affordable costs. There should be balance between company expenses
and its profitability.
 Continuity and risk management: When in the company there is period of high turnover
it will lead to uncertainty and inconsistency to the operations. In this condition
outsourcing helps the company to create stable environment and continuity in activities.
It helps the firm to maintain its substandard level of operations. For example, If HR
manager is on sick leave and at same time two administrative assistants left the job then
the company can outsource the HR function which help in risk management and delay in
work which can be done through QX recruitment services. It will help to get right kind of
talent at right position.
 Develop internal staff: It is needed when the company takes charge of the project for
which it does not have much skilled employees. On-site outsourcing for the project helps
the firm bring in skilled labourers as per the demand of project (Zhang and Gibson 2017).
There are some demerits to outsourcing function such as-
 The confidentially of the firm can be affected with the fear of loosing sensitive data of
from one party to another.
 The main control over the business activities can be harmed because firm is not able to
control operation for longer.
 The quality of the product can be violated if the business enterprise doesn't have
experienced key personnel.
 Many pitfall may come on the basis of selecting wrong another company for outsourcing
activity.
 Sometimes due to lower cost of investment the quality of service can be largely affected
and outcome may be in negative term,
 Too much lineality with the work is major drawback. Customer should receive the data
on a reliable time otherwise it can add as risk factors
 Lack of focus can add as detrimental to the small business.
 Difficulty in taking decision can affect the growth of the organisation.
 Data protection can get violated the privacy can be shifted by passing the information to
other people (Zahid Ghazali and Rahman 2017).

 There may arise a problem of offshore potential redundancies which may add as lack of
quality at work.
 There may have some other drawback as reviving contracts, poor quality, delay in service
miserable communication act as barrier to effective working in the entity
 With the term of offshore activities company can get harm with the terms of intellectual
property.
 By cutting unreasonable cost leads to excess in the production of toxic chemicals which
may increase the environmental degradation.
Therefore, it can be said that sometimes outsourcing function can turn into bad strategy. It can
also affect the brand reputation of the firm where it is going to be operate.
Question 3: Impact of Outsourcing
Kimberly Clark is a consumer products organization which produces which generally
produces its products made through paper. It is involved in producing facial tissues, feminine
hygiene products, utility wipes etc. (Pradhan, 2017). It is one among the fortune 500 companies.
Due to its huge market share and involved in manufacturing concern, it has got some of its
services outsourced through other companies. It has joined hands with Tata consultancy services
and Cognizant. It is a multi dollar deal in lieu of which the companies provide varied services
such as, product management facility, customized software, data exchange and compliance
services etc. TCS provide other services as well which h includes operational support,
messaging, computer security, video conferencing services, etc. It mainly impacts on the growth
position of the organisation in the following manner:
Bulled bottom line results:- All the business activity included in the bottom lines such
as, Revenue growth, product and service innovation, cost containment, process performance
improvements, market share expansion. This rapid growth in outsourcing IT has attracted the
attention of researchers and analysis, as they seek to ascertain the value of outsourcing IT.
Companies reduced Selling, General, administration. Expenses:- Kimberly Clark will
be able to reduce selling, general, administration expenses as it can concentrate on important
issues of the entity. Further, the enterprise will get expertise services in lieu of outsourcing
amount paid to the other organization.
Companies improved ROA:- After the agreement of outsourcing the companies
improved their ROA and achieved annual growth rates higher than the sector median.

IBM boosted EBIT:- Companies adopts the outsourcing strategy than improved their
EBIT same companies grew EBIT faster than their peers.
Outsourcing role in building a smarter plants:- In a world economy, financial
performance can be depends on a company's ability to exploit its global potential for integration
and collaboration. Its employees are driven to the sizes opportunities from whether they originate
to improve operational efficiency, leverage untapped talent and extracts new values from
outsourcing in all its forms enables the kinds of changes that can helps sustain. By bringing
organizations together to solve the problems and improve operations, outsourcing can be a
natural springboard for innovation and business models changes (Schöner and et.al., 2017).
Towards the outsourcing contribute to building a smartens plants. Outsourcing can provide the
flexibility in the working environment for the companies and out-performers and differentiates
themselves competitively. These are the benefits, and the demonstrated financially performance
of the companies included. Impacts of outsourcing and important indicator for those companies
considering by this strategy.
Conclusion
From the entire report it has been concluded that the outsourcing function in the business
enterprise is very helpful with the terms of avoiding the extra cost and time in the organisation.
Outsource activity is the main element in the present scenario. The main object of every firm is
maximised the profit for the longer period so that organisation can face the upcoming challenges.
The all facts and figure of the business enterprise is based on relevant information according to
this term.

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