Advantages and Disadvantages of Outsourcing Business Function.
The report will discuss in detail about the different advantages as well as disadvantages of outsourcing in business functions. Outsourcing has become one of the important solutions for the companies these days. However, it is important to understand advantages as well as disadvantages in a proper manner before embarking this path. Organizations must understand about good as well as bad kind of outsourcing to assist managers to decide whether outsourcing process is right for the organization or not. The process of outsourcing is a business strategy adopted by the company and these functions or processes or decisions outside the company (Schniederjans et al., 2015). The whole process is executed with the help of properly negotiating contract based agreements with the proper vendor who is given complete responsibility for the proper process of production as well as management of people, service to customers, quality as well as management of asset of many functions. The whole process can also further decrease the fixed based overhead costs of a company.
The function of outsourcing can be defined as the process of implementing a particular business function to some specialist service providers who are outside of the company. Many times, a company fails to handle each and every aspect of the business based process in the internal parameter. Also, some processes are very temporary by nature, and the company does not have any intention to hire any in-house professionals to perform the tasks in the proper manner. When the work is outsourced to any service provider, the person will be accountable for performing the work and also maintaining the quality of the work by keeping in mind organization's requirements (Schniederjans et al., 2015).
At the same time, the function of outsourcing of any element of the business when giving to a third part, it is important to be clear about different benefits and drawback of the process of outsourcing. However, outsourcing shows some advantages to the company, and it can also pose some challenges if not properly outsourced to the right person.
The process of outsourcing permits the company to be more dedicated to the core business concept and be able to develop a competitive edge by decreasing the overall operational costs. The overall beauty of the process of outsourcing is when one can outsource a complete function or reduce a part of it. For instance, one need to outsource the management of network oversight of any kind of IT based system and also keeps the end-user support the internal functions. This will help the company to maintain a high level of balance of any on-site help for the workforce. Companies usually use the process of outsourcing as a main strategic initiative to improve the customer based services, quality and also reduce the cost in a proper manner (Cavusgil et al., 2014). The process of outsourcing can be temporary or sometimes a permanent solution to make bridge the overall gap in the process of staffing and also learn the better level of quality tools or improve all the designs of faulty products. While looking for outsourcing based option, a company must look at some potential work, and every element within that particular area must decide whether the part or complete function can be outsourced. There are so many industries where outsourcing aspects of the business are normal; however, there are some common functions that are usually outsourced by any organization:
- Human Resource
- Customer care centers
- Research for marketing
More attention on core business: the function of outsourcing also permits companies to pay more attention to different kind of expertise as well as core businesses. When companies go outside the expertise level, they get to a business function and process that one might be aware of and this can potentially take away from the core business (Rushton et al., 2014).
Improvement in quality: when improvement in quality is accomplished by using some vendors with the high level of expertise and high specialized functions. For instance, an outsourced company may have the right resources like employees with proper training and experience that can be present when the functions are kept in-house in a proper manner.
Customer satisfaction: the benefit of maintaining a contract with the vendor is this bound to be fixed at the level of high quality as well as services. For instance, when IT functions are outsourced, and the technical team is sick, it becomes the vendor's duty to find the right person who can replace the other person and be able to meet the demand (Willcocks and Cullen, 2013).
Operational level efficiency: - the function of outsourcing provides exposure to a company to the systems followed be specialized vendors. The process of specialization also brings some efficiency that permits for quick turnaround time at the same time good quality level.
Quality based service: until and unless a contract recognizes calculative functions for high quality based service reporting and there can be poor service as well in quality based experiences. Some kinds of contract are properly written to leave the service level intentionally to save costs.
Barriers in language: when a customer based call center outsourced outside the country where the native language is different, there is the level of dissatisfaction for consumers who are dealing with this barrier with a strong accent (Prpi? et al., 2015).
Employee's opinion: there can be negative opinions with the process of outsourcing and the overall sympathy of losing the jobs. The need must be managed properly with grace as well as sensitivity.
Organization based knowledge: an employee who is outsourced may not follow same level of clarity as well as passion for a company that is regular with the employees. Also there is some potential that any outsourced employee will come in connection with the consumers and not be very knowledgeable about the company and this result in negative level of experiences of customers.
Labor based problems: - when an organized labor like one in the US has strong understanding related to the function of outsourcing to other countries that maintain less level of standard of living or worse conditions to work. The opinion can also impact how employees respond to the process and can influence the daily level of productivity.
