Challenges And Opportunities Of Outsourcing Business Functions In Telecommunication Industry Of Australia, Essay.

Company Introduction: Optus

Discuss About The Challenges Of Outsourcing Business Function?

Business functions outsourcing has become a key driving force for a number of industries. Growth in Australian economic and business sectors will reach beyond expectations (Mani, 2010). With globalisation impending large number of challenges, businesses for keeping up with competing forces will strive to do whatever they are best. In order to establish core competencies, businesses are devising sustainable and new methods for achieving performance to drive their bottom line. Majority of businesses in Australia has found outsourcing as the key drive to be cost effective. Cost effectiveness, leaner production methods and efficient ways to perform such that businesses can enhance their skills and expertise. While there remain innumerable opportunities with outsourcing, there are certain prominent challenges as well (Banerjee, 2009). The scope of this research discusses prominent opportunities and challenges extended in outsourcing, especially in the telecommunication sector of Australia. The scope of this study is limited to analyzing outsourcing opportunities and challenges of Optus and Telstra, which are giant telecommunication companies in Australia.

Singtel Optus Pty Ltd is second largest telecommunication company in Australia, which is a wholly owned subsidiary of SingTel. Its headquarters is based in Sydney, New South Wales, Australia and was established in 1981. The Company has several products including fixed telephony, mobile, internet connection, cable television, leased lines, data transmission amongst other products. It employs more than 8,900 employees and earns a net revenue of A$9.02 billion with net income of A$812 million.

Telstra Corporation is an Australian telecommunication and media company. Established in the year 1975 with headquarters in Telstra corporate Centre Melbourne, Australia. The Company employs approximately 36,450 employees and has operating profits of A$6.12 billion with revenue worth A$28.01 billion.

In order to attain goals of the study, following project objectives needs to be identified.

• Project Objective 1: To analyse key reasons for outsourcing of functions
• Project Objective 2: To understand the key opportunities provided through outsourcing of functions
• Project Objective 3: To understand the key benefits offered through outsourcing of functions
• Project Objective 4: To analyse the key challenges faced while outsourcing
• Project Objective 5: To diagnose favorable locations and key costs in outsourcing

Project scope defines the relevant areas in which the study will be able to make key impacts. The scope of the project is extremely limited to theoretical study and analysis only (Burdon, 2011). Further for the purpose of this study only two-telecommunication giants has been taken for analysis. Thus, the scope of analysis is also limited and cannot be applied or extended to any other industry. The project scope can only be applied in telecommunication sector and then the study can further be extended, to provide more applicability.

A literature review allows analysis pertaining to particular literature sources from journals or books that allow insight into the topic (Pai, 2007). While benefits of outsourcing cannot be overemphasised, initially opportunities and then challenges related to outsourcing in Australian telecommunication sector are discussed. Second largest telecommunication giant Optus is expected to make outsourcing pertaining to HR and finance. It has tied up with global tech firms, which has also resulted in numerous job cuts, which is expected to be transferred offshore (www.afr.com, Retrieved on 15th August 2017). The Company cut almost a thousand jobs to cut costs worth $200 million to reshape its business. The Australian Financial Review highlighted that Infosys and Accenture will help benefit Optus towards a sustainable growth, though affecting employees who would lose their jobs.

Company Introduction: Telstra

Opportunities with job cuts in Australia and offshoring will be primarily attached to inexpensive labour. Accenture and Infosys based in India have employees with lower cost of living, which is essentially lower than Australia. This cost reduction will directly affect their profitability, allowing business to save on budget (Fisher, 2008). There will be additional perks associated with close time zones, as there will be no need to pay for night shifts. G. D.K. Beverakis (2009), “Taking information systems business process outsourcing offshore: The conflict of competition and risk.” In the Journal of Global Information Management, page 32 identifies such innumerable benfits of outsouricng along with pertinent risks (Beverakis, 2009). While talent and skills are the key benefits of outsourcing, they often imposes challenges as well. Parent company needs to evaluate potential in host country along with training and development programs. Often outsourced workers are at par skilled or more skilled comapred to those of Australian counterparts. They preserve key business fucntions adequately by servicingthem well. K. Penter (2009), “Offshore Business Process Outsourcing to India: Two Australian SME Case Studies.” In Information Systems Outsourcing. Springer Berlin Heidelberg., pages 549 to 561 identifies cases of several Australian SMEs outsourcing to India and other developing countries (Penter, 2009). There has been tremendous surge in outsourcing from Australian companies to Phillipines and India, as there are numerous benefits attached. Phillipines has become a hub for outsourcing of key functionalities as Australians benefit from its time zone as well. SME is order to expand are increasingly considering key startegic partners offshore. Such offshoring has allowed them opportunities to expand as well. Accounting to Mohammad Abdul Razzaque and Chang Chen Sheng, Modernisation of business globally has developed the system of outsourcing functions. This helps to expand business through latest techniques. Many industries use journals, well-known magazines to expand the knowledge for planning, management and so on.

