Benefits/Advantages of Outsourcing and/or Off-Shore Outsourcing That Outweigh the Disadvantages

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Introduction

Outsourcing and “off-shore” outsourcing provisions have currently intensified in the business arenas. According to Raman (2009, p. 16), outsourcing refers to contracting out a business process to another organization, which is independent, competent, and deemed fit to accomplish the agreed obligations.

Concurrently, off-shoring is described as the shifting of business processes to a different country. When corporations or businesses employ subcontractors in a foreign nation, then off-shoring becomes analogous to outsourcing. However, the difference sets in when corporations shift jobs to a similar company in a different country.

There are several benefits of outsourcing and/or off-shoring. This explains why most corporations and institutions in developed nations such as US and UK outsource their tasks to different organisations overseas (Herath & Kishore 2009, p. 312).

Actually, there are individuals who believe that the benefits of outsourcing outweigh its disadvantages. In this essay, evidences to support that the benefits of outsourcing and/or “off-shore outsourcing” outweigh the disadvantages are discussed.

Evidence to Support That the Benefits of Outsourcing and/or Off-Shore Outsourcing Outweigh the Disadvantages

Free movement of trade has been experienced in the past two decades more than any other time in history. Even though BPO have been received by mixed responses, it has proved to be one of the greatest driving forces in international economy.

Workers, particularly those who work from overseas, can find new job opportunities to productively exploit their skills. They are not only able to earn income from their services but can also advance their skills (Tambe & Hitt 2010, p. 62).

However, there are individuals whose lives have been interfered with following outsourcing of their work to low-paid labours in foreign parts. According to their perception, outsourcing is a risk to people’s lifestyles.

Given that the global economy is rapidly opening up for emerging nations, outsourcing has developed to become widespread in rising Asian nations such as India and Africa.

Another driving factor to BPO is advancement in information technology, which is becoming one of the main industries. Currently, career prospects in outsourcing jobs have made substantial influence in offering job opportunities to a large fraction of the workforce in emerging nations (Benson et al. 2010, Pg. 23).

According to Tadelis (2007, p. 30), even though there are different benefits of outsourcing, there are also particular weaknesses such as poor communication between the individuals involved, which often results into poor performance.

Nevertheless, generally outsourcing has proved to very successful in most parts of the world and the advantages of outsourcing, backed by evidences, could outweigh their limitations. Even so, arguments on the advantages and disadvantages still remain.

Today, most people agree that the benefits of outsourcing of off-shore outsourcing are far much than just saving of cost to companies that embraces it (Ramanathan 2009). Business process outsourcing has become a tactical business option that could additionally be used to gain a competitive advantage within a certain industry.

When a corporate outsources its work or process to a merchant, whose principal proficiency is concentrated on that practice, the customer will certainly experience service enrichments that can give him or her competitive advantage over its competitors.

In addition, the good relationship between the customer and the merchant could develop into a business partnership, with both sides getting interested to find reciprocally advantageous means to influence the mutual asset pool.

The major benefits of outsourcing or off-shore outsourcing to a given company include cost saving, competence, and general enhancement in the performance of a business.

According to research that was conducted by the Bureau of National Affairs (BNA), the need for know-how is the main driving force behind outsourcing or off-shore outsourcing.

The research involved surveying well over 940 human resource executives and the outcome was startling. The report indicated that more than 69 per cent of the research participants they desired to outsource mainly for the purposes of expertise.

It also indicated most of the 44 per cent of the HR executives outsourced to enhance the quality of their services and 28 per cent to save costs. However, the most remarkable finding was that, outsourcing has more benefits as compared to its shortcomings (Click & Duening 2004, p. 56).

Managers feel they are freer to decide on processes since the outcomes can be experienced faster. Even though cost reduction is among the major areas, the managers also testified that they also have more control in the reliability, enhancements in cost effectiveness and effectual execution of ideas.

Remarkably, 55 per cent of the participants agreed that outsourcing allows their corporations to execute policies and change rapidly and more organised manner. With regard to the general frequency of outsourcing over 80 per cent or the respondents testified that they are devoted to outsourcing no less than one business responsibility permanently.

