In this assignment one topic is chosen and discussion is done on it. The topic chosen for this assignment is ‘outsourcing’. Outsourcing is the form of activity in which the business transfers its activity to the third party to reduce their cost and lessen their burden. Nowadays outsourcing has gain importance in the competitive world. This topic has been chosen to get the detail understanding of outsourcing that can benefit the company and help in their growth and development.
Define and discuss advantage and disadvantages of outsourcing and the role it plays in a global context. Practical examples are essential.
The term outsourcing derived from the phrase outside resourcing. It is an agreement between the companies in which one company hires the another company for the work that is too be done internally. Outsourcing includes both foreign and domestic contracts. It is the practice of getting some job function done outside the company that the employees cannot handle. Outsourcing can be done either to the company or to individuals (Kim et. al., 2013). Human resources outsourcing has become the major trends in the world nowadays. Most of the companies whether it is small or large are engaging in outsourcing so that it can reduce the overhead cost of the company.
One way to outsource is to hire independent contractors. For example, the company can hire the independent accountants who comes in the company only once in a month to collect all the documents. The process of hiring the independent contractors are much flexible and it incurs less cost (Rivard & Aubert,2015). The company should make sure the independent person he has hire is able to perform the job.
Company outsource their activity to reduce the cost and improve efficiency. The third party can perform the activity of the business either offsite or onsite the business (Wuyts et. al., 2015). There are various types of outsourcing that can be followed by the companies such as business process outsourcing, knowledge process outsourcing, out tasking and selective outsourcing.
Examples of outsourcing companies
There are various companies in Australia that are outsourcing.
It is an innovative company in Australia that provides solar system installation systems to various industries.
Securitas private health
The company provides financial security to their clients and various financial advice to Australians.
Many more companies are there in Australia such as Optus, Eco move, Eview group etc.
Advantages of outsourcing
There are various advantages of handing over the activity of the business to the third party.
The external companies to whom the activity has been transferred has a high degree of specialisation (Tayauova,2012). This help them to work more cost efficiently and therefore they work at low rates and offer discount to the companies.
Improvement of quality
Outsourcing helps in the improvement of the quality of the work. For example, the quality in manufacturing of goods can be achieved only by a good workshop or factory.
Outsourcing van help to increase the efficiency in business as management can focus on the core competencies or the work that needs their personal attention.
New processes and innovation are required in the company. All these processes cannot be handled by the present employees so the company outsource their work. The outsourcing in turn helps to hire skilled persons from outside that can perform their task.
Saving of time
Outsourcing helps to save the time of the employees as they can focus more on the new areas of business.
Fast completion of work
Outsourcing helps the business in getting their work done faster.
Disadvantages of outsourcing
Various disadvantages of outsourcing are.
The main disadvantage of outsourcing is that the company gets dependent on the external parties for the work to be done (Iqbal & Dad,2013). For example, if the external party gets into economic difficulties then the company have to bear the consequential cost.
Loss of knowledge
Outsourcing of work can make the loss of knowledge of employees for the task that has been, as the employees will not be working on it because of which they will lose their knowledge for that particular work (Oshri et. al., 2015).
Risk of exposure of data
Outsourcing can sometimes lead to exposure of confidential data of the company to the third party. This mainly happens when the human resources are outsourced, they disclose the confidential data of the company to the third party.
Outsourcing is generally recognized as the cheaper form, but sometime the outsourcing firm may tell you to sign the length contracts that may incudes various fines and if not ready properly it may lead to payment of unexpected cost.
The major disadvantage of outsourcing is that it may result in loss of the growth and development of the skilled employees in the companies (Dolgui & Proth,2013).
Examples of outsourcing tasks
Outsourcing strategies are used in wide variety of task such as customer service, IT, accounting and marketing departments. Some of the outsourcing strategies are:
A company generally outsources the social media channels to an external service provider such as agencies.
Many companies transfer the activity of customers services to the third parties and call centres are the best suited example for this.
Role outsourcing plays in global context
Outsourcing has been the part of the business since long. Outsourcing has been considered as an important product in terms of globalization. The main contribution of outsourcing is its ability to connect to the nations that helps in development. Outsourcing has been recognized today as playing the important role in globalization mobility. Since outsourcing helps in giving external service it helps in the increase in the international flow of capital (Ali & Green,2012). The employees of outsourcing firms enjoy international culture exchange as they work in different environment of different nations. Outsourcing has result in the development of better global communication networks that helps in better connections among different countries. Those companies who utilise the service of outsource can increase and speed up their workflows, so it is possible to counter the growing global competition (Lacity & Willcocks,2014).
Best practice methods that can be used for outsourcing
Analyse the current state
The first method is to analyse the state of the task that can help in taking the future course of actions and formulating the outsourcing strategies (Malik et. al., 2012).
This involves conducting the meeting with the stakeholders of the company to discuss the outsourcing activity and discuss its benefits, content and next step.
Select a service provider
After discussing and conducting meeting next step is to select the best service provider that can meet the requirements of the business.
Stick to your implementation timeline
This involves agreeing to the timetable when the contract has been formed and the work has been implemented.
The assignment gives the detail understanding of outsourcing. Its advantages and disadvantages of outsourcing has been discussed. The various companies that outsource in Australia has been discussed and various examples has been shared in this assignment.
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- Wuyts, S., Rindfleisch, A., & Citrin, A. (2015). Outsourcing customer support: The role of provider customer focus. Journal of Operations Management, 35, 40-55.