Category: Outsourcing

It is indeed true that determined attacks cannot be protected by firewalls. However, a companys network is supposed to be provided with a definitive filter in the form of a firewall. It is unfortunate that a number of well known commercial firewalls can still be bypassed by hackers.

The vulnerability of companies towards attacks is often increased during the process of outsourcing network security. The latter can be a cumbersome task owing to the high level of risks involved. Although outsourcing network security has several attractive ventures, there are considerable risks.

Managed security services have been offered by several companies for some decades. The confusing nature of the field has made it difficult for industry analysts even to classify the actual nature of services offered. A recent study on SonicWALL, Palo Alto Networks, Juniper, Fortinet, and Cisco firewall companies revealed that all of them are prone to attacks.

A split Handshake spoofing trick that interferes with TCP connections can penetrate through these firewalls. The trick is used by hackers to confuse server machine computers. The devices may not be able to differentiate between internal and external sources of communication.

Cisco and other firewalls cannot be used to enhance password policy. Noncompliance to strict password policy can lead to dire security ramifications. In addition, non-technical risks can hardly be prevented effectively by Cisco. For instance, social engineering is one of the areas that Cisco cannot manage properly. Besides, lax security policies and poor decisions cannot be prevented by the Cisco firewall.

In order to enhance the effective operation of a firewall, employees should not visit vulnerable sites within office networks. Passwords should remain confidential at all times. Office workers should also follow the security guidelines provided by the firewall company. Office users are also supposed to immediately report any signs of malicious attacks or suspicious links to the network security personnel.

This kind of research utilizes the services of a standardized data collection tool referred to as questionnaire. The managers of departments concerned with IT outsourcing and offshoring are asked whether outsourcing offshoring has any impact pertaining to sales and general performance of an organization. The design specifically employs surveying whereby the managers in IT sections of various companies are requested to give their views on the benefits of the new technology and whether it lowers or increases the costs of operations (Grover, Cheon & Teng, 1996). The sample to be used will be representative meaning that the research will select the companys IT officials randomly.

This research is occasionally referred to as factual knowledge and employs conventional arithmetical and statistical representations to compute results categorically. Quantitative researches make use of an average design, with a little insignificant inter-subject distinction of engendering a premise to be confirmed or refuted. In this research, hypothesis testing will be performed using mathematical and statistical techniques such as chi-square and regression, and is the foundation around which the entire research is calculated. The design permits randomization of any targeted clusters as well as organizing the required IT outsourcing respondents to be incorporated in the research if possible (MacLean & Mohr, 1999). A well-designed quantitative design influences only one variable at ago, or else statistical examination turns out to be burdensome and open to queries. Subsequent to statistical investigation of the outcomes, an all-inclusive response is arrived at, and the outcome scrutiny is legally conferred and published. Quantitative research furthermore sieves peripheral aspects, if suitably planned, and the outcomes achieved can be perceived to be authentic and equitable (Churchill & Iacobucci, 2004).

Operational Definition of Variables

After setting the study objectives and premises and describing the study arbitration, then the next step in the analytical procedure is to categorize operationally the significant variables and requisites of the study. Operational definitions present two crucial rationales, one being to set up the rules and proceedings that the research investigator will exploit in calculating the key variables of the research and secondly it offers clear subtext to terminologies that otherwise could be understood in abnormal ways. This investigation will enclose operational definitions of key variables and words. The dependent variable in this study is the impact of IT outsourcing and offshoring to businesses because it is affected by other variables for instance the kind of knowledge available in a business, the experience of the managers pertaining to outsourcing and off shoring and the educational level or the available trained staff in an organization. The personnel with sky-scraping dexterity or high educational levels are expected to apply the same dexterities in outsourcing or off shoring in the business. The operational definition of IT outsourcing knowledge in this study will be:

Acquaintance pertaining to IT outsourcing and = the number of faultless answers an IT

Off shoring plan Outsourcing and off shoring director in a firm provides to thirty questions asked on IT

Outsourcing

Besides the above operational definition, the researcher in this study will also categorize the IT outsourcing and off shoring correspondence basing on their knowledge of the new skill (Heeks, et al. 2001). This is done by setting up clusters of IT outsourcing knowledge, distinguishing between the respondents who have IT outsourcing and offshoring acquaintance (Carmel, & Agarwal, 2002). The clusters are alienated in terms of soaring familiarity, ordinary familiarity, diminutive knowledge and without information with reference to IT outsourcing and off shoring technology, and each grouping needs an operational decree that informs the researcher how to allocate any specified respondent to the class. This implies that an additional system of operationally defining the variables could be:

Soaring acquaintance = accurate replies to twenty eight or more of the thirty questions posed. They are those managers who have full knowledge pertaining to IT outsourcing.

Ordinary familiarity= exact answers to between ten and sixteen of the thirty

Questions posed. These are familiar with the new technology but do not really know its benefits and impacts to the

business

Diminutive familiarity=acceptable answers to between four and eight of the thirty questions posed in the questionnaire. This means that a particular group of top managers within the sampled population is not well

Conversant with the technology

Without familiarity= No perfect answers to every question posed. This Means that some of the top managers are not well acquainted

with outsourcing technology. This has a direct impact to the process of outsourcing or off shoring.

The investigator comments that the four clusters of the variable are jointly exclusive denoting that they will by no means superimpose. Depending on the operational rules acknowledged, IT outsourcing and off shoring respondent cannot be placed in the cluster soaring familiarity and concurrently be positioned in the ordinary, diminutive, or without familiarity categories (Jennex & Adelakun, 2003). The clusters are additionally entirely comprehensive. There are four clusters.

References

Churchill, G.A. & Iacobucci, D. (2004). Marketing Research with Infortrac: Methodological Foundations. 9 Edn. New York, NY: Southwestern Pub

MacLean, M. & Mohr, M.M. (1999). Teacher-researcher at Work. Berkeley, CA: National Writing Project.

Carmel, E. & Agarwal, R. (2002). The maturation of offshore sourcing of information technology work. MIS Quarterly Executive, 1 (2), 6578.

Grover, V., Cheon, M. & Teng, J. (1996). The effect of service quality and partnership on the outsourcing of information systems functions. Journal of Management Information Systems, 12 (4), 89117.

Heeks, R. et al. (2001). Synching or sinking: Global software outsourcing relationships. IEEE Software, 18 (2), 5460.

Jennex, M.E. & Adelakun, O. (2003). Success factors for offshore system development. Journal of Information Technology Cases and Applications, 5 (3), 1231.

Introduction

Operations risk management is an area that has a significant impact on the strategic values of a healthcare service provider. The study engaged a qualitative research approach to investigate, for the purpose of better service delivery, how to manage operational risks that arise due to the outsourcing of IT services, and why such risks happen. It was established that healthcare service providers use different models to identify and plan for the best strategies to address operational risks.

In the context of managing operational risks, the outstanding risks that were identified include service level agreements, changes in pricing, changes in the relationship with the vendor, hardware and software changes, and management issues.

Often, it emerged that healthcare service providers need to develop an appropriate model for selecting the right vendor to minimize risks. These risks include those that arise due to poor vendor selection that often leads to higher costs and poor service delivery. The recommended operations risk management steps include risk planning, identification, qualitative and quantitative risk analysis, developing a risk response plan, and putting in place a risk monitoring and control plan. The strategies identified as appropriate for risk management include accepting risks, putting methods in place to avoid the risks, exploiting opportunities for risk avoidance, transferring the risks, sharing the risks, and mitigating the risks to effectively manage them.

Significance of the Study

The study is critical because it provides healthcare service providers with the right approaches to use in selecting the right vendor for outsourcing non-core functions. The goal is to effectively achieve the strategic objectives of cost savings, technology optimization, and the use of professional expertise in specific domains by focusing on core functions. In addition, managing operational risks when outsourcing IT services is critical for a properly functioning healthcare service provider to lower the costs associated with outsourcing risks.

Conceptual discussion

The study was conceptualized in terms of non-core functions of healthcare services that were outsourced and focused on core functions to lower operating costs, increase productivity and performance, and provide better quality services to increase trust among consumers. By outsourcing non-core functions, operational risks associated with outsourcing key IT services, such as service level agreements, data privacy and security, hidden costs, and data entry errors, arise as shown in figure 1.

Review of the Literature

Outsourcing in health care

A research study by Heeks which investigated outsourcing of healthcare services among 12 service providers, using a methodology that accurately reflected the research problem, showed that the practice is an emerging global trend that most companies are adopting (129). Heeks notes that healthcare service delivery is driven by industry players, such as insurance companies, hospitals, and pharmaceutical companies (129).

