Outsourcing
Introduction
Outsourcing is a term which was coined in the 80s to refer to the aspect of business contracting a third party to provide the required services. In the contract, an external provider is consulted rather than the company such that there is some sort of exchange of goods and services between the two. Outsourcing may involve contracting suppliers from outside the country otherwise called offshore outsourcing although it does not necessarily involve going to sea. Quite a number of businesses can be outsourced dependent on a variety reasons which have different implications on the objectives of the company. Businesses seek outsourcing services so that they can achieve various benefits as a way of improving their performance in addition to maximizing on profits. Although outsourcing makes business procedures easier and more efficient, at times the quality of the services rendered are quite poor. This is especially possible if the outsourcing provider company is handling the same contracts with rival companies. However, establishment of concrete agreements between the receiver company and the provider may lead to a business achieving a lot in terms of the time taken to process certain services and transactions.
Discussion
The information technology sector has two main ways of creating outsourcing opportunities such that a company may commission a software development company to establish as well as install specific applications for the receiving company. Similarly, an outsourcing contract can be established for the outsourcing provider to carry out the tasks and responsibilities which would otherwise be carried out by the information technology department of the receiving company Engardio, Arndt, and Foust, (2006).
Advantages/ reasons why businesses seek out outsourcing services
Companies seeking to increase cost savings are more likely to involve a third party in its business transactions. Outsourcing reduce the cost of carrying out various services within the business as it involves a lot of re-pricing and cost re-restructuring which lower the scope of operations. The services offered by the outsourcing provider are usually competitive such that a company seeking the services of a third party are at liberty to choose from those available hence they go for the cheapest. This feature of allowing a company to choose the most affordable helps in cutting down the cost of operations hence it is advantageous to the receiving company. Labour arbitrage is a key component of outsourcing due to the wide variety of services to choose from which are presented at very affordable costs Sun, Lin, Sun, (2002).Some companies which seek outsourcing services from information technology specialists are able to focus more on the core aspects of the business. In this case, companies specializing in information systems present a crucial advantage such that instead of the IT department handling such applications, the outsourcing provider is able to offer those services. This is attributed to the fact that information technology is not the key feature or services in the receiving company’s line of business.
When the receiving company pays more attention on its core business deals, the overall performance is bound to improve as there will be two companies contributing towards the productivity of the company. This way, the outsourcing provider relieves the receiving company of significant activities and responsibilities thus leaving more time for indulging into increasing the productivity of workers among other key aspects of any business (Sun, 2002).Firms seeking to enhance their capacity for innovations may indulge the services of a third party which will not only act as external stimuli but as a source of motivation for the employees in various departments. This is because the outsourcing provider will be in possession of various techniques as well as skills which may be fundamental in promoting an innovative environment by encouraging creativity. Similarly, combining the knowledge of individuals from extremely diverse backgrounds in addition to different working environments may release enough trigger to seek out new ways of thinking (Rudy, Armin and Jens, 2009).
Innovations in companies are usually accomplished after exposure an appropriate environment which recognizes creativity and inventions such that the receiving company may adapt some of the tips aimed at increasing innovation from the outsourcing provider Flatworld solutions (2009). Certain companies indulge the services of third parties as a way of improving the quality of their services and goods. This is mostly achieved by taking advantage of a third party to seek strategies used by the outsourcing provider to achieve maximum or better provision of services. Sometimes the same strategies could be used but in the appropriate circumstances to achieve the desired results. This may also include provision of high quality services due to specialization and incorporation of diverse strategies which are fundamental towards achieving the high quality goods as well as services. Outsourcing especially in the field of information technology can result in better services as in most cases receiving companies seek out for the services of specialists in the field. This brings into the receiving company new and fresh expertise which is substantial towards achievement of high quality services.
In addition to the high quality services, outsourcing receivers may be seeking outsourcing services which will boost their efficiency in the highly technological world especially if their IT department is not in apposition to provide the same facilities Flatworld solutions (2009).Firms which are aiming towards reducing the time spent during production of their goods and services may be indebted to include the facilities of another company which will ease the process as well as reduce the resources used. Such services may involve introduction of outsourcing services to facilitate supply of raw materials or else during packaging or branding. Sometimes outsourcing services are sought from companies which specialize in packaging such that the receiving company allows a specialist to carry out the packaging. This reduces the cost of production as well as reducing the timeline for preparing the goods for the market as after processing another company takes over such that the receiving company is able to produce more goods as they are assured that the experts will spend less time in preparing the finished products (Rudy, 2009).
Consequently, the expertise presented by the outsourcing provider is more appealing and consistent as compared to that of the employees in the receiving company. Similarly, the receiving company is able to apply the operational best practice after incorporation of outsourcing services as it is quite difficult as well as time consuming to initiate the same without involvement of a third party. This is attributed to the fact that outsourcing leaves more time for the receiving company to engage in other activities which are aimed at improving the overall performance of each and every department in the receiving company. Sometimes the receiving company could be seeking for ways of enlarging their pool of talents such that by engaging the services of an outsourcing supplier, the receiving company is able to gauge a sustainable source of skills which is more dynamic as well as innovative. This wider pool of new talent creates an increased source of knowledge and experience which is sought for by most receiving companies especially those which recognize the importance of using best practise (Engardio, 2006).
