Outsourcing: A Global Phenomenon - Business Development Report

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HARISH ASSESSMENT
TOPIC: DEFINE AND DISCUSS ADVANTAGES
AND DISADVANTAGES OF OUTSOURCING AND
THE ROLE IT PLAYS IN A GLOBAL CONTEXT.

Table of Contents
INTRODUCTION............................................................................................................................. 2
MAIN BODY....................................................................................................................................3
OUTSOURCING: A GLOBAL PHENOMENON...............................................................................3
ADVANTAGES OF OUTSOURCING..............................................................................................3
DISADVANTAGES OF OUTSOURCING.........................................................................................4
OUTSOURCING IN AUSTRALIA................................................................................................... 5
CASE STUDY OF AUSTRALIAN BPO COMPANY...........................................................................6
CASE STUDY OF AUSTRALIAN TELECOM COMPANY...................................................................7
CASE STUDY OF AUSTRALIAN TECHNO-BASED COMPANY.........................................................7
CONCLUSION................................................................................................................................. 9
REFERENCES.................................................................................................................................10
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INTRODUCTION
Outsourcing is a procedure of providing a specific process of a business to an external source
who is a specialist in the given process. It then becomes the responsibility of the given external
agency to carry out the task in an effective manner and thus helps in maintaining the assets of
the organization. In the past couple of years, outsourcing has become a global phenomenon
which has boost up the economy of the developing nations where most of the work is
outsourced from the developed nation (Bruccoleri et al. 2018). In the given study, some live
examples of different organization would be taken into account and there would be a
discussion about its advantages and disadvantages and what role it plays in the global context
in a significant manner.
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MAIN BODY
OUTSOURCING: A GLOBAL PHENOMENON
From the studies of Banerjee, et al. (2019), outsourcing is a procedure where a company assigns
some of its business activities to some external agencies in another country so that the work
could be accomplished in low cost and time. The reason for outsourcing to become a global
phenomenon is that it has generated thousands of job opportunities in developing countries
and thus helped in boosting up the economy in a significant manner. Choi et al. (2018) have
replied in their study that apart from this, there has been a bright future of outsourcing as has
been indicated from the given trends. There has been standardization of the outsourcing
relationship and have become more people driven. Furthermore, startups and small business
would witness a higher order of outsourcing which would increase their efficiency. In addition
to this, experts have observed that Europe and Latin America would become a new paradise of
outsourcing instead of India and China.
Another study conducted by Brown (2015) has revealed that the outsourcing is expected to
grow at the rate of 8% and is an important part of the IT and BPO industries all over the
developing nations. The study has also disclosed that Human Resource (HR) outsourcing has
grown in a significant manner and helped the firm to capitalize more time towards high ROI
functions so as to develop their core competencies effectively. Thus, the given concept has
helped the outsourcing company to save operational costs such as tax remittances, office space,
staff training and benefits and so on.
ADVANTAGES OF OUTSOURCING
Damanpour et al. (2019) have listed various advantages of outsourcing the work to other
agencies by any given organization. The first advantage is that it helps the outsourcing
organization to get swift and expert services from the talented people working in some external
agency which helps the given business process to accomplish faster and thus provide quality
output for the parent organization. Second advantage has been that it helps the given
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outsourcing organization to get free from concerns about the business process and instead
focus on the main tasks and preparation of the future strategy.
Bruccoleri et al. (2018) have revealed the most important advantage of the outsourcing that it
helps in controlling unwanted cost. This is because lots of financial funds are saved as the work
is accomplished at the lower cost which could then be utilized in other areas where the
organization wants to expand and enhance their growth. Another study conducted by Lioliou
and Willcocks (2019) finds out another advantage of outsourcing is that it helps in increasing
the efficiency of the given organization. If the good external organization is selected by the
outsourcing company, it would help the company to achieve a more efficient, highly productive
and great quality of the services.
Furthermore, the procedure of outsourcing as per the report of Espino-Rodríguez et al. (2018),
would also help an organization to make it's a business more agile and flexible so that it would
enhance its competitiveness. In addition to this, it would also increase its capacity to adapt to
the given marketing conditions and face and overcome a large number of challenges to bring
improvement in the services provided to their customers. Bruccoleri et al. (2018) have disclosed
that outsourcing has also helped in exploring more in innovation as it gets its work
accomplished by talented and creative brains that give an innovative touch to their products
and services and enhance their quality in a significant and appropriate manner.
DISADVANTAGES OF OUTSOURCING
Sharma (2019) from their studies have identified various disadvantages and risks associated
with outsourcing for any organization across the globe. The first disadvantage is associated with
a hidden cost which includes cost related to the handover of severance, the layoff of the local
employees who are resisting working abroad and so on. This cost also arises when the
management faces a challenging aspect of managing the employees due to different time
zones, different languages and different or conservative cultural preferences. Mazzola et al.