Insurance companies are finding it difficult to address the increasing number of people wanting to process their insurance claims quickly. Streamlining such services through outsourced service delivery such as using information technology running applications on advanced infrastructure reduces the risk of incurring high operational costs when adopting new insurance plans into the market (Heckmann et al. 120). Besides, health care providers, including hospitals, outsource non-core services using IT cloud platforms, among others, to create an environment that fosters concentration in the core functions.

This enables the healthcare provider to maximize reimbursements and increase accurate and effective cash flow cycles by integrating information systems into service delivery through accurate data analysis. According to Heckmann et al., hospitals are concerned with patient enrollment and strategic planning, medical care (e.g., medical imaging, device monitoring, and medical transcription), and revenue cycle management through IT-based systems (121). According to Quinn, pharmaceutical outsourcing focuses on drug discovery, pre-clinical trials, clinical operations, data management, and stats, and medical writing, which are generally referred to as clinical research (9).

Researchers including Quinn have concluded that often, the services are either IT-based or non-IT-based (9). In each case of outsourcing, different operational risks are bound to happen that need to be managed.

What can be outsourced in health care?

Roberts reviewed several academic research articles that revealed that pharmaceutical, insurance, health care, and information technology services when outsourced lead to a significant number of benefits (239). The clinical services that can be outsourced include patient care in the areas of diagnostic imaging, hospitalist staffing, anesthesia, dialysis, and emergency department staffing. Recent studies have shown that healthcare service providers outsource non-core services to information technology vendors to increase the quality and accuracy of data analysis.

Data entry operations and analysis is done using modern and-up-to date technologies. It has been established that outsourcing information technology services such as Business Process Management (BPM) enable the service provider to concentrate on core services, which is a strategic approach for saving money that leads to better quality services. In addition, Roberts argues that the need to address the increasing demand for healthcare services in the medical industry demands the integration of devices that use networked computers, servers, laptops, and personal digital assistants (PDAs) (239).

According to Quinn, the aim is to manage the data generated from the services delivered to patients, and other people seeking consultation services, using the devices (9). Examples include billing records, electronic management of medical records, and information management. Looking at another area, the types of pharmaceutical services that are outsourced include exploration of the best methods to test a drug to determine its behavior on the human agent. In addition, trials are conducted on patients who volunteer, to find enough data for analysis so that researchers can establish the level of metabolism and toxicity when the drug has been taken.

Top reasons for outsourcing health care

A case study by Quinn to determine the top reasons for outsourcing healthcare services in the healthcare setting enumerated factors such as cash infusion and lower infrastructure investment costs (9). The results show that lower costs are achieved by cutting back on investing in expensive infrastructure such as state-of-the-art IT technologies. Additional savings result from avoiding the cost of investing in expensive call centers and avoiding investing in highly qualified medical and IT staff.

The results include controlling operating costs, which translates into major cost savings in addition to accelerating the migration into new technologies. Such investments lead to increased performance and minimum downtime for better productivity and high-quality service delivery.

Another reason cited by Roberts involves disruptive risks such as seasonal workflows (239). Outsourcing helps organizations overcome the problem by forcing them to efficiently deal with seasonal peak workloads. Outsourcing enables a company to focus on its core functions and enhance risk management, such as addressing issues related to technical crises, as well as disaster recovery and risk management. Improving operational performance to the level of world-class infrastructure and capabilities, based on excellent service delivery by dedicated teams who operate within specialized domains with expert experience, leads to greater operational efficiencies (Logan 25).

The reasons are summarized as specialization, quality of services, cost savings, and effective staffing. The approach has been demonstrated in best practices in quality improvement through better clinical governance (Logan 25). Such approaches are critical enablers for different types of risks that happen in the outsourcing program. Operational risk management in outsourcing has an overall positive effect on value innovation.

The challenges of outsourcing in health care

Logan argues that the majority of practitioners lack the ability to operate sophisticated applications and mission-critical systems (26). Outsourcing such services to poorly qualified vendors is a source of critical errors such as medical billing mistakes. Logan established that 80% of the medical bills contain serious errors that need to be corrected by specialized IT professionals. Researchers including Roberts note that establishing and enforcing service level agreements is a significant challenge that institutions need to address (245).

In addition, emerging challenges such as the introduction of new hardware, under-performing services, sudden termination of services, and poorly functioning applications can breach parts of the contract. Such occurrences emerge in the form of business risks in the healthcare service industry. Here, it is critical for both parties involved in the agreement to ensure that cost upon termination and other obligations need to be specified upfront. It is also critical to ensure that the destruction of data or its maintenance is addressed, to keep it safe from unauthorized access and use.

According to Roberts, price changes have been observed to be the sources of legal redress when certain clauses in the contract have been violated (240). Here, price changes happen due to changing hardware and software costs and the underlying technology which makes change overly difficult. Additional challenges that happen in the industry include service change over time, third party license issues, patient safety issues, and ease of using the available solutions. Other challenges include problems with negotiating and building agreements, vendor selection process, building an outsourced team, outsourcing clinical services, and determining the correct strategy for service transition.

Outsourcing healthcare services: pros and cons

As shown in Table 1, Roberts analyzed 100 articles on the pros and cons of outsourcing healthcare services and enumerated the findings as being critical in outsourcing for IT healthcare services. Based on the Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis, key elements emerge in the discourse. The strengths include improved quality of services, lower operating costs, use of professional personnel, ability to get better and easy solutions, and high-quality service delivery.

The weaknesses include hidden costs, vendor risks, staffing problems, and increasing variable costs such as related costs. The opportunities include employee buy-ins, adoption of various management practices, and sharing of risks among others. The threats that emerge include practitioner operations management, technology mismatch, operations failure, and data security issues. Technology mismatch happens when healthcare service providers outsource their services to IT firms that operate new applications and infrastructure that are not interoperable with the technology of the outsourcing firm.

Table 1. SWOT.

Strategic approach to outsourcing

According to Roberts, various healthcare service providers use different models to outsource medical services (250). While the models remain diverse, strategic outsourcing is seen as a model that adds value for the patients or those who seek medical advice. When outsourcing, the service provider must identify those services in the value chain that need to be outsourced. It is important to identify the activities that remain within the core competence and strategic focus of the organization.

Quinn evaluated both linear and modularized outsourcing process models and revealed that the process-oriented model focuses on end-to-end outsourcing of business processes without emphasizing the underlying hierarchical and functional structures (11).

Further investigations by Roberts showed that embedded within the strategic outsourcing paradigm are key steps, which include developing an outsourcing relationship with experts from the internal and external environments, as well as establishing the core functions to outsource (250). Heeks identified additional steps that include creating a request for proposal, evaluating prospective vendors, creating an agreement for the outsourcing to take effect, and executing the best outsourcing contract based on a reliable governance structure (130).

The key elements emerging in the discourse include establishing the goals of outsourcing arrangements, identifying risk factors, gains in competitive advantages, internal and external expertise, types of vendors, and service level agreements. Each case involves the improvement of costs, service quality, customer satisfaction, operational effectiveness, and value-added outcomes. Roberts notes that when incorporating the best practices and different outsourcing approaches, it is possible to emphasize the value stream that creates value and perfect service delivery (250).

Operational Risk Management in outsourcing services in health care

While outsourcing remains an effective solution for optimizing high-quality services, certain risks accompany the process. According to Logan, loss of control and dependence on the vendor are strategic risks that executives fear could have a negative impact on the operations of a company (22). Loss of internal technical expertise and sensitive data, violations of service level agreements, and poor vendor performance or complete nonperformance constitute the additional risks. Different models have been proposed for operations risk management.

It is evident that outsourcing in health care is a complex phenomenon that is related to regulatory bodies, technological development, and strategic issues and plans that have an impact on the effectiveness of IT healthcare outsourcing. Organizational issues that affect outsourcing include compliance with issues in the business environment, the need to develop new and better applications and information systems, improved service quality, and the nature of the relationship between IT services provider and the healthcare service provider.

Outsourcing IT services causes additional issues that can be categorized into strategic issues. Strategic issues include cost control, reduced transaction costs, greater flexibility, cost of hardware, strategic alliance, and reduced capital costs. In addition, support for vertical integration is a source of risk that organizations need to factor into their calculations (Roberts 240). On the one hand, regulatory issues include ownership, terms, and conditions of the contract, business relationship with the origin of the hardware devices, and the underlying politics. On the other hand, risks happen due to technical issues that include rapid changes in technology, achieving the best practices, and accessing new technologies and skills.