Many companies seek to outsource their work so as to create time for other innovations as well as creating more room for indulging in other activities which boost the performance of various departments. However, some companies seek outsourcing services so that their employees may obtain more time to engage in their studies especially those holding key positions in the company. This is usually arranged by the receiving companies such that those who are engaging in their studies or in other personal, interests are able to increase their efficiency to meet the current demands.Small scale businesses with fewer employees may seek outsourcing services so that their employees may have adequate time to carry out their personal interest after their working hours which may not be necessarily academic pursuits (Rudy, 2009).Companies which have been aspiring to change their way of doing things with little success may involve the services of an outsourcing company which will act as an agent of change. The nature of change could be structural or managerial such that the outsourcing provider will be the catalyst for the designated change. This is achieved by introduction of new policies as well as presentation of a challenging and dynamic environment by the change agent.
However, for the receiving company to achieve this objective, it must seek the services of an outsourcing provider with the desired attributes in addition to the willingness to pay for the extra services offered. At times the outsourcing company may provide consultancy services coupled with closer supervision to enable the change be enacted effectively and with minimal inconveniences Flatworld solutions (2009).Outsourcing reduces risks associated with management as well as those related to high employee turn out. Some companies usually experience severe employee turn over such that they spend more in hiring and training staff than is expected. Occasionally risks associated with continuity of a project as well as activities in a department which should be continuous are adversely affected by such disruptions. It therefore becomes quiet convenient for that company to seek the services of an outsourcing company which will ensure that the programs of the company are never disrupted as well as ensuring that all aspects of the receiving company are continuous Ganesh, (2007).
Disadvantages of outsourcing services
Most outsourcing companies usually overstate their capabilities by promising a variety of appealing benefits to their clients. Most of the promises are usually never delivered or achieved as most are used as strategies of attaining more clients and after that they are ignored by the provider company. Such strategies are used by many companies seeking to increase their client base such that promises of improving the business outcome of the receiving company. Sometimes the strategies laid out by the outsourcing company may fail to materialize such that the goals and objectives laid out by the receiving company fail to take place. This results in lose of clients and business transactions which may cost the receiving company lots of money as well as reduced productivity Rothman, (2003).Receiving companies which over rely on the outsourcing provider may end up failing and eventually collapsing due to misappropriations as well as unattained goals even after spending substantial amounts of money in terms of charges. Customers may lose their trust on the service provided by the company while at the same time the credibility of the outsourcing provider is lowered Ganesh, (2007)
Companies which are involved offering call centre services are usually disadvantaged when seeking outsourcing services as the provider may not be conversant with the dialect used in the recipient’s country. This is especially difficult when the accent used by the employees of the outsourcer is completely different such that a communication barrier is created. Such a problem may cost the receiving company a lot in terms of client dissatisfaction and the incapability to meet the needs at the other end Rothman, (2003).Most outsourcing contracts are usually void of clearly defined ways of measuring the quality of services to be delivered by the outsourcer. Therefore, subsequent involvement of the previous outsourcer does not guarantee that the same level of services will be provided. Such contracts which lack this feature usually cots the receiving company lot in terms of client satisfaction. Consequently, the receiving company may overlook the quality of service by paying more attention to the details concerning the charges in order to reduce the cost of production. Hence, it becomes evident that most companies compromise their services to the prices set up by the third party Rothman, (2003).
Sometimes the outsourcer may include new ways of doing things which are completely different form what the consumers are used to hence this may contribute to reduce consumer loyalty as well as incompetence in services provided.Outsourcing reduces the accountability of employees of the receiving company as well as their job security as at times outsourcing may involve handing over all the activities of a company to the outsourcer. At that eventuality, the employees who were initially reporting directly, to their employer experience severe confusion as they may not be sure about who should address their grievances and complaints. Similarly, the outsourcing company may present a different set of policies and regulations which may be quite different from what was initially available. Such inconveniencies provide favourable ground for fraud as well as incompetence due to lack of proper transition from one employer to the other. Most outsourcing companies are usually greatly affected by problems of high staff turn over which leads to inefficiency in provision of services Ganesh, (2007).
Conclusion
Outsourcing is an efficient business operation which can be post both substantial advantages as well as critical demerits. It is an avenue for companies which are aiming at diversifying their operations as well as those who are aiming at reducing the time spent in the production process. However, complete indulgence of the outsourcer in all aspects of the company is equal to collapse of the receiving company due to the challenges posed by the providing company. Hence, caution should be taken to ensure that outsourcing does not affect the productivity as well as performance of the receiving company.
References
Engardio, P., Arndt, M. and Foust, D. (2006), the future of outsourcing. Business week
Flatworld solutions (2009), advantages of business outsourcing. Retrieved on June 6th 2010: www.outsource2india.com/…outsource/…/benefit_outsourcing.asp
Ganesh, S. (2007), Outsourcing as symptomatic. Class visibility and ethnic scapegoating in the US IT sector. Journal of Communication Management. Vol.11, iss.1, pp. 71-83
Rudy, H, Armin, H and Jens, D. (2009), Information systems outsourcing: enduring themes, global challenges and process opportunities. Springer Publishers
Rothman,J. (2003), 11 Steps to successful outsourcing: a contrarian’s view. Retrieved on June 6th 2010 from: www.computerworld.com
Sun, Y., Lin T.-C., Sun P.-C. (2002), “The Factors Influencing Information Systems Outsourcing Partnership – A Study Integrating Case Study and Survey Research Methods,” 35th Annual Hawaii International Conference on System Sciences (HICSS’02)-Vol 8,
Is this your assignment or some part of it?
We can do it for you! Click to Order!