Security as well as legal compliance: it is crucial that several issues related to legal compliance as well as security can be dealt in a formal based documentation. Many functions are entirely outsourced, and it requires to be managed to make sure there is the proper level of diligence with different kind of legal based compliance as well as systems for security (Prpi? et al., 2015).
Layoffs by employees: the function of outsourcing usually arise the need to decrease the staff. Unless it is planned with the help of attrition process like the layoff is natural and cannot be avoided. This is also challenging when not managed in a proper manner and can make some serious negative effects on rest of the workforce. In the end, while researching the vendor for the process of outsourcing, it is important to ensure and also think with the help of particular needs and also get three kinds of requests for the right proposals to make sure that company is getting the best kind value.
The function of outsourcing like payroll or preparation of tax, the outsourcing provider, will be able to see the information of company confidential and therefore, there is also some level of threat to the overall security as well as the confidentiality of outsourcing function. When a company starts to think about outsourcing a particular function, one must find it challenging to manage the providers who are offshore especially when compared to management of process in the company. An offshore process can also generate some potential level of redundancies for the company and the employees that can express the lack of some interest or lack of quality in work (Rothaermel, 2015).
The outsourcing provider providers to other companies as well and because the provider is dealing with the need of many other organizations, they cannot give hundred percent attention to the company. The function of outsourcing with the help of proper cost-effective as well as a number of other hidden costs like legal costs which incurred while signing a contract among the organizations. Also, outsourcing can bring the lack of focus on the customer. All kind of gaps identified can be ignored by partnering with right kind of service providers and before this function, it is important to take some interest in the customers as well as employees into proper consideration and then make a more informed decision (Heizer and Barry, 2013).
The development in outsourcing function in recent time is partly is the outcome of gradual movement in business based philosophies. In mid-1980, there were a number of companies that merge with other organizations and this way, could diversify the interest in business to decrease the overall risk. More and more companies also discovered that there are few benefits to run a large company with unrelated work. At the same time, may also start to invest in some subsidiaries and the attention on the efforts is on one or a few connected areas of work.
The organization also tries to recognize or generate an element which is based on core competency which can be termed as a distinct combination of experience as well as expertise that will also create a source of competitive edge (Hill et al., 2014). Every feature of the operation of the company is usually aligned around the core competency and any functions that were previously taken important to save it outsourced. In the present time, the process of outsourcing can be embraced by the organization of every size as well as industry based orientations. A number of organizations also determined that transactional, as well as administrative based functions, are not associated with core competency or any other value added function. Some organizations are putting themselves at some risk as an outcome of utilizing any outdated technology and also not completely comply with regulations of government. Successful and efficient outsourcing process needs a very strong clarity on the capabilities of the company as well as future directions. There are a number of decisions that are associated with outsourcing which can be termed as an important function, and all the functions come under the choices of the company of different functions for which many internal based experts are developed and also nurtured (Johnson, 2014). These are considered as some of the standard or fundamental decisions which are associated with complete design or structure of the company.
Schniederjans, M.J., Schniederjans, A.M. and Schniederjans, D.G., 2015. Outsourcing and insourcing in an international context. Routledge.
Cavusgil, S.T., Knight, G., Riesenberger, J.R., Rammal, H.G. and Rose, E.L., 2014. International business. Pearson Australia.
Rushton, A., Croucher, P. and Baker, P., 2014. The handbook of logistics and distribution management: Understanding the supply chain. Kogan Page Publishers.
Willcocks, L. and Cullen, S., 2013. Intelligent IT outsourcing. Routledge.
Prpi?, J., Shukla, P.P., Kietzmann, J.H. and McCarthy, I.P., 2015. How to work a crowd: Developing crowd capital through crowdsourcing. Business Horizons, 58(1), pp.77-85.
Rothaermel, F.T., 2015. Strategic management. New York, NY: McGraw-Hill.
Heizer, R. and Barry, R., 2013. Operation Management, Sustainability and Supply Chain management (Vol. 11). Pearson, UK.
Hill, C.W., Jones, G.R. and Schilling, M.A., 2014. Strategic management: theory: an integrated approach. Cengage Learning.
Johnson, P.F., 2014. Purchasing and supply management. McGraw-Hill Higher Education.
Cavusgil, S.T., Knight, G.A. and Riesenberger, J.R., 2013. A framework for international business. Pearson.
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