Research studies have revealed that outsourcing IT services provide better and more accurate services that comply with dynamically changing billing needs that require hospitals to invest in training and retraining personnel. As another benefit, outsourcing IT services accommodate billing changes that happen dynamically and enable the service provider to address core functions (Roberts 241). It is possible to create a positive collaboration between the service provider and the patient to allow for predictable cash flow. Certified IT firms that offer outsourced services provide professional and efficient services in compliance with healthcare laws, including taxes, employee benefits, and salaries.

Information technology-based outsourcing operations promise to offer better service delivery, reduced service cost, better business consulting, and management focuses on the core functions of providing healthcare services for better and high-quality service delivery (Heckmann et al. 119).

The specific areas of IT outsourcing include finance and accounting, human resource management, tracking services that are offered to determine the progress of the patients, and the ability to use complex applications and other infrastructure that need specialized personnel to operate (Roberts 240). It is imperative to note that the majority of IT employees in hospitals in many parts of the world do not operate mission-critical services and applications that comply with new data privacy and security laws.

The use of such data centers, when management within the hospitals does not have specialized personnel, increases the risk of data breaches and other problems associated with data entry. Billing problems due to the use of less specialized and less experienced personnel have been noted among hospitals that use complex IT infrastructure. It has been estimated that over 80% of the bills received by insurance companies contain errors that result from poor data entry practices.

Operational risks in outsourcing IT services in health care

Researchers have established that outsourcing IT services is accompanied by several risks that need to be addressed. Among these risks is the possibility of weak management (Berger 219). The rationale is that if the vendor fails to provide the desired quality services and outsources to a third party, the result can lead to costly problems, quality issues, and privacy issues (Logan 22). Sometimes inexperienced staff can be a critical source of risks.

Such outsourcing can cause errors in data entry, lack of compliance with regulations, and breach of service level agreements, leading to lower quality services. Besides, it is possible for a company to experience a loss due to uncertainties in the market.

Introduction to Outsourcing IT Services in Health Care

Researchers have identified an approach, commonly used in the healthcare industry when managing operations risks. The first step involves establishing the context in which the risks occur, followed by risk identification, analysis in the context of qualitative and quantitative risks, risk evaluation, and risk treatment (Berger 219). The method resonates well within the commonly used enterprise risk management framework. After the context of operational risks has been established, the healthcare organization can establish the best risk mitigation strategies.

Operational risks include uncertainties related to outsourcing threats and mitigating those risks using managerial resources. As mentioned above, at the outset, risk planning includes identifying the context in which risks occur (Berger 219). The key inputs into this high-level process include determining the amount and types of risks that fall within the scope of the outsourced processes and making sure they are clearly defined in the scope statement that details the type of risks and associated threat levels.

Among the methods that have been suggested include the alignment of risk appetite and strategy, managing multiple and cross-enterprise risks, reducing operational surprises, seizing opportunities, and enhancing risk response. According to Quinn, different authors have suggested the cost management plan as an important input because of the general costs incurred in the risk management process (13). Within the framework is a schedule management plan that incorporates the operational risk management activities, showing internal and external system constraints. The planning components include a communication management plan that shows the specific risks and how to address them and basic enterprise environmental factors that reflect the nature of risks.

The Fishbone (Ishikawa) Diagram

The next step is to identify the risks. Different models have been proposed for risk identification, and one popular method that has widely been used in the healthcare industry can be conceptualized and expressed in the Fishbone (Ishikawa) Diagram.

The importance of operations risk management underpins the need to use an appropriate paradigm for risk identification. While various modes have been proposed for risk identification, the Fishbone (Ishikawa) Diagram shown in figure 2 provides details of the drivers of the risks and the resulting cause and effects.

As depicted in figure 2, the primary risks include compliance with the standards and guidelines for third party information management, business continuity in case of the third-party hardware and software system failures, loss of information confidentiality, and operational and transaction risks. Operational and transaction risks arise because of process flaws in any of the processes involved in the exchange of data between the healthcare service provider and the information technology service provider.

Secondary risks include the validity of the service provider, quality of service, and the discontinuance of service delivery. Other secondary risks include the inability to serve an increasing customer base besides inappropriate quality responsiveness, assurance, empathy, and trust. The overall result is the problem of loss of control and business continuity in the provision of outsourced IT services. However, the risks can be addressed through an appropriate risk management process.

Research Methodology

The study was based on a qualitative review of literature and case studies of organizations that have outsourced services to determine the sources of operational risks and how to manage these risks. A qualitative research method was deemed to fit well into the study because of the centrality of linking the research approach with the desired results of the study. The research approach was used to answer the main research question on how to manage operations risk in outsourcing healthcare services (Berger 219). A systematically predefined procedure was used to address the research questions.

The predefined approach consisted of analyzing the case study and collecting evidence from the literature review, which was a secondary source of data to address the research questions. One of the outstanding features of the qualitative research approach was seeking to explore the phenomena based on an analysis that provides a detailed description of the relationship that exists between outsourcing and operations risk management.

Using the qualitative research paradigm had certain advantages that made the approach appropriate for the study. The credibility of the results was deemed to be one of the advantages. Besides credibility, researchers point out that qualitative research results are transferable. It was established that qualitative research results are dependable. Dependability is an aspect of reliability and the ability to replicate results. In summary, it was established that the research is systematic, dependable, reliable, accurate, and reproducible.

Result and Discussion

Discussion

Many companies specializing in the provision of healthcare services have opted to outsource non-core functions and concentrate on core functions to increase the quality of services, enhance professional learning in the domain of specialized services, improve professional competence, lower operational and labor costs, tap into and leverage knowledge and other technologies, and share or mitigate risks associated with operating IT infrastructure.

Observations indicate that information technology services are widely outsourced to different vendors in the healthcare industry with the objective of minimizing costs. When outsourcing, it is imperative to use methods that have been proved to work to avoid or minimize the effects of associated risks. Moreover, it is imperative to manage the operational risks associated with outsourcing IT services through a risk management plan.

The key steps include planning, identification, qualitative and quantitative analysis, risk response, and a plan for risk monitoring and control. Typical operational risks that were identified to have implications on outsourcing IT functions include weak management approaches, employing inexperienced staff, uncertainties in the business environment, breaching of the service level agreements, and use of outdated technology.

Conclusion & Recommendation

In conclusion, outsourcing is a process that continues to be embraced by different organizations offering healthcare services in many parts of the world. Outsourcing IT functions comes with various benefits such as allowing the outsourcing company to concentrate on its core functions to gain competitive advantage and reduce cost. In addition, healthcare service providers gain greater competencies leading to better innovation capabilities, organizational flexibility, use of state-of-the-art technologies, lower training costs, expert focus on the domain of interest, access to modern technologies, and optimization of vendor economies of scale.

However, significant operational risks are possible when outsourcing IT services that should be given adequate attention to optimizing the outsourced services. Best practices for operational risk management include risk planning to identify and mitigate the risks. However, different approaches have been suggested to address operational risks such as avoiding the risks, transferring the risks, mitigation of the risks, enhancing the risks, sharing, exploiting, and accepting the risks. In any case, based on the results of the study, it can be recommended that outsourcing healthcare organizations need to first establish the financial standing, legal compliance status, technical capabilities, competencies, and history of the vendor organization before awarding a contract to an IT firm.

Works Cited

Berger, Roni. Now I see it, now I dont: Researchers position and reflexivity in qualitative research. Qualitative Research 15.2 (2015): 219-234. Print.

Heckmann, Iris, Tina Comes, and Stefan Nickel. A critical review on supply chain riskDefinition, measure and modeling. Omega 52 (2015): 119-132. Print.

Heeks, Richard. Health information systems: Failure, success and improvisation. International journal of medical informatics 75.2 (2006): 125-137. Print.

Logan, Mary Spencer. Using agency theory to design successful outsourcing relationships. The International Journal of Logistics Management 11.2 (2000): 21-32. Print.

Quinn, James Brian. Strategic outsourcing: leveraging knowledge capabilities. MIT Sloan Management Review 40.4 (1999): 9. Print.

Roberts, Velma. Managing strategic outsourcing in the healthcare industry. Journal of Healthcare Management 46.4 (2001): 239-250. Print.

