Business Function Outsourcing

Question: Discuss about the Business Function Outsourcing. Answer: Introduction: Outsourcing is considered as one of the major business activities in contemporary world. This is considered as important because it helps in attaining innovation and providing best services to the customers. This facilitates the company to develop themselves in their core competencies and activities that are more important to be conducted. This also helps in reducing the expense of the company in the activities that can be outsourced (Sturgeon and Gereffi, 2009). This is because these activities can be conducted by other third party company and the parent company does not need to spend a huge amount of money in employing the employees as well as provision of training to them. This literature review focuses on disadvantages and advantages of outsourcing functions of business. This report discusses about the theories and concepts of outsourcing as well as their benefits and disadvantages. Definition and Types of Outsourcing: Outsourcing said to be made of two words that is out and sourcing. This suggests that the companies source out their responsibilities and work from different companies or from other sources (Wllenweber, Beimborn, Weitzel and Knig, 2008). It is defined as the process that deals with delegation of work and responsibilities of one party to another party in order to save the expenses of training to the employees as well as saving the time. outsourcing can be of two types, first is partial outsourcing in which the partial work or some of the functions of the company is delegated to third part in order to source out work from them. Another author at the same time defined out sourcing as the process of delivering the responsibility of decision making to the other organization in order to help the business to increase this return of investment. According to Kurdi et al. outsourcing every time is not the appropriate approach to conduct, sometimes it is necessary to out-tasking the responsibil ities (Kurdia, Abdul-Tharim, Jaffar, Azli, Shuib and Ab-Wahid, 2011). He also argues about the facility management activities that are necessary for the business but has not been focused when the business gradually increase, thus he suggested that out sourcing of these activities help the company to have such activities with proper movement without wasting the company's expenses on these activates. He defined outsourcing as the process of procurement of the services from the external organization other than the parent organization. Author suggested that out-tasking is also an alternative for the traditional out sourcing of the work (Shi, 2007). He has compared the out sourcing activities and in house activities to determine the advantages and disadvantages of the outsourcing (Mohr, Sengupta and Slater, 2011). This approach has enabled to reader to know about the differences between the in house activities with respect to outsourcing, this information from this study help the organiz ation to take decision over the selection of any of the effective technique for the function from outsourcing and in house functioning. Tayaouova suggested that there are three theories related to the process of outsourcing. The first theory is the resource based theory that is based on overcomes the weakness of the company (Tayauova, 2012). In this type of outsourcing, the outsourcing of such functions is done that are not established in the company. This is used to overcome the weakness of the company. The next theory is the core competency theory. This theory discusses about the fact that the core competencies or the core activities of the company should be conducted in house but the activities that are not core on nature should be outsourced from the other organizations. The last theory is the transaction theory. The transaction theory talks about determining the transaction cost of any of the activity when conducted in house and when are outsourced. Then, according to that tran saction costs associated with the activity, it should be outsourced. Reasons for Outsourcing: Iqbal and Dad discuses some of the reasons behind outsourcing. The first reason that has been discussed by the author is the reduction in cost and the economies of scale (Iqbal and Dad, 2013). Most of the companies have the motive of reducing the short term cost of the company by outsourcing some of the activities such as IT functions. The main cost that acts as the driver for outsourcing is the cost related to the employees. Another reason that drives the outsourcing activities is advancement in the technology over the globe. The advancement in technology forces the organization to delegate their work to the BPO that have the technical capability to perform the activities outsourcing the non-core activities help the organization to focus completely on the core competencies of the organization so that they can achieve competitive advantage with the help of those core competencies (Lacity, Solomon, Yan and Willcocks, 2011). Advantages and Disadvantages of Outsourcing: Different authors have suggested some of the advantages and disadvantages of outsourcing business functions. The concepts of these authors may be different but the basic elements that have been discussed by them are almost similar (Carettas, 2009). As far as the advantages of outsourcing are concerned, the first advantage of outsourcing is the reduction in the cost or the reduction in the expenses of the company over the non-core activities. The non-core activities of the company can be defined as the activities that are essential to be conducted but directly do not contribute in the success of the company or the output of the company. For example, if a medium sized company needs to build software for the company, then the company would prefer to outsource the work instead of hiring or training their own engineer to perform the same task (Haugen, Musser and Lovelace, 2009). This is because it saves the hiring and the training cost of the company which is higher than its outsourcing c ost. The second advantage that has been discussed by the author is that the company can get the time and money to spend on the core activities of the business. it has been analyzed by the researchers that most of the companies have suggested that outsourcing some of their activities allow them to focuses on the core activities of the business so that they achieve competitive advantage out of those activities (Noe, 2013). Third advantage that has been discussed is related to the access of the high qualified professional with the help of the third part organization. This point suggests that the company can have access over the well qualified professional that cannot be employed by the company itself. This is because the third part company is specialized in the field and thus has acquired the best human resource for the purposes (Norman, 2010). The fourth advantage of outsourcing the work is the attain improvement in the processes. The improvement in performance is because of the high capability of the outsourcing firm and