Managers feel that rather than overworking or stressing themselves, they can find relief by getting the help of an external service provider (Ramanathan 2009). Only 14 per cent apply outsourcing on a provisional basis to enhance major roles and use internal means once efficacies are achieved.

These statistics is clear indication that managers and human resource executives prefer outsourcing since they believe that it is its benefits far much outweigh its negative impacts (Click & Duening 2004, p. 56).

Creation of a credible outsourcing system is paramount as a performance measure to ensure effective coordination and control of resources. The process should be undertaken in cognizance to the set steps to ensure engagement of suppliers with unquestionable business operatives.

This is to ensure acquisition of quality and reliable items with immense capacity to serve the rightful need of the users in propelling production (Trent, 2009). Scholars asserts that inferior procurement procedures leads to immense loses and acquisition of substandard products with low functional capacity.

Managers should follow set guidelines of purchasing to achieve a perfect match between quality and the resources used in purchasing. These evidences demonstrate that the benefits of outsourcing and/or off-shore outsourcing outweigh the disadvantages.

Major steps that administrators should consider include performance of a comprehensive contracting process. The process requires stakeholder involvement to ascertain the needs of the users. This is achievable through monitoring of procedures and execution of research on the various needs that are hindering effective performance and delivery of efficient services.

The needs are initiated by users to enable purchasing of relevant products to improve user efficiency. It would also reduce stock hold up in storage facility since purchases are made and sales are executed systematically. This limits wastage of resources and storage space that causes low performance (Trent 2009).

Comprehensive research on the supplying institutions and the state of the condition in terms of operation form a paramount step that purchasing department is under obligation to evaluate.

The research should be done using available resources for example the internet on the diverse institutions that trade in the identified products needed (Tadelis 2007). This enables the procurement department to develop a list of vendors over which probable choices are made to execute the supplies.

This stage will advance the establishment of the institution s operating settings, geographical location, distribution network and their reputation in the global arena (Barrar & Gervais, 2006). This is to establish their credibility and reliability in service delivery.

Systematic evaluation of the vendors forms the next step in the purchasing process. The step provides clear strategies of scrutinising the supplying agency based on diverse factors that influence buying decisions. This argument exhibit that the benefits of outsourcing and/or off-shore outsourcing outweigh the disadvantages as alleged earlier.

It has to be noted that buyers are influenced by product quality, reliability of the items, price, serviceability and the technological process involved in the production chain (Wee, Peng & Wee 2010). These elements are crucial since they contribute in defining products suitability and the institutions reputation.

According to Trent (2009) purchasing department should make negotiations with the institutions that hold favourable business operating guidelines that emphasises on quality and fair pricing to avert over expenditure

Evidently, outsourcing is a business practice where institutions acquire operating items based on temporary agreements. The agreements can be referred to as “lease contracts” that require superior negotiation.

The program facilitates effective administration of resources and elimination of unwarranted systems or costs that may compromise exemplary performance. Indeed, outsourcing of resources for example expertise and technological equipments at lower costs is enabling small institutions with limited resources to gain good performance (Trent, 2009).

It is a practice that if done objectively, holds the capacity to revolutionise operation in institutions. It presents immense advantages that include effective utilisation of available resources. The practice provides requisite guideline where an institution only acquires what is needed to execute certain activity at the time of want.

This reduces the daily maintenance cost incurred in the management of the equipments that translate to colossal amount on yearly basis that may be unsustainable. This evidence indicates that the benefits of outsourcing and/or off-shore outsourcing outweigh the disadvantages.

It focuses on the core activities of the business to ensure the achievement of maximum returns. This explains why managers outsource equipments based on the needs for specified period of time to propel the execution of activities in the core business units.

Variably, it advances efficiency in savings that is fundamental for growth especially in small institutions (Trent, 2009). Savings in operating cost is vital since high expenditure of operating procedures is detrimental to the realisation of exemplary performance.

It also leads to the reduction of overhead cost of executing back-office functions that consumes immense resources. This explains the imperativeness of outsourcing of the resources that can be moved with ease.

Consequently, outsourcing whose application is gaining momentum enable the development of effective operational guidelines and staffing flexibility. Precisely, these evidences demonstrate that the benefits of outsourcing and/or off-shore outsourcing outweigh the disadvantages.