Demand for outsourcing among organizations especially in the field of information technology has increased rapidly. Organizations opt to outsource their activities to near-source and offshore outsourcing firms that have high experience in these processes and charge low for the services. With most of the American firms opting for near-source in Canada, Yan there are critics who are opposed to this move. According to these critics, there is a need for some of the currently outsourced services to be performed in the home country. This is due to the differences in process analysis among different countries. Currently, there is a potential for growth of Information technology in Canada with most organizations willing to outsource some of their processes in Canada. This has been due to advancements in IT industry in Canada. However, demand for some of the processes to be performed at home countries may have a negative impact on the Canadian It industry. There is the possibility of most organizations shifting from outsourcing their processes to training their employees. This will deny the industry numerous dollars it has been accruing from outsourcing (Schick para. 2).

An increase in the number of organizations outsourcing their processes to Canada has led to universities and colleges changing the way in which they used to teach information systems. Unlike in the past when students were only taught coding in computer science, currently, students have been motivated to taking more advanced projects. Rend in outsourcing has resulted in students being culturally indoctrinated. Currently, students are being taught different fields in IT which include programming and software development.

Due to differences in methods of process analysis among organizations, outsourcing all processes may result in errors in projects. This calls for some of the processes to be performed onshore. There are different processes that can be outsourced while others need to be done within the organization. Examples of information technology processes that can be outsourced include payroll processing activities, loan processing, and employee recruitment (Schick para. 3-5). This is because these processes are generally uniform in most organizations and do not require a lot of considerations. On the other hand, some of the IT functions that need to be managed onshore include organization management as well as Insurance claim processing. Different organizations have different management techniques. Outsourcing employee training and recruitment process may lead to organizations not getting employees with the required experience. Different countries have different regulations and considerations when it comes to processing insurance claims. Outsourcing these services may result in clients claiming more or less than what they deserve.

With the Canadian IT industry showing potential in its growth, it will act as a major source of employment to its citizens. Allowing It jobs to be processed offshore will hamper the growth of the industry. In return, most of the graduates coming from Universities will lack employment. There is a high need for the Canadian government to step in and stop the flow of Its jobs to other countries (Buckler pp. 23-31). To facilitate ensuring that jobs are processed onshore, the government needs to offer incentives to domestic outsourcing firms. This will help them charge a low cost for the services. In addition, the government needs to come up with strategies on how to train more people in information system fields. This will help in improving the quality of services offered by domestic firms. The government also needs to come up with measures to ensure that the countrys dollar does not scare people from outsourcing their services to domestic companies.

Works Cited

Buckler, Grant. American outsourcing firms expands Halifax operation. Computing Canada, 29.23 (2003): 23-31.

Schick, Shane.The Opportunity cost of offshore. ITBusiness.ca. February 2004. Web.

Introduction

Through the process of globalization markets around the world are experiencing a greater degree of interconnectivity resulting in a far more efficient process of global capital flows and resource allocation. In other words resources from one area in the world can now be allocated to another area in the world in a faster, cheaper and more efficient way.

This is an important factor to take into consideration due to the fact that as the green movement progresses within the U.S. and new forms of legislation are enacted to force companies to comply with stricter environmental standards this creates a distinctly unfriendly business environment for companies to continue operations in.

Why do Companies Outsource?

When factoring in the high cost of American labor, high local and government taxes as well as higher utility cost expenditure as compared to that in other countries it becomes obvious as to why companies are outsourcing their business processing and manufacturing sectors to locations such as China, the Philippines and India.

In such locations not only is the minimum wage lower but utility expenditure is cheaper, local environmental laws are more lax and companies are able to be more flexible in terms of how they want their operations to grow and develop.

Implications

Unfortunately the long term implications of the outsourcing movement is a decrease in the American manufacturing sector as more and more jobs go to foreign countries.

Also it must be noted that there are environmental implications that should be taken into consideration since the reason why the green movement has become so prevalent in the U.S. is related to the fact that it is often the case that unregulated and unrestricted manufacturing processes often result in adverse impacts on the local environment.

As noted in the case of China and India where a majority of outsourced manufacturing has been going, it was seen that between the 1990s to the present the level of toxic chemicals in the air and water has increased exponentially due to the rather lax environmental standards for the disposal of industrial waste during the manufacturing process.

Corporate Social Responsibility

What must be understood is that while companies are not directly liable for activities before particular laws have been enacted against them all companies should at least follow a certain degree of corporate social responsibility (CSR) during normal business processes.

CSR is a way in which a company limits its actions in order to comply with certain ethical standards and principles, the goal of which is a positive impact on the local community and environment (KRENG & MAY-YAO, 2011).

The reason behind this is connected to the way in which a company is perceived by consumers which results in either a positive or negative company image which will impact consumer patronage of a companys products and services.

Thus, it can be seen that in cases where there is a necessity to perform a certain degree of due diligence in cases where a company has to fix a problem when certain laws prohibit particular actions then under CSR a company must do so in order to maintain a positive public image.

Conclusion

As such, in the case of damage control in the case presented what will be done is for the company to immediately take responsibility and fix the problem under the tenets of CSR however based on the possibility of future problems such as this surfacing in the future it would be recommended that the companys manufacturing facilities be transferred to locations abroad where environmental regulation laws are less strict so as to prevent future regulation problems from occurring.

Reference

Kreng, V. B., & May-Yao, H. (2011). Corporate Social Responsibility: Consumer Behavior, Corporate Strategy, And Public Policy. Social Behavior & Personality: An International Journal, 39(4), 529-541.

Abstract

Globalization, especially economic globalization, has led to a competitive business environment. To meet the demands of globalization, firms have undertaken various strategies including outsourcing and international diversification of their operations. Outsourcing has the advantage of lowering operational and net production costs.

However, companies outsourcing abroad must consider various factors associated with the foreign supplier business practices. In addition, to enhance global competitiveness, supervisors need to identify specified personality traits, which sometimes result to problematic workplace behaviors.

In this way, employee performance can be improved. Globalization has some benefits and associated costs to the economies, regionally and globally. In particular, the distribution of the benefits often raises the issue of equity and has the potential of resulting to conflicts.

What are the key issues for consideration before sourcing production abroad?

In recent years, there has been a trend where manufacturers in industrialized nations outsource production, call centers, and vendor services to companies abroad.

Given this increasing trend, there are some issues which American companies must consider when outsourcing vendor services or manufacturing from either domestic or foreign sources. Among the principal issues are the issues of product pricing, product trade name, product warranties and contract enforcement issues.

Product pricing and contractual issues involving the vendor and the distributor often arise in any outsourcing from foreign sources (Kotler, & Keller, 2009, p. 116). In particular, contention as to which party between the vendor and the distributor should incur the initial cost of product design and development often arise in outsourcing.

The supplier may not bear the initial cost of product development if the projected return from the investment is low. Additionally, the supplier may prefer a long-term contractual agreement, which ensure sustainability by generating enough returns to cover the tooling costs.

The distributor, on the other hand, may consider outsourcing services from a different firm if the product is not performing well in the market (Kotler, & Keller, 2009, p. 114). In the light of this, the two parties often agree on a multi-year form of contract, which provide for reimbursement of initial production costs between the parties. However, multi-layer contracts often raise the issues of product pricing.

As the production costs are dependent on volatile labor rates and material prices, developing a formula for pricing is often a challenge. Often, the foreign manufacturer proposes a price adjustment yearly. However, the American market may opt for cheaper alternative products. Therefore, the American firm should advance or reimburse the tooling costs to a foreign firm, which, however, should be returned upon contract termination.

Issues of products liability and cover also arise in outsourcing agreements. The American distributor may prefer that the costs resulting from personal injuries or damage to property be borne by the foreign firm or its insurance cover.

However, in some countries such as China, it is often difficult to transfer coverage or product liability to the foreign firm. In effect, most Chinese firms may not provide coverage for product liability. This implies that the American company should consider the insurance costs during outsourcing contract negotiations.

Product warranty is another issue that affects outsourcing agreements. Often, the product warranty is a preserve of the foreign manufacturer.

Since customer claims regarding defective products may not be covered by the product liability insurance, the American firm must seek for warranty for protection. However, since product design involves collaboration between the two parties, the foreign firm may fail to give a long-term product warranty. Additionally, warranty issues such as shipping costs or repair costs should be addressed during contract negotiations.

