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What is Offshore Outsourcing?

Discuss about the Human Resources Management for Business and Social Science.

Outsourcing services provided to overseas or foreign providers increases the level of employment law challenges as operations performed at the headquarters shift over to employees belonging to an outside company located overseas. The process of outsourcing certainly increases issues and challenges related to human resources, because of being a distinct factor of an HR strategy. However, the role of outsourcing further means to shift an in-house employee over to the labour of an external business (Kotlarsky, Scarbrough and Oshri 2014). The essay intend to evaluate the practice of offshore outsourcing of business operations by shedding light on the influence of offshore outsourcing on employees along with employee-employee psychological contract. In addition to this, the paper will further assess offshore outsourcing can be perceived as effective or ineffective to an organization by further analysing the implications for human resource management as well as the future prospects of this practice as a method to achieve well-established business performance.

The concept of offshore outsourcing is regarded as a strategic practice whereby a business recruits a supplier selected by third party outsourcing firms in order to perform work in a nation other than the company in which recruitment business considerably conducts its operations (Gurung and Prater 2017). This type of outsourcing can further be distinguished from ‘near shore outsourcing’ in that region of the sourced third party operations of the business that has its occurrences in a nation that is distant from the recruiting organization’s country of origin (Mukherjee, Gaur and Datta 2013). Several factors can be sited that cause organizations choose to exercise the practice of offshore outsourcing. In most cases, outsourcing occurs because it enhances the level of flexibility as well as business effectiveness. Several reports reveal that sustaining offshore processes has enhanced the rate of flexibility from over 45% in 2014 to 67% in 2016 (Moe et al. 2014). Another factor is associated with the business processes of leading multinational organizations specifically the ones providing technological services. Furthermore, it is to be noted that various dynamics have determined repatriation of manufacturing in comparison to services. However, the wage gap between high-cost nations as well as renowned offshore regions has continued to remain considerable over the period, it has been anticipated by organizations that there will be a predominance of outbound in opposition to inbound and congestion in the services segment (Niazi et al. 2013). It must be noted that Australian consumers have been persistently to the offshore business processing output units while dealing with companies like Telco. Studies reveal that several employees engaged in the roles of analysts or accountants in Australia have been shifting large proportions of their business operations offshore to nations like India and the Philippines whereby employees can be paid a minimum wage of $5 an hour in order to complete enduring compliance work (Gurung and Prater 2017).

Factors Driving Offshore Outsourcing


The process of outsourcing has always received controversies either related to its purposes or to obtain an advantageous position of low-cost employment in other regions along with the productivities of large recruitment contractors (Gurung and Prater 2017). At this juncture, it is important to note that the phenomenon of relocation to foreign countries is the consequences of interaction between direct investments, subcontracting with the non-associated organizations along with international trade (Khan and Khan 2013). Furthermore, it is significant to recognize that employee cognitions and influence related to outsourcing are likely to differ with the rate of their acquaintance of several facets of offshore outsourcing such as its content and procedures. Companies provide employees with a sense of recognition and emotions of security as well as belonging. However, when such factors of are interrupted, employees as stakeholders may develop feelings of being indignant as well as retaliatory (Lioliou et al. 2014). Despite of fundamental reasons for offshore outsourcing operations, employees distinguish qualitative transformations in their employment as well as psychological contract with the organizations as a consequence of the company’s outsourcing decision making procedures. Psychological Contract however symbolizes a compilation of mutual beliefs and principles that individuals possess on the reciprocal commitments and obligations within the process of contractual association (Yap and Webber 2015). However, the process of offshore outsourcing may have significant impacts on some employees in a positive manner by improve the roles, further requiring them to concentrate on high-level value added activities, along further reinstating or replacing ordinary or repetitive activities (Iqbal and Dad 2013). On the other hand, for some employees, outsourcing overseas can lead to the loss of employment. With such crucial effect on employees, it must be noted that offshore outsourcing may result to an alleged modification of the psychological contract, potentially resulting to unconstructive organizational consequences such perceived infidelity, job insecurity, mental disorders along with low level self-esteem (Mukherjee, Gaur and Datta 2013).

Offshore outsourcing is often related to the process of involving establishing substantial infrastructure in other nations or locations. It is important to note that offshore outsourcing cause certain positive as well as negative impacts on an organization (Lioliou et al. 2014). Process of offshore outsourcing enhances the efficiency level of a company by further positing its focal point on its fundamental operations. The cost reduction that an organization earns from outsourcing can be repurposed to invest on revenue generating operations of the company.