Hammer and Champy along with Davenport and Short, published  reports research in outsourcing business functions. Functions, which are developed for payroll, customer service, big data via agencies outside or within the country. Outsourcing facilitates business to overcome other activities through expertise (Kohlbacher and Gruenwald). Many books has been published by Oliver Schmidt, according to him, if during working hours business, place suffer home network issues, and work cannot be proceeded further, so here outsource works as leader in their own expertise. He explains that recent companies, depends on outsourcing agreement. Innovations are major principle taken into consideration while outsourcing partners for activities. Business sectors like those that IT uses outsource for employment, software is as discussed by Orrin Klopper. He gave presentation on how IT sector are benefited through outsourcing.

Project Objective

Authors and researchers Lacity, Mary C. and Solomon, Stan and Yan, has pointed and published how with the help of outsourcing business can developed and progress immensely. Researcher actively participates on development and expansion of outsourcing Business functions. Researcher Leslie P gives critical review as outsourcing for software’s, customer service helps to expand business globally.

Reasons according to Robert and Gordon why the trend setup to use outsourcing have developed further since last few years are due to changing trend for economy. Companies previously operated all the services through self and working employees. This was the reason, for not use of outsource system. Organisation needs to understand the term outsource. As per them outsource refer to, employees hiring, software installation, manufacturing of goods through contractors and so on. It can be concluded that Outsourcing is an influential business strategy, which can lead to greater success and expansion.

Australian company Telstra plans to outsource 170 jobs to India, which is considered to be fastest growing unit for the Company (www.thehindubusinessline.com, Retrieved on 15th August 2017). The Company plans to reorganise internally its operational activities to form five key activities. India office will act as a back office for functioning of the various operations department. This will impact an overall of 30,000 jobs in Australia but the Company Managing Director John Allan did not want to comment on amount of job losses. For Telstra outsourcing will provide more client and market opportunity for the Company. P. K.Ross (2009), “New technology and work in the Australian telecommunications sector: What role for technicians?.” In Labour & Industry: a journal of the social and economic relations of work, pages 45 to 66 views increased opportunities with outsourcing (Ross, 2009). Increased productivity is a quick aspect that Australian companies are easily able to visualise from outsourcing of their fucntions. Saved income from increased productivity can be diversified into generating more income from other related projects. Outsourcing will allow these companies access to latest technologies as advanced accounting programs that are more efficienct. IT infrastucture that are provided by outsourced firms have impended high levels of impact on these companies which has in turn translated to cost saving, outsourcing and so on.

Brown (2007), “The Black Books of Outsourcing: How to managem the changes, challenges, and opportunities. Published by John Wiley & Sons identifies the challenges associated with outsourcing with companies (Brown, 2007). There are several negatives associated with outsourcing that have translated into allignment isues, cultural issues, delivery related challenges and so on. While outsourcing companies needs to analyse functions that they can outsource as It, accounting, operations, HR related aspects can be outsourced on the other hand companies need to consider keeping marketing and sales in-house. While outsourcing of functions analysis of impact on various business stakeholders needs to be conducted (Chadee, 2009). While outsourcing might directly benefit the Company, on the other hand it might have a negative impact on society at large. Various employees are now averse to working for Optus or Telstra, hence there has been a loss of commitment that has lowered productivity. Cultural gap is a major issue in companies while offshoring. Succesful offshoring and outsourcing requires improvised communication, investment and successful partnership. Efforts needs to be made for bridging cultural gap amongst outsourced functions and company (Schniederjans, 2015). Critical success factors for the purpose of outsourcing has to be evaluated prior to outsourcing. Magement of adequate quality control measures has to be impended which can evaluate appropriate delivery os desired services. Parent company needs to conduct on-going training such that continued efforts can be made towards delivery of services. Parent company should not view outsourcing as a cost curtelement only, rather it should be identified as an investment endevour (Wreford, 2011). This will allow open lines of communication to understand any gaps or lags in services and then accordingly such gaps can easily be bridged. Cultural divergence in outsourced company needs to be attempted and respected for overcoming of any pertinent issue.

Project Scope

Outsourcing of functions needs to necessarily take care of all non-essential items that encompasses non-core activities. It can effectively reduce overhead costs, creating more opportunities for a company to expand and grow its business (Lewin, 2009). Positive impact of outsourcing, can free an organisation from various investments into infrastructure, technology and support processes. This can substantially help reduce capital expenditure. It enables a business to create flexibility for manpower and staffing for managing workforce effectively. There are however certain disadvantages of outsourcing as well that exposes risks of the company, as it might lose confidential data. Loss of crucial information is a key stake in outsourcing of any functionality (Susomrith, 2013). This might lead to management losing control over key business functionalities, thus having no control over outsourced functions. Business leaders llok at outsourcing in a way that enable to drive profitability in businesses. There needs to be transformation in attitude and ways outsourcing in current situation is visualised as it might lead to creating an overall business viability and sustenability for the future. It needs to be considerd a separate entity of the business rather than a profit driving machine. Such atribute of the parent company can help a long way to save on current job aspects rather than by just doing away with jobs. with so many stakeholders at bay, it becomes essential for a firm to evaluate the critical resources and analyse long term impacts that any action of a firm can suitably understand. Such in-depth understanding can help generate and create unique business capability. Businesses in this manner will not only be able to overcome challenges but also drive their core business strategies and competencies. Outsourcing needs to be viewed as a startegic partner rather than comparing them with outside untis. Busineses needs to make congruent efforts in bridging and developing any startegic partners that they associate with for greater customer satisfaction. With increased customer satisfaction, there can be greater brand value development and brand recognition. All endevours will be later recognised as attitudes for creating long term business impacts. Rather n striving in the short term such long term efects evaluation can render viability and return on investments.