Fluctuations in currency exchange rates present challenges to outsourcing. Often, the American firm may prefer payment to be made in dollars to avoid the risks associated with currency fluctuations. However, the foreign firm may not prefer this especially for large transactions. Trade name or logo is another issue that American firms should consider when outsourcing from foreign companies.

Often, since the products are primarily meant for the American market, the foreign firm will apply the logo and trade name of the American company. However, in the agreement should strictly limit the use of the logo and name to the product(s) only.

Additionally, enforcement issues are often a challenge. In case of disputes, litigation in foreign jurisdictions is problematic due to variations in business laws across countries. However, arbitration can resolve disputes compared to litigation.

What are the strategies for dealing with three types of difficult workers? First, you have to identify the type and then provide the strategies

Difficult people demonstrate behaviors that make it difficult for other people to work with them. Difficult human behaviors originate from either hereditary factors or formative life experience (Meredith, & Shafer, 2010, p. 76). In order to deal with difficult behaviors effectively, it is essential for supervisors to recognize the role of personality in shaping difficult behaviors.

Four personality traits exhibit difficult behaviors in the workplace: dominant, patient, extrovert and conformist personality traits. The dominants exhibit many qualities that make them easily identifiable. They are self-assertive and active in their tasks and aim to accomplish the goals of a project.

They lead by example, enjoy challenging tasks, and are confident decision makers. Most importantly, the dominant personalities prefer to control people and resources to achieve specified goals.

However, dominants often exhibit difficult behaviors in response to situations they dislike. Dominants sometimes can exhibit insensitivity towards other peoples feelings especially those who restrict their goal accomplishment. The strategy to counter this behavior is to confront them and encourage them to consider other peoples feelings or perceptions before taking any action.

They are usually apologetic and usually respond accordingly (Meredith, & Shafer, 2010, p. 82). Other dominants difficult behaviors include their constant agitation for change and innovation, which may be disruptive to others.

The response to this should be to ask them to involve the other peoples input before taking action. Additionally, the supervisor can request them to communicate their change plans openly and expect feedback before taking action.

Another problematic behavior shown by dominants is the tendency to ignore authority, which can be disruptive especially to the supervisor. The supervisor should ask them to evaluate their behavior from the supervisors perspective and explain how ignoring established authority can create misunderstandings.

The dominants desire for a challenge and risks make other people anxious and uncomfortable, which kill teamwork spirit. To counter this, the supervisor should ask them to offer solutions or alternatives to current problems before trying a new venture.

The extroverts are more people-oriented than task-oriented and thus, excel in activities that involve teams. However, extroverts sometimes exhibit defensive, often emotional, when their reputation is threatened especially with regard to their social standing in a group. Additionally, due to their outgoing nature, extroverts find it difficult to remain focused on a given task, follow instructions, or rules, and be punctual in meetings.

To help extrovert employees, supervisors should assign them tasks that involve people or teams. Additionally, complimenting their efforts during teamwork can motivate them. The supervisor should also pay attention to their opinions and confront them when they fail to follow rules or protocols.

The patient personality types, on the other hand, exhibit a balance with regard to task and tasks. They show patience during task performance and prefer to handle one task at ago with no interruptions. They are adept at setting priorities and emphasize on quality when performing tasks. However, patient personality individuals find it difficult to take risks or adopt change.

Additionally, they are concerned more of injustice in the workplace and take more time pursuing fairness. To help patient personality individuals, supervisors should provide sufficient information prior to implementing any change or innovation. Moreover, fair treatment of all employees and fair resolution of workplace conflicts can motivate patient personality people.

What are the executive traits? Apply these traits to a global perspective

The impact of globalization on organizations is profound. This calls for a shift in leadership styles in order to confront the emerging challenges of globalization. The challenges of technological advancement and capital and labor mobility call for strategic leaders with more diverse attributes.

A Combination of these characteristics is essential for the effective management of an organization in the wake of globalization and environmental turbulence (Cohen, & Levinthal, 1990, p. 128). Essential executive traits include the capacity to absorb changes especially in technology, future orientation, pro-activity, and the ability to take risks.

One of the principal executive traits of a strategic leader is absorptive capacity. This means that the leader should have the capacity to obtain and analyze new information from an innovation perspective and readily embrace institutional change. Cohen and Levinthal (1992, p.129) hold the view that, absorptive capacity stems from prior knowledge, previous work-related roles and individual cognitive structures.

Often, the gatekeepers and line managers at strategic levels of the organization should exhibit absorptive capacity especially with regard to research and development (Cohen, & Levinthal, 1990, p. 131). Absorptive capacity allows leaders to make effective decisions in the increasingly complex global environment.

Futuristic or visionary is another noteworthy characteristic of efficient leaders. Rowe (2001, p.81) contends that, strategic business leaders should be futuristic with regard to implications of present risks or challenges on future business viability. Additionally, this quality is paramount in making projections about future challenges and competition issues.

This implies proactive use of current information to predict future market conditions both in the short-term and long-term basis. Accordingly, effective executives possess a vision, are inspirational and constantly forecast the future based on facts and values.

The global business environment is highly dynamic. Therefore, future orientation gives the CEO to the capacity to make strategic decisions based on powerful predictions of the future business environment.

Although, conceptualization and strategic decision-making leadership are indispensable qualities of an executive, the capacity to take action in a timely manner is of most significance. The actual action should be timely in order to achieve the desired impact.

Rowe (2001, p.82) defines the ability to undertake an action as the capacity to implement necessary measures at appropriate strategic inflection points (SIPs) in order to achieve optimal impact. In this regard, SIPs can involve technological changes, innovations, or improved products that revive and reinvent the old systems.

Rowe argues that, demographically, younger CEOs have a higher likelihood to act compared to older CEOs who prefer the status quo (2001, p. 85). In this respect, executives must be transformational with regard to change and revival. They know how to utilize information to predict future actions and know the opportune time at which action will have the most impact.

Risk-taking is an essential quality of effective business executives. It involves effective cost-benefit analysis of available options to make a decision event with scanty information. Under these situations of uncertainty, the chances of success or failure are not clear. Effective CEOs must possess relevant skills to evaluate potential risks and be bold to take action.

However, they should be flexible enough to avoid potential disasters associated with poor managerial decisions. Risk-taking is an essential quality of innovative executives (Cohen, & Levinthal, 1990, p. 132).

It determines success or failure of an organization both in the short-term and long-term basis. Risk-taking is a fundamental trait in todays global business environment that is characterized with many opportunities, risks, and stiff competition.

What are the factors that can draw companies into the international area? Expand with detail explanation for each of the factors

Many factors contribute to expansion of the domestic firms to international markets. These factors are the driving forces behind international diversification of local firms and are of immense significance to the investors. Size, penetration projections, market access, annual growth earnings, leveraging advantage are some of the factors that drive publicly traded organizations to diversify their operations internationally.

Baek (2004, p. 135) argues that, a firms size can affect its benefits and costs for two reasons; firstly, a larger firm may experience a comparatively larger change in its income, and secondly, the large income change may affect costs and benefits. However, this depends on the firms size. In this regard, a firms size influences the decision to expand to international markets to minimize its costs and increase the benefits.

Another factor that drives a firms internationalization plans is a competitive advantage. Baek (2004, p. 137) contends that, accounting practices of a firm are associated with their size and leverage.

This implies that firms that seek competitive advantage are more risky than risk-averse firms are. In this regard, such firms have a culture of taking risks and are thus, more likely to diversify their operations in markets abroad. Therefore, the leveraging nature of a firm determines its inclination to risk exposure and consequently its decision to invest abroad.

The desire to enhance a firms penetration is another factor that drives a firm to international markets. Increased competition in the domestic market often drives some firms to overseas markets to explore opportunities for higher growth (Baek, 2004, p. 139). The expansions also aim at increasing brand recognition in overseas markets and consequently achieve a higher market share.

Of most significance, however, is the firms level of penetration of the domestic market. Enhanced penetration of the local market drives a firm to international diversification. Additionally, the level of penetration of the local market also determines a firms decision to diversify internationally.

A declining level of penetration, especially of large firms, will influence its decision to expand to overseas markets. Therefore, a change in the penetration rate in the domestic market affects a firms decision to expand.

The annual earnings from the domestic market also affect a firms decision to expand abroad. In other words, the growth and profitability of a firm bears a positive relationship with its international diversification plans. A firms financial performance in the domestic arena determines its decision to establish more subsidiaries both locally and abroad.