(2019) have identified the second challenge posed by outsourcing in the form of a lack of focus
among the customers. This happens because an outsource vendor would be simultaneously
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working to meet the needs of multiple organization at a time which makes the given
organization to forget about completion of their task and lost the focus to achieve their
objectives.
Mosca and Bordelon, G.R (2017) have revealed that outsourcing comes with some grave
security risks. There is a serious issue of protection of the personal data of the customers. This
usually happens when the outsourcing services include recruitment, payroll and HR which have
some confidential customers' data and might happen that the third party may misuse such data
and affect the privacy of the customers. Another risk highlighted by Lioliou and Willcocks (2019)
is that outsourcing reduces the quality control which indicates that the companies might go for
earning profit instead of offering good quality products. This, in turn, would create dissent
among the customers who would be dissatisfied with the services provided to them which
would then tarnish the brand image of the outsourcing company.
Thus, it could be said that outsourcing comes with some benefits and some drawbacks. It is up
to the outsourcing companies how to avail the benefit for their business and increase their
growth and profit in a significant manner.
OUTSOURCING IN AUSTRALIA
According to the studies of Nyameboame and Haddud (2017), there has been a significant
increase in the outsourcing of jobs to Australia in recent years which has helped the local
businesses to meet their needs and requirements in a significant manner. One such significant
growth due to outsourcing is seen in Business Process Outsourcing (BPO) where there has been
an enhancement in the demand of downstream businesses and has been expected to continue
for the upcoming years. Previously, outsourcing as per the studies of () was restricted to the
provision of the technical services such as human resources, IT, finance and recruitment.
Nowadays, the scope of outsourcing in Australia has also expanded to non-technical tasks such
as translation services, legal and article writing.
There has been significant development of new trends in outsourcing in the companies of
Australia. One such example as identified by Penter (2018) is new technologies such as Artificial
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Intelligence (AI) and machine learning which has made the process of outsourcing more easier
and an attractive popular option for various industries in Australia. There are various reasons
that sectors such as IT and BPO in Australia are turning towards outsourcing. First is as
explained by Giustiniano and Brunetta (2018) is low entry cost because it has less number of
risks. Various companies outsource the production and distribution of their product which
results in the elimination of the need to invest in the labour, logistics and machinery.
Walker (2018) has revealed that outsourcing has allowed Australian companies to get closer to
their clients so as to effectively avail market opportunities. This, in turn, would help them to
make a cordial relationship with their customers and increase their growth and profitability to a
higher extent. Furthermore, outsourcing also provides flexibility as it helps the companies to
build a business which expands to higher scales. Besides, outsourcing has also helped the
companies to have access to a large number of advanced technologies which would help them
to bring significant improvement in their infrastructure which they would not be able to achieve
by themselves.
CASE STUDY OF AUSTRALIAN BPO COMPANY
Acquire BPO is one of the leading Australian global outsourcing firms which specialize in
customer acquisition, back office support, technical support, lead generation, customer
acquisition and software development. It has recently opened its new offices in the Philippines,
Dominican Republic and the USA where its outsource most of the work to their efficient 7,000
employees. The main objective of the given organization is to provide the superior and high-
quality result to their customers so as to meet their demand in an appropriate manner (Patel et
al., 2018).
In one of its new office in the Philippines, there have been significant growth opportunities
provided to the given organization due to outsourcing. BPO is one of the highest growing
sectors in the Philippines which have provided an opportunity to Acquire to enhance its
presence in the given country. Furthermore, the given country has young and skilled
professionals who are available to work at a lower cost which would be an added benefit for
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the given organization. Besides, the company would also get added advantage from
outsourcing in the form of increased competitiveness which persuades the employees to work
for their best and fulfil objectives of the given organization in an appropriate manner
(Bruccoleri et al., 2018).
CASE STUDY OF AUSTRALIAN TELECOM COMPANY
Telstra is the largest telecom company in Australia which builds and operate
telecommunication networks, mobile, internet access and other services and products. It has
become more customer focused and have been fully privatized. Three years ago, the company
had axed more than 300 jobs in the country and transferred the majority of their jobs to the
newly build call centre in the Philippines. Some experts raised concerned that this step would
backfire the company and could result in the tarnishing of its image (Hodge, 2018).
However, from three years on, the management of the company is happy that they have taken
this decision. With the help of outsourcing, the company has been able to accomplish its work
at a lower cost with the provision of quick delivery. Moreover, the company has also been able
to enhance its revenue which has resulted in a significant amount of growth and expansion.
