Enactment of Technology Strategy: Developing the Firm’s Innovative Capabilities

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Table of Contents

Introduction
Outsourcing: definition and relevance
The negative impact of outsourcing
Will outsourcing boost the company’s innovative capabilities?
How this concept of IT outsourcing fit in with the engineering career
References

Introduction

What do Microsoft Corporation, Marks & Spencer, and Mambo Graphics have in common? One thing that made them related to each other is that they were known in their fields and achieved more than what they expected. This, they owe to the power of outsourcing. They did not rely on the skills and capabilities of their employees internally. They took time to explore new possibilities for how to be more competitive with the market. They learned that outsourcing can be a very good tool in achieving one’s goal.

Highly skilled operators, programmers, agents for a specific insurance company, or even call center agents are hired to provide a certain function that cannot be provided within the country or the state.

Lever (1997 pp. 6) defined outsourcing as the contracted services outside a company or even outside the country to do a specific job or function. “Outsourcing or contracting started was initiated in the manufacturing business in the early 1980s primarily as a means of cutting back staff and saving on wages” (Ryans, 1996 pp. 15). They are commonly called third-party providers or simply service providers.

Outsourcing: definition and relevance

Outsourcing is now more preferred by most organizations rather than developing in-house talents. Such strategy is in line with the goal of the management to continually innovate the human resources, management, and technology of the company. It is seen as more cost-effective (Hira and Hira, 2005, para 13) because normally, contracted personnel from other countries require only smaller salary because of the certain standardized salary scheme within the country; Outsourcing is also done to cut cost and refocus resources (MacCarthy, et. al, 2002 para 3). A large company with numerous personnel with no specific work is the same as a company with smaller personnel but with specified work. This was done through outsourcing of different functions from different sources. Another reason why most organizations nowadays do outsourcing is to lower the investment in internal infrastructure (Reaser, 2004 pp 5) since it will be built instead of the outsourced country.

In India, the volume of work outsourced has increased to more than 50 percent since 2005 (Ahmed, 2006, BBC News, para 5). Skilled professionals in IT and call center jobs are growing in India. When outsourcing from other countries started, India has been one of the countries most favored for this aim.

Some commended outsourcing as the best option to be more competitive in the market. Other than India, China, Japan, and the UK are also now outsourcing some of their workforces because they want to remain competitive in their respective industries (Ahmed, 2006, BBC News, para 5).

The negative impact of outsourcing

But, despite the positive feedback from the countries that have been using outsourcing methods for several years now, there are still some countries that seem to be facing issues related to outsourcing. The US is one of these countries.

As of October 2006, the Bureau of Labor Statistics reported that the US population continues to grow at 300,263,379. Although employment grew by 92,000 in October, the workforce is still apprehensive with might happen if companies continue to outsource personnel (Ahmed, 2006, BBC News, para 5). More so, the Hira brothers’ book cites a University of California Study that estimates 14 million U.S. white-collar jobs – one in every nine – are at risk. A 2004 report by Forrester Research suggests that a total of 3.3 million US white-collar jobs will move overseas by 2015, with 830,000 jobs leaving by the end of 2005 (Hira and Hira, 2005, para 11).

It should be noted that other than IT, outsourcing has already extended to desk job employments, networking, and healthcare. Although the data shows from the BLS that the unemployment rate has declined to 4.4%, the presented data on the employment rate and unemployment rate of America, only suggests that too many outsourced jobs can affect the economy of America. Based on the book written by the Hira brothers, outsourcing can lead to the loss of workforce and a decrease in the economic capabilities of the country (Hira and Hira, 2005, para 16).

Will outsourcing boost the company’s innovative capabilities?

From the data and figures shown above, it looks as if outsourcing will continue to grow.

Companies will continue to mature and so as labor workforce will continue to develop. Outsourcing can offer several good advantages to some companies. Or it can be a disadvantage either.