Nevertheless, according to Baek (2004, p. 141), if a firm is experiencing positive financial performance from its domestic operations, it may delay expanding to overseas markets, which are more risky. The condition of the domestic market also influences a firms decision to diversify its operations internationally.

A rise in the domestic consumer spending, or excess annual market return, will create the impression that there is more room for domestic expansion, which will delay overseas expansion. Conversely, a decline in consumer spending, as indicated by lower annual market returns, will imply a saturated domestic market and hence lead to internationalization of a firms operations.

Discuss the costs and benefits of globalization. Provide examples of how globalization has helped or harmed individual nations and the world economy

Globalization is an influential phenomenon that takes multiple dimensions: political, economic, environment, social, health, and cultural aspects. Contrasting views exist with regard to economic globalization; while most people hold the view that it is beneficial to the global economy, others contend that, its effects are detrimental.

Globalization in the context of the world economy encompasses increased global trade, improved foreign exchanges, and an open international trade across national boundaries. It means increased technology transfer, enhanced capital and labor mobility as well as free flows of ideas internationally. The positive effects of globalization stem from enhanced competition on the global front.

Globalization has enhanced competition on a global scale, which has associated beneficial effects in terms of output and production efficiency. Competition enhances market diversification, which brings the benefits of a market system: division of labor and specialization (Eleonore, & Youngs, 1996, p. 157). Specialization and the division of labor have implications on production output and efficiency on a national scale and globally.

Additionally, globalization leads to economies of scale, which has the potential of reducing production costs and subsequently the prices of commodities or services. Lower prices of goods and services attract investments, which stimulate economic growth in countries.

Another benefit of globalization involves the gains resulting from bilateral and multilateral trade agreements. In such agreements, both parties (countries) stand to gain through trade exchanges at the organizational level, economic blocs, national, or continental levels.

Economic globalization often leads to the coordination of production activities and facilitation of labor and capital mobility on a global basis. This enhances productivity both nationally and regionally. In addition, accelerated technology transfer fosters continual innovation and competition on a global scale.

Overall, the economic globalization benefits are potentially advantageous to all nations, as increased output results to higher GDP and wages, and by extension, improved standards of living. However, equitable distribution of globalization benefits is an issue globally.

Globalization also has its costs has the potential of creating problems and conflicts. Among its main costs is the issue of equity of the benefits resulting from globalization between nations, regions, or organizations (Giddens, 2000, p. 69). Much of the gains of globalization end up in developed nations, which results to economic inequalities that have the potential of resulting to international conflicts.

For example, East Asia economies are growing at such a rapid rate due to economic globalization while the economies of developing nations in Africa and Latin America remain stagnated. This will result to polarization of incomes on a global scale as the middle-income economies become richer, and the developing economies become poorer. Additionally, the issue of equity in distribution of the gains of globalization is often a challenge.

Another problem resulting from economic globalization is regional instability resulting from economic interdependencies regionally and globally. Evidence from recent financial crises indicates that, fluctuations in a given countrys economy, in terms of exchange rates or domestic liquidity, affect regional and global economies.

The 2007 US financial crisis is an outstanding example as it resulted to a worldwide recession of financial markets. This implies that, interconnected economies are more vulnerable to a financial crisis from a single economy (Eleonore, & Youngs, 1996, p. 161). The recession attracted protectionism economic measures that have the potential of creating conflicts and economic warfare.

Another problem associated with globalization is the tendency of the control of national economies to shift from governments to international entities such as multinational organizations. This has the potential of undermining national sovereignty, which result to extreme protectionism policies, fundamentalism, and xenophobic activism.

Reference List

Baek, H.Y. (2004). Corporation Diversification and Performance: Evidence on Production Efficiency. Journal of Multinational Financial Management, 14, 135-142.

Cohen, W., & Levinthal, D. (1990). Absorptive Capacity: A New Perspective on Learning and Innovation. Administrative Science Quarterly, 35, 128-132.

Eleonore, K., & Youngs, G. (1996). Globalization: Theory and Practice, New York: Pinter.

Giddens, A. (2000). Runaway World: How Globalization Is Reshaping Our Lives, London: Routledge.

Kotler, P., & Keller, K. (2009). Marketing Management. New York: Prentice Hall.

Meredith, J. R., & Shafer, M., S. (2010). Operations Management for MBA. London: John Wiley & Sons.

Rowe, W. G. (2001). Creating Wealth in Organizations: The Role of Strategic Leadership. Academy Of Management Executive, 15(1), 8189.

Various departments of a firm face outsourcing such as the human resource, marketing, IT, finance and even the inventory stores. For huge generation of monetary income a business has to handle a wide array of inventory beside the bills, accounts, and expansion projects.

The functions of the departments have to be diligent and efficient for consistency. A wise entrepreneur is one who is in a position of boldly base decisions against all odds with the aim of curtailing on the cost and having things done in a timely manner besides ensuring customer satisfaction hence loyalty (Howe, 2010). Lack of proper planning over the management diverts and dilutes the focus from the core business goals.

In most instances, people outsource the tasks they are not core competent at such as IT, which is contrary to the Futronics Inc. Others will prefer to stick to the key business tasks while they outsource all the other tasks. It is equally common to subcontract a failing sector, with the aim of improving it.

Currently the argument behind outsourcing at Futronics revolves about reduction on cost as the main driver. There are many cons associated with outsourcing which the analysts need to consider before making the decision. They include, staff proceeds, it would be logical if the company can cater for the four employees at the department under question.

It is the social responsibility of the company over the issue of laying-off. One huge challenge to the analyst regards the risk involved in reducing control over the central office store. He would also need to have good analysis over the profits made by the firms to be outsourced. Considering the proposals, the companies have a wide pricing advantage due to the mass buying. The catalogues also indicate over quotations meaning higher profit margins.

Majority of the challenges associated with outsourcing are not enough reason to avoid it. People want to gain access to specialized skills for better and timely product delivery. Other good reasons include but are not limited to better business transactions or processes, flexibility on staff allocation, better workflow, business continuity and ability to focus on key sectors of the business among other reasons. The analyst has to focus on the key reasons for considering outsourcing over the in-house management.

In the case of Futronics Inc, which is under business threats by competitors, the main aim of outsourcing ought to be reducing cost without sacrificing growth. Replacement of the companys central store operations with huge inventory and service delivery is a huge risk over control, but highly reduces on the expenditure. (Kahn, 2009) The business might be able to come back to its strong basis and fight the competitors back to status quo.

The concept is highly compromised but comparing the outcome to the status of the firm provides this as the better option. The cost of having in-house employees is still higher in comparison to subcontracting. Dealing with fewer inventories is expensive and inferior too.

The third party providers have excellent knowledge, skill and experience of how to undertake the proceedings and in this case keep the business on the competitive edge. Arguably, the employees in the central store are equally competent enough but without proper supplies, they cannot maintain the firms endeavours.

According to Kahn (2009), outsourcing would be an automatic guarantee for quality and profitability of the firm especially when the tendered team is competent enough and has good standing in the field. The business is as stake and efficiency accuracy and quality provided by outsourced panel would provide the required service to revive the business and thus save its reputation. (Greene, 2009)

Considering the analysis conducted, the items would be available at lower prices and still provide the company with an initial reasonable savings of about 6 percent. Outsourced team gives the business a chance to access specialized skills and wide range of products because of its expertise nature and higher investments.

The current employees in the central store if retained also have the chance of acquiring the skills and advancing to beat the competitors in future. The specialized skills enable the business to capture and capitalize on the intended market niche. The business also has the chance for accessing skills to supplement to other fields of operations beside the inventory store.

Conclusion

Evidently considering the above-mentioned analysis it would be more benefiting to consider subcontracting since creates a contractual obligation or liability that is higher and thus more advantageous to the business compared to the in-house contraction. There is a safer bet when the there is a signed contract.

Arguably, an outsourced team affects the current staffing issues and reduced control but considering that, this is a core department in the business the in-house employees and firms input requirements might not be in a position to handle pressure associated with the current advancement that are anticipated.

The function of the store would also become critical in the hands of the providers because of the specialization involved the risk of collapse faces mitigation. Today it is equally easy to tie such urgent issues to the specialized groups due to security through the insurance covers.

The overall management would have to come into acceptance of losing the opportunity of control for the contacted three years, which are probably adjustable but enjoy the opportunity cost thereafter. Every business occasionally is overwhelmed with functions thus the need for the extra hands. Management enables the business to meet demands and the pressure associated with profits and competitions.

References

Greene, O. (2009). Outsourcing  The Best Way to Do it successfully. Web.