the economies of scale. As the company that performs the outsourced work processes at very higher scale in the same fields thus provide the companies with great performance output. The last advantage that has been enjoyed by the companies in order to outsource the work from the third party is the flexibility of change. As the business environment changes, it is not possible for the companies to change their operations in order to match those environment every time. Thus, outsourcing the work from the socialized organizations helps in providing the work according to the latest environment. As the process of outsourcing has so many advantages, but also have many disadvantages as well. There are various disadvantages of outsourcing the work. The first disadvantage is the loss of control. The managers of the organization do not have any control over the work processes as the work is conducted by the third party organization (Gewald and Dibbern, 2009). To manage the process that are conducted outside the organization require different skills such as contract management, negotiation etc. auditing is another difficult job that needs to be done in case if the organization chose to outsource the work. It is the essential step to be performed in order to check and monitor the functioning that has been conducted. This is because the work that has been processed in the third party company is very confidential and thus it is very important to secure the data. The third disadvantage of the outsourcing process is expectation. As the third party company is specialized in the function so it is the expectation of the company that the third party will perform beyond expectation as compared to the internal staff (Liston, Byrne, Byrne and Heavey, 2007). Sometimes, this expectation may not get fulfilled and the organization need to suffer loses because of the fault of the other organization. So, this acts as the risk of outsourcing the work. Outsourcing results in downsizing of the organization sometimes. This may be beneficial for the organization but is not good for the employees of the organization. The downsizing is the process that acts as the burden for the top management of the company as they have to make decision over the firing of the employees. It becomes very difficult for the top management to decide who deserves and who is not. The change in the organization due to downsizing also acts as the challenge for the company. Every article that has been discussed has almost same concepts but the author has different way of thinking regarding the concepts (Bustinza, Molina and GUTIERREZ?GUTIERREZ, 2010).. If the comparison has been made in the articles, it can be seen that Tayauova has clearly mentioned the advantages and disadvantages of the outsourcing process. Conclusion: Thus literature review provides the knowledge about different aspects of the business outsourcing functions. It has been analyzed that there are various functions that can outsourced and may have advantages and disadvantages for the organizations, some author discuses that outsourcing provides the company to focus on their core competencies and other argues that the company loses the control over their operations as the work is done by the third party. Many contradictory statements have also been made by the authors such as it help the company to get effective work output but also has the risk of delay and inefficient work as the company is not monitoring the work processes (Liou and Chuang, 2010). This creates the dilemmas among the mind of readers that whether outsourcing is good for the company or not. various advantages of the outsourcing business functions has been discussed in the articles such as reduction in cost, efficient work output, focus on core competencies etc. Several disadvantages have also been discussed such as high expectations of the output, downsizing of the organization, loss of control over the process, responsibility of timely auditing the work, late in delivery of the work, loss due to fault of the third party etc. the articles that have been discussed in the review have contrasting views regarding the topic but have similarities in the aspects that has been discussed by different authors. It is difficult to measure the advantages of outsourcing with respect to its disadvantages. One of the author has suggested that the task that needs to be outsourced should be associated with the cist first and then needs to be analyzed whether outsourcings has to be done or not. The practice helps the organization to make good decision regarding business outsourcing functions. References: Bustinza, O.F., Molina, L.M. and GUTIERREZ?GUTIERREZ, L.J., 2010. Outsourcing as seen from the perspective of knowledge management.Journal of Supply Chain Management,46(3), pp.23-39. Carettas, K., 2009.Outsourcing, teamwork business management. New York. Gewald, H. and Dibbern, J., 2009. Risks and benefits of business process outsourcing: A study of transaction services in the German banking industry.Information Management,46(4), pp.249-257. Haugen, D., Musser, S. and Lovelace, K., 2009.Outsourcing. Detroit: Greenhaven Press. Iqbal, Z. and Dad, A.M., 2013. Outsourcing: A Review of Trends, Winners Losers and Future Directions.International Journal of Business and Social Science,4(8). Kurdia, M.K., Abdul-Tharim, A.H., Jaffar, N., Azli, M.S., Shuib, M.N. and Ab-Wahid, A.M., 2011. Outsourcing in facilities management-A Literature Review.Procedia Engineering,20, pp.445-457. Lacity, M.C., Solomon, S., Yan, A. and Willcocks, L.P., 2011. Business process outsourcing studies: a critical review and research directions.Journal of information technology,26(4), pp.221-258. Liou, J.J. and Chuang, Y.T., 2010. Developing a hybrid multi-criteria model for selection of outsourcing providers.Expert Systems with Applications,37(5), pp.3755-3761. Liston, P., Byrne, J., Byrne, P.J. and Heavey, C., 2007. Contract costing in outsourcing enterprises: Exploring the benefits of discrete-event simulation.International Journal of Production Economics,110(1), pp.97-114. Mohr, J.J., Sengupta, S. and Slater, S.F., 2011. Mapping the outsourcing landscape.Journal of Business Strategy,32(1), pp.42-50. Noe, R., 2013.Human resource management. New York: McGraw-Hill/Irwin. Norman, T., 2010.Outsourcing human resource activities. Saarbru?cken, Germany: Lambert Academic Publishing. Shi, Y., 2007. Today's solution and tomorrow's problem: the business process outsourcing risk management puzzle.California Management Review,49(3), pp.27-44. Sturgeon, T.J. and Gereffi, G., 2009. Measuring success in the global economy: International trade, industrial upgrading and business function outsourcing in global value chains.Transnational Corporations,18(2), p.1. Tayauova, G., 2012. Advantages and disadvantages of outsourcing: analysis of outsourcing practices of Kazakhstan banks.Procedia-Social and Behavioral Sciences,41, pp.188-195. Wllenweber, K., Beimborn, D., Weitzel, T. and Knig, W., 2008. The impact of process standardization on business process outsourcing success.Information Systems Frontiers,10(2), pp.211-224.