It advances consistency in service delivery and risk management to eliminate uncertainty in the supply processes. Although, outsourcing present noble operating incentives it fails to guarantee continuity in the production process since the equipment are only hired when need arises.

This limits daily production and performance that is necessary for growth. As noted by Trent (2009) it compromises innovation and creativity in institutions in terms of service delivery since it delimits holistic and consistent nurturing of employees to high levels of creativity. Additionally, it may lead to the acquisition of equipments with compromise operating capacity.

Authorities in diverse settings are currently emphasising the adoption of credible procurement procedures especially in the current environment that is characterised with severed economic complications.

In particular, multinational companies, for example Nokia, Samsung, and Toyota Ltd are practicing the conventional purchasing procedures that define acquisition process for relevant items that advances their productivity.

The institutions recognise the significance of the purchasing and supply systems that guides the identification of products, quotation procedures and the ordering process.

Clearly, the institutions operate well staffed purchasing departments that coordinate supplies and buying of diverse equipments that propel service delivery (Barrar & Gervais, 2006).

This is achievable through designing credible sales and distribution network to reduce stock ties and wastage of resources (Pouder, Cantrell & Daly 2011, p. 4). Variably, market researchers mandated to perform effective research on the consumer needs are integrated in the department.

This is to ensure that comprehensive research is carried out based on diverse factors that influence procurement decisions. It is imperative to note that the companies operate under defined procurement procedures that enhance their contracting engagement with suppliers.

This enable them to adequately evaluate institutions based on purchasing guidelines for example quality, price and reliability hence develop superior buying decisions. These evidences demonstrate that the benefits of outsourcing and/or off-shore outsourcing outweigh the disadvantages

Indeed, institutions that seek to leverage their performance should adopt superior procurement procedures to streamline their purchasing and supplies. This is a fundamental aspect since inferior execution of procurement procedures is detrimental to organisational growth.

Therefore, it is professionally advisable for managers to institute purchasing department in their institution s to coordinate the acquisition process of diverse commodities (Pellicelli & Meo-Colombo 2011, p. 276). It is agreeable that the mentioned evidences demonstrate that the benefits of outsourcing and/or off-shore outsourcing outweigh the disadvantages.

Agreeably, even though there are different benefits of outsourcing, there are also particular weaknesses such as poor communication between the individuals involved, which often results into poor performance.

However, outsourcing has proved to be very successful in most parts of the world and the advantages of outsourcing, backed by evidences, could outweigh their limitations as indicated before.

Appropriate outsourcing or off-shore outsourcing also demands that viable and competent suppliers be engaged in the entire process. Procedures of selecting qualified suppliers are designed to promote fairness and to ensure that consumers are compliant to the binding guidelines (Weerakkody & Irani 2010).

Evidently, the practice is used by purchasers to advance competition and ensure that relevant transaction principles are employed in the procurement process. The guidelines are to equip consumers with pertinent knowledge and understanding of the purchasing process as provided by the vendors (Johnson et al, 2010).

This is to facilitate communication and a guiding purchasing checklist that assist consumers in obtaining accurate price quotes of products. Due to the complex nature of selecting appropriate suppliers, there are superior strategies that individuals can adopt to facilitate the identification of credible institutions with superior products (Trent, 2009).

The major strategy is the execution of comparison shopping through request for Quotation (RFQ) from various institutions. The quotation document entails fundamental information of the institutions and the products.

The inclusive information that is included in the document explains all the factors that determine individual’s choice to certain products. Precisely, these evidences demonstrate that the benefits of outsourcing and/or off-shore outsourcing outweigh the disadvantages.

It is agreeable that the benefits of outsourcing and/or off-shore outsourcing outweigh the suspected disadvantages. This is a considerable provision in diverse contexts. The situation advances the establishment of the institution’s operational settings, geographical location, distribution network and their reputation in the global arena (Barrar & Gervais, 2006).

This is to establish their credibility and reliability in service delivery. Systematic evaluation of the vendors forms the next step in the purchasing process. The step provides clear strategies of scrutinising the supplying agency based on diverse factors that influence buying decisions.

It has to be noted that buyers are influenced by product quality, reliability of the items, price, serviceability and the technological process involved in the production chain. These elements are crucial since they contribute in defining products suitability and the institutions reputation.