Howe, M. (2010). Serious Entrepreneurs Dont Do Everything Themselves  They Outsource. Web.

Khan, M. H. (2009). Advantages of IT Outsourcing Over In-house Development. Web.

Various departments of a firm such as the human resource, marketing, IT, finance and even the inventory stores often require outsourcing. Outsourcing is a procedure that involves quest of external expertise on various business functions. The main aim of outsourcing is the need to enhance business operations for maximal profit gain.

The functions of the outsourced company have to be diligent and efficient for consistency. Good outsourcing involves partial hiring of specialized companies that are able to boldly base decisions against all odds with the aim of curtailing on unnecessary costs. The specialist work as casual or part-time enterprises and ensure delivery of business functions in a timely manner besides ensuring customer satisfaction and loyalty.

There is need to engage proper and strategic business plans as a way of maintaining focus on the core business goals. In most instances, businesses outsource those tasks that are technical and are not fundamental to overall management but important and supportive units of the business such as IT departments. Most firms managers prefer to stick to the key business responsibilities and outsource all the other tasks. It is equally common to subcontract a failing sector or department, with the aim of gaining improvement.

Some of the main reasons for outsourcing include the need to reduce running cost of subsidiary departments and focus attention to the key areas of the firm. There are many cons associated with outsourcing including, staffing proceeds. It is logical for a company to cater for four employees at a technical department such as IT, and outsource specialization, other than engage many personnel and soon engage extra social or economic responsibilities of laying-off due to non-performances.

One huge challenge regards the risk involving reduction of managerial control over the outsourced sector. There is also need to analyse performance in relation to the outsourcing expenses. Analysing the proposals presented by outsourcing firms, managers are able to find the best yet economical offers. Managers have a wider view of companys pricing advantage due to availability.

Majority of the challenges associated with outsourcing are not enough reason to avoid the practice. Clients or customers want to gain access to specialized skills for better and timely product or service delivery.

Other good reasons include but are not limited to better business transactions or processes, flexibility on staff allocation, better workflow, business continuity and ability to focus on key sectors of the business. As professional business analyst, managers must focus on the key reasons for considering outsourcing over the in-house management.

One good reason for outsourcing is the performance threats by potential competitors. The main aim of outsourcing ought to be reducing cost without sacrificing growth or competitive advantages. Replacement of the companys technical operations with specialized outsourced services is a huge risk over control, but highly reduces on business expenditures. A firm might be able to come back to its strong basis and fight competitors to performance status quo.

The managerial concepts are highly compromised, but comparing the outcome to the status of the firm proves that outsourcing is a better option. The cost of having in-house employees is still higher in comparison to subcontracting, if the former compromises business functionality or performance. Dealing with unprofessional is expensive and inferior.

Outsourced companies are third party providers who have excellent knowledge, skill and experience of how to undertake the proceedings and keep businesses on a competitive edge. Arguably, the employees are equally competent enough but lack the extra expertise to maintain the firms endeavours.

Outsourcing would be an automatic guarantee for quality and profitability of a firm especially when the tendered team is competent enough and has good standing in the field. Non-performing businesses are at stake over efficiency, accuracy and quality provisions but outsourced panels or experts can provide the required service to revive them and thus save on reputations.

Outsourced team gives the business a chance to access specialized skills and wider range of products because of its proficiency nature and higher investments. Employees also have the chance of acquiring the skills and advancing to challenge competitors in future. The specialized skills enable the businesses to capture and capitalize on the intended market niche. The business also has the chance for accessing skills to supplement to other fields of operations beside the intended department.

Evidently, considering outsourcing would be more benefiting to a firm since it creates a contractual obligation or liability that is higher, and thus more advantageous to the business compared to the in-house permanent contractions. There is a safer bet when there is a signed contract between the firm and outsourced team.

Arguably, an outsourced team affects staffing issues and reduces control but considering proper management of technical departments in the business that the in-house employees or firms input requirements might not be in a position to handle, a firm has the capability to absorb pressure associated with future anticipations.

The function of technical departments also becomes critical in the hands of the providers because of the specialization in strategies of absorbing risks of collapse or mitigation. Today it is equally easy to tie urgent business requirements to specialized groups due to security and rates of returns.

The overall management lose the opportunity of controlling all departments, but enjoy the opportunity lost thereafter. Business functions often overwhelm firms, thus the need for the extra hands. Outsourced management enables the business to meet demands and pressure associated with profits and competition.

Everyone wants to outsource some works to third parties. It is necessary when business owners want to focus on their high-level jobs. However, there are certain situations under which outsourcing may not be desirable. Reasons may vary from one organization to another (Turban and King 549).

High costs

No firm would want to outsource EC business when the cost of outsourcing is too high. In most cases, businesses outsource some jobs in order to cut costs related to permanent staff and training of IT staff. However, under rare situations, the cost of outsourcing could be expensive, especially for startups.

Core business competencies

Firms should not outsource their core business competencies. This is where the competitive advantage of a company is. Firms use such competitive advantages to achieve their strategic objectives and missions. Thus, any attempt to delegate or transfer such jobs to a third party could compromise the main reason for business existence.

Dynamic business functions

There are business functions, which are highly dynamic and difficult to predict in terms of risk factors. For instance, customer service has become unpredictable as customers have become demanding and dynamic. Thus, such services should remain in-house because the service provider may lack the capacity to meet such challenging and dynamic roles.

Changes in management

Outsourcing should not take place during shifts among top executives. The incumbent team is the best for facilitating implementation of the process because it understands the companys core business and the need for outsourcing.

Outsourcing is an undertaking that requires dedicated resources like time, finance, planning, and implementation with supportive leadership. Thus, firms should put on hold all outsourcing plan when there are changes in management team, until the new executive articulates business mission and the need for outsourcing.

Restructuring

Some firms undertake major restructuring. This might not be the best time to outsource services. Usually, when the economy is weak, some organizations may embark on internal restructuring as a way of cutting costs, reducing hierarchies, eliminating unprofitable units, consolidating, transferring staff, and refinancing operations among other initiatives. On the other hand, firms may start new operations in a strong economy without negative impacts on the business.

When firms undertake such restructuring programs, they should avoid any outsourcing without adequate orientation. Under such situations, any attempt to outsource services could result in high risk by distracting employees, executives and introducing complications in the system. Thus, any outsourcing plan should be under the management plan of senior executives so that they can have adequate concentration, stable operations, and adequate time to allow them to achieve the desired results from outsourcing.

Knowledge-based functions

Firms should not outsource knowledge-based functions. This is an intellectual capital, which should stay in-house. A knowledge-based economy depends on a competitive advantage. Thus, any organization must be able to control its internal business secrets and develop new concepts out of experience and skills.

Core functions that do not require any form of risks

Some risks may hamper the delivery of core functions to a firm. This is risky in situations where foreign firms provide outsourcing services. For instance, countries with political risks may undermine attempts to deliver services and payment. Thus, the firm must have special ways of mitigating and managing risks. Although such risks could be manageable, they may consume time and other resources.

Works Cited

Turban, Efraim and David King. Electronic Commerce 2012: Managerial and Social Networks Perspectives. 7th ed. New Jersey: Prentice Hall, 2012. Print.

Introduction

Internationalization and outsourcing refers to the elements of interest in global aspects with contextual respect to business. With the spread of globalization theory, institutions have sought to obtain their resources as well as sell their products in a global perspective.

International trade and outsourcing of an organizations resources have therefore become fundamental of large as well as medium companies. This paper seeks to discuss challenges facing Coglin clothing company in relation to internationalization and outsourcing. The paper will explore external environmental conditions of Coglin clothing.

Case study

Coglin is a clothing design and manufacturing company in Australia. The firm has been in existence for twelve years and under one chief executive officer. The company has experienced a considerable level of growth though it is currently faced with a number of threats.

Its recent growth has led to changes such as increased level of recruited staff and expenditure on management. The company is also facing increased competition from the global market following the governments move to liberalize the local market to international trade.

The company is thus faced with the task of copping with the external environment in order to handle its current and future contracts (Case Study, n.d., p. 1).

External Environment facing Coglin Clothing

External environment facing an organization refers to forces that emanates from outside the organization which has the capacity to affect the operations of the particular organization. Factors such as competition facing an organization as well as issues that pertains to regulations and natural factors therefore constitute an organizational environment.