Outsourcing is good because it ensures job workloads to be done at a seemingly lesser cost. Because a company has to hire for an agency and the like to provide the service they want without having to think about the benefits, social security services, medical benefits, etc. that are lawfully the responsibilities of such companies. But some are also thinking that outsourcing is not favorable, because the attachment and the loyalty to a company will be lost. Agencies who offer outsourced jobs work for the money and money alone.

Employers and company management are still on the advantageous side if they are to provide benefits directly than to outsource because having direct employees ensures loyalty from them and a higher form of commitment in doing the jobs that will be tasked to them.

Furthermore, outsourcing is usually on a contractual basis, hence there is a possibility that twice or thrice a year, there will be a replacement for that outsourced worker… this only means that the employer will be training every outsourced employee twice or thrice a year also – and that is truly time-consuming.

But then again, the corporation’s shareholder value will remain at a competitive end because of outsourcing.

Outsourced personnel will always try to prove themselves to the company. They will always be on the lookout for praises and incentives thereby making sure that they always put their best foot forward. This will of course result in higher productivity of the organization. Higher outputs will mean higher profit, thus good feedback for the shareholders.

The only challenge for top managements’ point of view is choosing the best course of action related to outsourcing. Hence, managers considering an outsourcing move must allot enough time into identifying and prioritizing all of the objectives they seek – for the company and the entire human workforce. Ensuring the success of any outsourcing endeavor will always be dependent on the decisions made by the top management.

While there are hundreds of best possible practices about outsourcing, it is clear there is no one-size-fits-all outsourcing strategy. It should be noted that whatever outsourcing strategy a company must decide to use, should always be based on the company’s current and unique business needs and how it aims to satisfy the target customers. As businesses develop greater capabilities, their outsourcing requirements change. Moreover, any company may pursue diverse outsourcing strategies for different functions, operations, or processes. Consequently, companies need to have a flexible and dynamic process for selecting outsourcing engagements rather than a rigid, static one. In coming to their decisions, companies must first review their business objectives for outsourcing and not fall prey to the apparent momentum of the outsourcing trend (Bettis et. al., 1992).

How this concept of IT outsourcing fit in with the engineering career

It is worth noting that one of the factors affecting the high increase of outsourced jobs is the low enrollees in science and engineering courses in America (MacCarthy, et. al, 2002 para 8). These specializations are not given attention by the government and the schools. That is why some of the companies rely on outside service providers who can serve with a minimum cost which is very beneficial to the contracting company.

As it is already established that outsourcing becomes prominent because companies realized the need for innovative and updated skills and capabilities of workers outside the organization, this presents a brighter and more comprehensive career for all engineering and IT-related graduates.

Engineering, for one, is normally a five-year course and would require a board exam before one can fully work and register as a professional engineer. Because of this, not everyone can afford – mentally, physically, and financially – to take an engineering-related course. This made it one of the most technical and highly sought-after skills and knowledge by most companies nowadays. But since employees that are engineers are very hard to find, management would then opt to outsource. The more companies would seek engineers, the better it is for the engineers, as they will be presented with more work opportunities, better salaries, and of course, better work experiences.

References

Ahmed (2006). BBC News Article on India dismisses outsourcing fears. 2007. Web.

Bettis, Richard A., Bradley, Stephan P., & Hamel, Gary. (1992) “Outsourcing and Industrial Decline.” The Academy of Management Executive. 6: no. 1: 7-22.

Hira, R. & Hira, A. (2005). Outsourcing America: What’s Behind Our National Crisis and How We Can Reclaim American Jobs. 2007. Web.

Lever, S. (1997). An Analysis of Managerial Motivations Behind Outsourcing Practices in Human Resources. Human Resource Planning (20).

McCarthy, JC, with Dash, A., Liddell, Heather, Ross, C.F., & Tenkin, B. (2002). 3.3 Million US Services Jobs To Go Offshore. 2007. Web.

Reaser, L. (2004). Outsourcing of U.S. Jobs: Threat or Benefit?. ABA Banking Journal, (96).

Ryans, C. (1996). Outsourcing. Journal of Small Business Managemen (34).

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