Impact on Employees


To employers the process of outsourcing is regarded as an ideal method for small and large organisations to operate a cost effective, dynamic as well as leaner operation. In fact as per the Australian Offshore Outsourcing data over 78% of companies outsource and further utilise offshore resources (Mukherjee, Gaur and Datta 2013). However, this percentage has upgraded their domestic labour force of over 200%. Several leading companies in Australia such as the Serco have been influenced by this process of offshore outsourcing within its business operations. Serco with its operative outsourcing procedure have been experiencing an inexpensive labour expenditure where by it spends a relatively lower employee cost that has been further profiting the company in relation to its cost reduction of employees (Iqbal and Dad 2013). However, with the process of offshore outsourcing the business of Serco will be processing the same business operations. It must further be stated that several Australian organisations are using the process of offshore outsourcing in order to subcontract their production as well as operation functions that has gradually taking them closer to end users and has further provided them the availability towards potential opportunities for their business (Khan and Khan 2013. However, for few Australian entities the process of global outsourcing can be regarded as an inexpensive receipt to access advanced accounting programs or IT infrastructure.

Through the process of offshore outsourcing, stakeholders as well as customer base of a company may experience a steady rise with the implementation of outsourcing. The rate of sales to the nation's where the company is planning to establish its infrastructure all further recruit local employees will establish grounds for its development (Lioliou et al. 2014). Furthermore, the factor related to strategic planning must be taken into consideration with the expenditure of operating a business in a global arena in order to preserve a considerable profit. However, other factors such as taxation as well as tariff charges along with shipping costs may also play an active participation in the process of strategic planning for establishing global base (Wirtz, Tuzovic and Ehret 2015). It is further to be noted that global outsourcing can be comprehended as the means to facilitate an organisation to concentrate and further exploit it's an internal competencies while operating with labour provider entities in order to generate potentialities for inbound expertise and capability transfer. However, such a perspective provides many relevant associations with the priorities and conceptualizations related to human resource management. The implications for HRM further incorporates what is strategic Global Outsourcing contract that include knowledge and expertise management, HRM support for strategic approaches and innovations along with change management within the organisation (Mukherjee, Gaur and Datta 2013). Thus, it can be stated that the strategic association of global outsourcing is considered as route to sustain competitive beneficial factors through the economy is of opportunities, resource acquisition as well as core competencies that would assist in achieving well-established organisational objectives (Iqbal and Dad 2013).


Therefore, from the above discussion it can be concluded that Outsourcing or Overseas outsourcing can prove to be immensely beneficial to accomplish organisational aims and enhance its performance. The essay effectively evaluated the practice of global outsourcing bye casting light on the impact of the practice on employees and employer to employee psychological contract. Lastly the essay has analysed effectively of offshore outsourcing on an organisation by focusing on the implications of HRM and global outsourcing as means to accomplish greater organisational performance.

References

Gurung, A. and Prater, E., 2017. A research framework for the impact of cultural differences on IT outsourcing. In Global Sourcing Of Services: Strategies, Issues And Challenges (pp. 49-82).

Iqbal, Z. and Dad, A.M., 2013. Outsourcing: A review of trends, winners & losers and future directions. International Journal of Business and Social Science, 4(8).

Khan, A.W. and Khan, S.U., 2013. Critical success factors for offshore software outsourcing contract management from vendors’ perspective: an exploratory study using a systematic literature review. IET software, 7(6), pp.327-338.

Kotlarsky, J., Scarbrough, H. and Oshri, I., 2014. Coordinating Expertise Across Knowledge Boundaries in Offshore-Outsourcing Projects: The Role of Codification. Mis Quarterly, 38(2).

Lioliou, E., Zimmermann, A., Willcocks, L. and Gao, L., 2014. Formal and relational governance in IT outsourcing: substitution, complementarity and the role of the psychological contract. Information Systems Journal, 24(6), pp.503-535.

Moe, N.B., Šmite, D., Hanssen, G.K. and Barney, H., 2014. From offshore outsourcing to insourcing and partnerships: four failed outsourcing attempts. Empirical Software Engineering, 19(5), pp.1225-1258.

Mukherjee, D., Gaur, A.S. and Datta, A., 2013. Creating value through offshore outsourcing: An integrative framework. Journal of International Management, 19(4), pp.377-389.

Niazi, M., Ikram, N., Bano, M., Imtiaz, S. and Khan, S.U., 2013. Establishing trust in offshore software outsourcing relationships: an exploratory study using a systematic literature review. IET software, 7(5), pp.283-293.

Wirtz, J., Tuzovic, S. and Ehret, M., 2015. Global business services: Increasing specialization and integration of the world economy as drivers of economic growth. Journal of Service Management, 26(4), pp.565-587.

Yap, Q.S. and Webber, J.K., 2015. Developing corporate culture in a training department: A qualitative case study of internal and outsourced staff.

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