Therefore, evaluation entails ascertaining the price levels of the products needed in various companies. The establishment of the quality standards, distribution network, procurement procedures and suppliers core business line of operations paramount.

These are crucial information that helps in identifying credible institutions to engage in business contracts (Johnson et al, 2010). The evaluation process is fundamental since it enable the acquisition of quality and price effective goods with limited cost implication (Trent 2009).

In addition, establishment of the institutions primary customers and its financial stability is a relevant step that purchasers should undertake to enable formulation of viable and informed buying decisions.

Conclusion

In conclusion, outsourcing and “off-shore” outsourcing have increased tremendously in the recent past. This, according to research, is influenced by their advantages that are perceived to outweigh their disadvantages.

Some of the advantages of outsourcing include cost reduction, job creation, better planning and control, competitive advantages, expanded market potential, and expertise. It is true that most of the U.S. and U.K.’s corporations outsource their jobs to developing countries.

Even though critics point out that outsourcing result into job loss within a country, the impact of this is often exaggerated. For instance, the United States outsourced a total of 274,000 jobs to India between 2000 and 2003.

However, there was a net yearly employment opportunity growth by approximately 327,000 over the same time according to McKinsey, which is a consultancy firm. This suggests that the number of jobs outsourced is less compared to available employment opportunities.

The only major disadvantage of outsourcing is poor communication between partners, which sometimes affect businesses negatively. However, clearly the advantages of outsourcing outweigh its disadvantages.

Precisely, even though there are different benefits of outsourcing, there are also particular weaknesses such as poor communication between the individuals involved, which often results into poor performance.

However, outsourcing has proved to be very successful since its advantages, backed by evidences, outweigh its limitations incredibly.

List of References

Barrar, W & Gervais, R 2006, Global outsourcing strategies: An international reference on effective outsourcing relationships, ALDERSHOT, London.

Benson, B, Davidson, W, Duesing, J, Gilley, K. Matthew, 2010, Investor Reactions to Substitution-Based Outsourcing Agreements. Academic journal article from Journal of Managerial Issues, Vol. 22, No. pp. 23-47.

Click, L., & Duening, N 2004, Business Process Outsourcing the Competitive Advantage, John Wiley & Sons, Hoboken, NJ.

Herath, T & Kishore, R 2009, ‘Offshore Outsourcing: Risks, Challenges, and Potential Solutions’, Information Systems Management, vol. 26, no. 1, pp 312-326.

Johnson, P., Leenders, M & Flynn, A 2010, Purchasing and supply Management, McGraw-Hill Irwin, Boston, MA.

Pellicelli, M & Meo-Colombo, C 2011, ‘Outsourcing Strategies, How to Formalize and Negotiate the Outsourcing Contract’, Annals of the University of Oradea, Economic Science Series, vol. 20, no. 1, pp 276-287.

Pouder, R, Cantrell, R & Daly, J 2011 ‘The Impact of Outsourcing on Firm Value: New Insights’, SAM Advanced Management Journal, Spring, vol. 1, no. 1, pp 4-13.

Ramanathan, R 2009, The role of organizational change management in offshore outsourcing of information technology services: qualitative case studies from a multinational pharmaceutical company, John Wiley& sons. Hoboken, NJ.

Tadelis, S 2007, ‘The Innovative Organisation: Creating Value Through Outsourcing’, California Management Review, vol. 50, no. 1, pp. 261-277.

Tambe, P & Hitt, LM 2010, ‘How Offshoring Affects IT Workers’, Communications of the ACM, vol. 53, no. 10, pp 62-70.

Trent, R 2009, Managing global supply and risk: Best practices, concepts, and strategies, ROSS Pub. Florida.

Wee, H, Peng, S & Wee, P 2010, ‘Modelling of outsourcing decisions in global supply chains. An empirical study on supplier management performance with different outsourcing strategies’, International Journal of Production Research, vol. 48, no. 7, pp. 2081-2094.

Weerakkody, V & Irani, Z 2010, A value and risk analysis of offshore outsourcing business models: an exploratory study, International Journal of Production Research, vol. 8, no. 2, pp. 613-634.

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Benefits/Advantages of Outsourcing and/or Off-Shore Outsourcing That Outweigh the Disadvantages

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