Outsourcing has been utilized by companies in sundry industries for many decades as a key business strategy (Ghodeswar and Vaidyanathan, 2008). Harmancioglu (2009) argue that several successful companies depend on outsourcing to continue being responsive in coping with market changes as well as to expand their operations globally. He also stated that outsourcing was primarily perceived and employed to reduce costs, however recently it has become a prevalent and essential tool to gain competitive advantage. There are various reasons that lead companies to outsource some of their functions, these include: cost cutting, entrance to new markets, and to concentrate on main activities (Ghodeswar and Vaidyanathan, 2008). Wright (2004) mentions a number of functions that a company can outsource, these include: human resources, customer care service, and information technology functions.
Regardless of the growing concern in outsourcing relationship, there is also increasing indication of failure in its arrangement (Langfield-Smith and Smith 2003). Lee et al (2011) claim that due to the recent prominence on risk management in supply chain, companies are identifying the importance of including risk measures into outsourcing decisions. Outsourcing is exposed to high level of risks since it involves the discretion and relationship with third party (Auzair et al, 2013).
After consulting various articles about the subject, the author will give a brief definition of what outsourcing is and the types of activities that companies source outside of their company’s boundaries. Moreover, the author will mention the risks that both the client and the service provider face when outsourcing takes place, and will also talk about how control measures of...
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...s on outsourcing. According to Rothaermel et al., (2006) as cited in Broedner et al, (2009) firms that follow a carefully balanced strategy of simultaneously practising vertical integration and strategic outsourcing when managing for innovation enhances a company’s product portfolio and product success, and therefore adds to competitive advantage and overall firm performance (Rothaermel et al., 2006).
Risks in outsourcing relationships
There are high levels of risks in outsourcing since confidentiality and relationship with third parties is involved. (Auzair et al, 2013). Das Aundhe, and Mathew (2009) claim that when an outsourcing contract fail, both the client and the server provider are affected. They also state that outsourcing contracts are planned on the basis of certain rules and therefore hold intrinsic risks due to a limited understanding about the future.
Outsourcing simply means acquiring services from an external organization instead of using internal resources (Butler, 2000). By using outsourced resources, organizations can gain a competitive advantage by utilizing contingent staff to accomplish strategic goals without incurring the fixed overhead. By focusing on the leading edge and highly specialized skill sets, outsourcing providers can often offer higher quality services, or at a lower price than the client organization. Typical reasons for outsourcing go beyond simple contingent staffing. Outsourcing providers are able to maintain economies of scale with regard to specialization (...
Recently outsourcing has been in the news, especially during political election years. It seems to be a phenomenon that is causing much concern among the population. But exactly how is outsourcing effecting both workers and businesses? And is it as big of a problem as politicians describe?
In many cases outsourcing has proven to be beneficial for businesses. It can help a business’s management by allowing executives to focus on the core structure of the firm rather than every specific element. Production, manufacturing, or additional servic...
Kibbe, C. (2004). Outsourcing” the good, the bad, and the inevitable. New Hampshire Business Review, 26(14), 1A.
Outsourcing is a technique for companies to reassign specific responsibilities to external entities. There are several motivations for outsourcing including organizational, improvement, cost, and revenue advantages (Ghodeswar & Vaidyanathan, 2008).
Risks can be high with outsourcing in the healthcare industry because personal information and medical information is being transferred somewhere else, but if the right services provider is chosen things can go
The main problem Bharti Airtel Limited facing is "How to manage its capital expenditures for its operations and how to face the expected exponential growth and a competitive environment." The challenges that the company is facing are
The next competitive advantage is quality of service. Outsourced environment is quite different than that of the environment in an enterprise. Advertisers are different economic entity with profits at risk. External service provider will make every effort to deliver good quality; good service and everything will apply and will be tested. For example, the usage of the ITIL methodology. Service providers will also provide high output, and perform better output, needs, and change control. Thr...
Outsourcing has been around for many years. In this paper, I will discuss some of the history of outsourcing, the good things about outsourcing, and the bad things about outsourcing. Outsourcing is important because many companies rely on it in order to get many different products and services to their facility on time and in good shape. Outsourcing is a huge part of the business industry today. Any business can be affected by outsourcing.
“Outsourcing” or “Buy” decision- when volume is increasing at a constant rate, outsource non core activities to others.
...urcing services, the company operation will be became a mess. This is because one organization can’t run a lot of task or project at one time. Therefore an organization need outsourcing in the way to help their organization run smoothly.
Outsourcing is the hiring out of work by a company to a separate existing unit or company with more specialization that can do them more efficiently and less expensively. This helps the company outsourcing work increase profit while shedding work. Over the years businesses have adopted the strategy ...
Sorey, C. L. (2005). The hidden risks of outsourcing. Business Law Brief. Retrieved from http://www.wcl.american.edu/blb/01/2sorey.pdf?rd=1
A disciplined approach to management eying leading employees, improving the management team and building the business strategy. Instead of treating each problem as a one off. They design systems and structures that make it easier to handle in the future. (Techrepublic, 2015) 2.2. Risk of exposing confidential data: When an organization outsources HR, Payroll and Recruitment services, it involves a risk if exposing confidential company information to a third-party Synchronizing the deliverables: Some of the common problem areas include stretched delivery time frames, sub-standard quality output and inappropriate categorization of responsibilities. At times it is easier to regulate these factors inside an organization rather than with an outsourced partner Hidden costs: Although outsourcing most of the times is cost-effective at times the hidden costs involved in signing a contract while signing a contract across international boundaries may pose a serious threat Lack of customer focus: An outsourced vendor may be catering to the expertise-needs of multiple company at a time. In such situations vendors may lack complete focus on your organization 's tasks. 2.3. 1.Know the
Outsourcing means that companies are enlisting the services of third-party providers, vendors or consultants to provide the services that the companies are unable to perform on their own due to lack of expertise. Outsourcing means that the people doing the job externally, not in-house. (Noe, Hollenbeck, Gerhart and Wright, 2014)