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Cost / benefit analysis of outsourcing
Cost / benefit analysis of outsourcing
Cost / benefit analysis of outsourcing
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Pros and Cons of Outsourcing and Offshoring
Businesses face lots of challenges today during their development and growth, and they should decide how much financial investment are they want to put into the development of certain projects.
When they make decision, business owners find the idea of developing an in-house team dedicated to certain project much more expensive than the company’s current situation can control. That’s why they turn to find alternatives. In many cases the alternative is finding someone to do it for you at lower costs. This is why we need to talk now about outsourcing and offshoring.
But before you start to think about the alternatives, you must know what kind of benefits and risks are assumed and which one suits
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There are many reasons why company decide to do and there are many places where companies could go to take advantage of cheaper labor cost. For examples, China, India, Poland, or Romania. Offshore outsourcing is desired by numerous companies considering the premier facts like quality, access to resources and tools, time, cost etc.
What is Pros of outsourcing and offshoring?
Financial Savings
There is always a huge financial savings upon outsourcing. You don’t need to spend your time and money on resources tools, technology or infrastructure. These reinforcements are pre-arranged and applied to your project by your outsourced partner. After comparing between your in-house team and outsourced team, it is clear that outsourcing or offshoring will cost you much less.
Diminished Cost
Outsourcing is to slash down your operational cost. Using offshoring you can save 40-60% of your operational and maintenance cost. For example, when you hiring website developer, the average annual wage in 2015 is USD $23,000 in US and USD$38,234 in UK. But Indian website developer’s annual salary is USD 3608.24. This huge difference make us to decide outsourcing and offshoring.
Efficient
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 (...
Since the concept of outsourcing was introduced it has been a subject of debate between politicians and citizens of the United States. Remarkably, it was the United States who supported outsourcing and now it is the United States that feels its economic progress is being threatened by outsourcing. One may argue that the financial situations that existed two decades earlier are not the same as they are today, thus the change of time, business priorities of economies have also changed.
Making an investment towards a new project/product/company is hardly a simple process. Numerous factors including costs, benefits, time, and resources need to be taken into account before a decision to pursue a new project should be ventured into. At the end of the day prioritising projects and investing funds into projects that have the most potential towards favourable return on investment should be considered. Investment appraisal should not only be used for projects with a monetary return, it is also pertinent to use the tools where the return may not be easy to quantify such as training or development programs. Investment
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...
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).
Top 7 Outsourcing Advantages Outsourcing Advantages: A Back-Office Operations Illustration By James Bucki ; http://operationstech.about.com/od/officestaffingandmanagem/a/OutSrcAdvantg.htm
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.
It also entails financial actions; possible funding and timescales that will enable the organisation or the project sail successfully. A funding and income generation strategy provide the organisation attain the set goals and provide a platform to account what has yielded in the past as well as giving recommendations for the future (Kaplan, 2002). The project research outlines the major sources of funding to the business, costs involved, business accounts and the financial
Companies usually outsource when a job is too dangerous for the country’s labour laws without being extremely expensive. A cheaper and more efficient option is out sourcing to another country that doesn’t or have less labour laws. Apple outsources their products and their people; their products to China, and their workers from countries ...
...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.
The boundaries of which activities are to be performed inside the firm and which to be out-sourced from markets are demarcated as vertical boundaries of the firm (Besanko et al 2009). Therefore, it is possible for the firm to source components they need from competitors. However, the firm need to resolve the make-or- buy decision by comparing the benefits and costs of performing the activity itself as opposed to purchasing from competitor’s firm(Besanko et al 2009). This essay will firstly discuss the advantages and disadvantages of outsourcing from competitors. Then two solutions will be applied according to the risks of outsourcing. Finally. It will make a conclusion.
2005). IT outsourcing allows client to get the job done for a less price. They can cut their costs on technology and don’t have to hire and train IT staff. The relaxed laws such as labour laws in foreign countries also helps in reducing the costs. Additionally, client doesn’t have to pay for other costs such as health insurance and vacation pay.
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 itself is generally thought of as a secondary business practice. Ideally it is intended to be a temporary solution to an immediate business need. As technology becomes more sophisticated with the passing of time, outsourcing has grown in activity in the past recent years in tandem with the availability of more advanced, cheaper technologies. These include the proliferation of mobile devices, the increased usage of internet communication and the emergence of CLOUD services being offered by increasing number of vendors. Information technology components now permeate almost all functions of the business world and thus the risks which are present with the use of this technology also has become a growing concern for CIOs and IT managers alike.
Big organizations often do this because they want to save money and produce cheaper products for the customer, so that they feel like they got an impressive deal. When Americans hear the word “offshore outsourcing”, they automatically assume that Americans are losing their jobs to foreign countries. Most of these jobs that companies outsource, such as the garment industry jobs, are offshore outsourced because they are labor intensive jobs. According to Timmerman “they do, and Nari tells me what each girl does during the process.