The environment with respect to Coglin Company can be viewed from two perspectives: task environment and general environment (Wadolell et al., 2007, p. 83). Task environment refers to the organizations immediate factors such as its suppliers, distributers, customers and competitors (Wadolell et al., 2007, p. 83).

These factors are immediate in the sense that they face the organization in every aspect of its operations. The other category of environment, general environment, consists of widely extensive factors that include economic, technological, sociacultural, demographic, political and legal, and global forces that affects the organization (Wadolell et al., 2007, p. 83).

Suppliers to an organization are the parties that make the organizations provisions for resources. Such parties are occasionally subject to variations with respect to elements such as nature, number and type (Wadolell et al., 2007, p. 83).

The organizations suppliers can for example change their structures and terms or relation with their contracting partners such as coglin or their number could change due to closures or entry of more firms in the supplier market.

Any change with respect to the organizations suppliers will call for adjustments by Coglins managers in order to maintain the companys desired and planned operations. This is because any of such changes will either have an advantage or a disadvantage to the organization calling for a move to either capitalize on cases of opportunities or to counter any form of threat.

A reduction in number of suppliers is, for example, associated with a stronger bargaining power by the remaining parties over the company. Coglin might therefore be forced to endure dictated terms from suppliers if the number reduces to levels that can have monopolistic or oligopolistic influences.

An increase in the number of suppliers on the other hand gives more power to the company through its increased options in seeking supplies. Competition among the suppliers will also lead to moderated terms which will be advantageous to Coglin.

Similarly, distributers have a significant level of impact in a producer company such as Coglin. As a link between the company and its customers, the effectiveness of the relationship between the company and distributers will be reflected in its level of sales.

A reduced number of distributers will have a negative impact on the company in terms of more bargaining power by the remaining distributers together with a threat of reduces consumer servicers in cases where the number of distributers cannot reach all customers.

The company may therefore suffer from reduced sales. An increased number of distributers will on the other hand give more advantage to the company with respect to relatively increased power by the company over the distributers and subsequent customer coverage (Wadolell et al., 2007, p. 87). Customers refer to the parties that purchase products from an organization.

Being a clothing design and manufacturing industry, Coglins customers include individuals, small companies, large companies, government agencies and educational institutions (Wadolell et al., 2007, p. 83) that might be interested in the companys textile products for final use in houses and office premises.

The products from the company can be used by these parties for clothes or furnishings. Changes with respect to consumers also affect the decisions made by management of the company. Unlike suppliers and distributers, customers exhibit a wide variety of changes that can include fashion, taste, and income, complimentary and supplementary products among others.

The changes in consumers will also be realized in either an advantageous or a disadvantageous perspective. Competitors also shape the direction of the organizations decision making in terms of moves to gain or maintain market control (Wadolell et al., 2007, p. 88).

The general environment surrounding Coglin Company is on the other hand diverse in nature and is mostly out of control of the companys management. Coglin is therefore in response forced to adopt decisions that will align the company to its best advantage following the environmental conditions.

Being a profit oriented organization; the company is highly affected by economic factors in its surrounding. Elements such as interest rates, inflation, changes in disposable income, share market fluctuation and the general business cycle are some of the economic factors that affect the company (Robbins et al., 2009, p. 86).

The economy with respect to individual customers is for example directly associated with the level of demand for products in any market. Economic factors such as reduced incomes or increased unemployment rates therefore cause negative effects on the companys capacity to generate revenues.

This is because such changes causes customers to either reduce or suspend expenditures on non basic commodities in which category, clothing may fall. This effect is also felt with respect to institutions that will be forced to control their expenditures and concentrate on necessities.

Inflation which affects elements of the company such as the prices of its resources also has direct impacts on its management. When the economy realizes inflation prices of resources shoots up raising production costs of the companys commodities.

Consequently, the management is forced into the dilemma of whether or not the increased costs should be transferred to customers in the form of increased product cost. More complications are realized in cases where production costs in external markets are not affected by inflation and cheaper products are availed through importation (Robbins et al., 2009, p. 86).

Political and legal requirements in a business set up also drives the operations of organizations in their territories. Political stability, for instance, has both direct and indirect impacts on the operations of organizations.

Political instability induces negative impacts on environmental factors such as security, economy and even investor confidence. Instances of politically instigated violence can, for example, disrupt production processes and even distribution of finished products due to curtailed movements of employees, distributors and even customers to Coglin.

Compromised investor confidence due to political instability can also lead to reduced levels of productions in order to avoid loses due to economic instability. Legal issues also significantly affect the organization.

Laws that cover elements such as: practices regulations, environmental protection laws, anti discrimination policies and industrial relation legislations (Robbins et al., 2009, p. 86), play a direct role in shaping management decisions making.

Every decision by the management that relates to sourcing of raw materials, recruitment and management of human resource, production processes and relations with other parties are conducted in line with constitutional requirements and bi-laws.

Regulations such as antidiscrimination laws and rights of employees significantly affect decisions with respect to actions against employees who might not be performing or behaving to the expectation of the organization.

Managements may be forced to compromise on the companys principles and objectives just to avoid legal actions that can be instituted by certain disciplinary actions are taken against employees. Social and cultural factors such as crime, violence, religion and spiritual activities and lifestyles (Robbins et al., 2009, p. 86) also affect the organization.

The products of the firm are directly related to religious and traditional believes that are evident on peoples clothing. Lifestyles and fashion in dressing codes and premises furniture and decorations are also directly related to the organizations products.

Coglins management is therefore obliged to yield to pressure as caused by these factors and align the company accordingly (Robbins et al., 2009, p. 87).

International aspects

The companys operations especially with respect to international trade are also dependent on forces in foreign countries that affect business transactions. One of the forces in international trade is the fluctuation of currencies of the countries which the trading parties come from.

When the Australian currency rises against currency of an importing country, Coglin experiences a disadvantage with respect to global competitiveness.

This will negatively affect and even limit the company from exploring foreign markets. A fall in value of the domestic currency relative to foreign currencies on the other hand favors the company with respect to international trade.

The economic stability of Australia which categorizes it under developed countries also influences its impact in the international market following the recognized flow of goods from developed countries to developing countries (Bartol et al., 2009, pp. 65, 519).

International business refers to the trade activities that are conducted between countries. With the emergence of globalization, international trade has been realizing a growing trend in terms of the amount of commodities that are moved across boarders in terms of trade.

Data revealing the trend in volume of international trade from the year 1995 to 2004 indicates a general increase in the volume of trade especially after the year 2001. The percentage increment in volume of international trade has also been significantly increasing (IFCBA, n.d., p. 2).

Administrative measures of exploring international markets, identifying and capitalizing on factors such as mergers and acquisition are some of the steps to internationalization of business (IFCBA, n.d., p. 7).

A companys involvement in international trade however enlists more responsibility with respect to managing delivery of goods and money, bureaucratic hick ups and distance and travel time (Sercu P., n.d., p. 8).

Factors that would impact Coglin in Vietnam and Thailand

External environmental factors in Vietnam such as cheaper labor and cost of locating a business enterprise, intellectual property threat and poor infrastructure contributes to task environmental factors.

Consideration of factors such threat to intellectual property and poor infrastructure in Vietnam can overweigh factors such cheap labor to influence investors away from the country (Nieuwoudt, 2010, p. 1).

The market in Thailand which has a wide advantage with respect to general environment such as government policies is on the contrary not favorable with respect to task environmental factors. The Thailand textile market is also already saturated with both export and import activities that might not make it very attractive for new investments (Report, 2010, p. 1).

Control measures to challenge in Vietnam and Thailand

The challenges in Vietnam and Thailand include both general and task environmental forces that include factors driven by government policies and market forces for resources and finished products.

A firm in these locations will therefore enact decisions to capitalize on the advantages that are offered by market forces such as cheap labor and market liberalization effects as well as adopting policies that are in line with the countrys legislations (Nieuwoudt, 2010, 1).

References

Bartol et al., (2009). Management. Sydney: McGraw Hill.

IFCBA. New trends in international trade, emerging business models, and the needs of small and medium-sized businesses in preparing the Framework of Standards to Secure and Facilitate Global Trade. Web.

Nieuwoudt, T., (2010). Vietnams textile industry: Opportunities and challenges. Web.

Report., (2010). Prospects for the textile and clothing industry in Thailand. Web.

Robbins et al., (2009). Management. Sydney: Prentice Hall.

Sercu, P., Managing credit risk in international trade. Web.

Wadolell et al., (2007). Contemporary management. Sydney: McGraw Hill.