Besides with the help of outsourcing, the company has been able to satisfy the needs and
aspirations of its customers so that it would increase a cordial relationship with them and
enhance its brand image (Giustiniano and Brunetta, 2018).
CASE STUDY OF AUSTRALIAN TECHNO-BASED COMPANY
Ansarada is a technology-based Australian company which provides AI based services for a
business transaction, IPOs, fundraising and so on. Furthermore, it has also created the world's
first M&A video game using the latest technology so as to help the customers to make them
aware of the merger and acquisition processes. Outsourcing has helped the organization to get
its work done from the most talented people from the globe at low cost and with good quality.
Furthermore, the company has also been able to reduce its operational cost with respect to
labour and technology and utilized in the expansion of its field. On the other hand, the
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company has also faced some risks from outsourcing in the form of reduced quality of products
due to the unavailability of advanced technology in the outsourced country (Hodge, 2018).
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CONCLUSION
From the given study, it could be concluded that outsourcing has become a global phenomenon
and has allowed various companies to reap benefits from it in their respective business. The
study has displayed various advantages related to the outsourcing of the job such as low cost,
high-quality product and more focus on other work. On the other hands, lack of focus, rise in
hidden cost and many more were drawbacks of the outsourcing. At last, the case study of
outsourcing in Australia industries has been taken into consideration and answered it in an
appropriate manner.
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REFERENCES
Banerjee, A., Hanna, R., Kyle, J., Olken, B.A. and Sumarto, S., 2019. Private Outsourcing and
Competition: Subsidized Food Distribution in Indonesia. Journal of Political Economy, 127(1),
pp.101-137.
Brown, M., 2015. Global Outsourcing: A Growing Global Phenomenon. [Online]. (Available
Through: https://www.cadcrowd.com/blog/global-outsourcing-a-growing-global-
phenomenon/. Accessed on 6th May, 2019)
Bruccoleri, M., Perrone, G., Mazzola, E. and Handfield, R., 2018. The magnitude of a product
recall: offshore outsourcing vs. captive offshoring effects. International Journal of Production
Research, pp.1-17.
Choi, J.J., Ju, M., Kotabe, M., Trigeorgis, L. and Zhang, X.T., 2018. Flexibility as firm value driver:
Evidence from offshore outsourcing. Global Strategy Journal, 8(2), pp.351-376.
Damanpour, F., Magelssen, C. and Walker, R.M., 2019. Outsourcing and insourcing of
organizational activities: the role of outsourcing process mechanisms. Public Management
Review, pp.1-24.
Espino-Rodríguez, T. and Ramírez-Fierro, J., 2018. Outsourcing Performance in Hotels:
Evaluating Partnership Quality. Sustainability, 10(8), p.2766.
Giustiniano, L. and Brunetta, F., 2018. The organizational side of outsourcing. In Materiality and
Managerial Techniques (pp. 41-55). Palgrave Macmillan, Cham.
Hodge, G., 2018. Privatization: An international review of performance. Routledge.
Lioliou, E. and Willcocks, L.P., 2019. Global Outsourcing Discourse. Springer International
Publishing.
Mazzola, E., Bruccoleri, M. and Perrone, G., 2019. The curvilinear effect of manufacturing
outsourcing and captive-offshoring on firms' innovation: The role of temporal endurance.
International Journal of Production Economics, 211, pp.197-210.
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Mosca, J.B. and Bordelon, G.R., 2017. Human Resource Managers Detect Management & Legal
Disadvantages to Outsourcing. Business, Management and Economics Research, 3(2), pp.8-17.
Nyameboame, J. and Haddud, A., 2017. "Exploring the impact of outsourcing on organizational
performance", Journal of Global Operations and Strategic Sourcing, 10(3), pp.362-387.
Patel, P., Sinha, P., Bhanugopan, R., Boyle, B. and Bray, M., 2018. The transfer of HRM practices
from emerging Indian IT MNEs to their subsidiaries in Australia: The MNE diamond model.
Journal of Business Research, 93, pp.268-279.
Penter, K.J., 2018. Offshore Business Processing Outsourcing by Australian Enterprises to
Service Providers Located in India (Doctoral dissertation, Curtin University).
Sharma, P., 2019. A View on–Outsourcing. European Journal of Business and Social Sciences,
7(1), pp.391-395.
Walker, M., 2018. Spotlight on: Outsourcing transport and warehousing. MHD Supply Chain
Solutions, 48(4), p.26.
Wang, Y. and Warn, J., 2019. Break-out strategies of Chinese immigrant entrepreneurs in
Australia. International Journal of Entrepreneurial Behavior & Research, 25(2), pp.217-242.
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