Outsourcing company might work with several customers, which makes it have no priority for any particular client. This will eventually lead to delay in processing of information and work. There might also be errors in work accompanied as outsourcing firm caters to a number of customers. In many cases hidden costs arises in case outsourcing terms and conditions are not clearly spelled out (Javalgi, 2009). However, any types of challenges pose needs to be overcome by outsourcing company by integrating in management control, adhering to quality issues, communicating and in estimating risks. Australian companies in order that they can meet global challenges are focussing on doing what they do best. In such endevour to remain competitive and extend core competencies, they are assessing potential outsourcing destinations across developing countries. While such outsourcing continue to offer immense potential opportunity, they are having a multitude of effects on Australia. With rising unemployment, rising inflation and lowering income potential, the economy is steadily starting to suffer. As large and global corporations are multiplying their wealth, purchasing power of individuals are gradually declining leading to lowring potential of the economy. Hence, business leader needs to consider effects of outsourcing in a broader light compared to their own advantages.

Literature Review

Conclusion

Analysis from the above situation and understanding of the Australian telecommunication sector it can be well stated that benefits outweigh challenges. There are tremendous amounts of opportunities that are provided to the host country in case it outsources some of its key functions. However, while outsourcing, the outsourced company’s profile needs to be carefully analysed such that appropriate profitability and sustainable business can be established. The parent Company needs to equip and provide adequate training such that outsourced company’s services or products are at par with the parent company’s designated standards. There need to be frequent evaluation of resources and capabilities at the outsourced company. With appropriate and proper monitoring benefits from outsourcing can be reaped adequately.

Reference Lists

Banerjee, A. &. 2009. International Service Outsourcing: Using offshore analytics to identify determinants of value-added outsourcing. . Strategic Outsourcing: An International Journal, 68-79.

Beverakis, G. D.-K. 2009. vTaking information systems business process outsourcing offshore: The conflict of competition and risk. Journal of Global Information Management, 32.

Brown, D. &. 2007. THE BLACK BOOKS OF OUTSOURCING: HOW TO MANAGE THE CHANGES, CHALLENGES, AND OPPORTUNITIES. John Wiley & Sons.

Burdon, S. &. 2011. Mobilizing for value added partnerships. . Journal of Information Technology Case and Application Research, 22-41.

Chadee, D. &. 2009. International outsourcing of information technology services: review and future directions. . International Marketing Review, 411-438.

Fisher, J. H. 2008. Understanding the outsourcing learning curve: A longitudinal analysis of a large Australian company. Information Systems Frontiers, 165-178.

Javalgi, R. R. 2009. Outsourcing to emerging markets: Theoretical perspectives and policy implications. Journal of International Management, 156-168.

Lewin, A. Y. 2009. Why are companies offshoring innovation? The emerging global race for talent. Journal of International Business Studies, 901-925.

Mani, D. B. 2010. An empirical analysis of the impact of information capabilities design on business process outsourcing performance. Mis Quarterly, 39-62.

Pai, A. K. 2007. Offshore technology outsourcing: overview of management and legal issues. Business Process Management Journal, 21-46.

Penter, K. &. 2009. Offshore Business Process Outsourcing to India: Two Australian SME Case Studies. In Information Systems Outsourcing. Springer Berlin Heidelberg., 549-561.

Ross, P. K. 2009. New technology and work in the Australian telecommunications sector: What role for technicians?. Labour & Industry: a journal of the social and economic relations of work, 45-66.

Schniederjans, M. J. 2015. Outsourcing and insourcing in an international context. Routledge.

Susomrith, P. &. 2013. Motivations for HR outsourcing in Australia. The International Journal of Human Resource Management, 704-720.

Wreford, J. P. 2011. Opaque indifference, trust and service provider succcess in offshore business process outsourcing. In Proceedings of the 22th Australasian Conference on Information Systems (ACIS).

www.afr.com. (Retrieved on 15th August 2017). Optus cuts jobs by outsourcing HR and finance. https://www.afr.com/technology/enterprise-it/optus-cuts-jobs-by-outsourcing-hr-and-finance-teams-20160623-gpqe1g.

www.thehindubusinessline.com. (Retrieved on 15th August 2017). Australian firm Telstra to outsource 170 jobs to India. https://www.thehindubusinessline.com/info-tech/australian-firm-telstra-to-outsource-170-jobs-to-india/article4897524.ece.