The Problems, Restrictions and Challenges of Outsourcing - Term Paper Example

Postgraduate Programs E-School of Business and Quality Management Research Methods Assignment 1 :Data Collection The problems, restrictions and challenges of outsourcing Student Name: Amina Abdulkarim Ahmed Learner ID: 121130008 Course Title: Research Methods Professor Name: Raid Al Aomar Submitted date : 5th, October, 2013 TABLE OF CONTENT Table of Content ………………………………...……Pg 1 Introduction…………………………………………...Pg 2 Problem Definition …….…………….……………….Pg 2 Objectives……………………………..………………Pg 2 Theoretical Background………………………...........Pg 3 Research design……………………………………...Pg 7 References..…………………………….……………Pg 8 Introduction Within the context of this chosen research paper, I have chosen to examine the benefits, problems, restrictions and challenges faced by the outsourcing industry on a global scale and narrowing it down to the U.A.E market. Outsourcing is a practice employed by an organization in a business arena in which it hires service from a third-party normally located out of the country (Insight Into, 2012). Problem Definition Outsourcing has been faced with numerous problems that stem from within an organization’s HR Department in terms of how new changes are integrated into the existing company and how it can impact the organization on the long term. It is faced with the new challenges and changes it needs to keep up with. Within this research, it shall tailor to the interests of academics, i.e. my lecturers and business organizations within the U.A.E to understand why outsourcing problems and challenges needs to be confidently tackled. Objectives This research has placed aim to investigate on several objectives: i. To understand the role of outsourcing in today’s business market. ii. To investigate outsourcing as a frequent used system currently, how it impacts the HR department of an organization in reference to potential implementation problems, disadvantages, restrictions and potential challenges outsourcing holds. iii. To find out solutions to challenges faced by the outsourcing system as a whole. iv. To investigate ways in which the organization involved in outsourcing can overcome outsourcing challenges There is sufficient literature and theory available on the topic of outsourcing itself which has gained so much popularity in the recent years, it has contributed to reducing expenses of an organization, and where recruiting cheap labor or team workers on a temporary basis helps alleviate the stress of an organization where it can focus on its other core operations. Hypothesis This study sets out one hypothesis that will be tested in the course of the research: i. Outsourcing comes with challenges. Theoretical Background Observation As my observation in writing up this research paper, it can be observed there are numerous examples at hand that demonstrate the way outsourcing as become popular, however it has been faced with a certain amount of scrutiny. An example is the recent Olympics in the U.K were preparing to take place; it meant a major event would require major outsourcing and be capable of ensuring everything went smoothly, prim and proper. Bearing in mind the good side of outsourcing, there are certain weaknesses; a good example is when U.S senators criticized how outsourcing for their Olympic uniforms was produced in China; whilst this is not a new thing since globalization has very much witnessed clothing multinationals opt for cheaper production it did spark a certain outrage in the U.S. Developing countries are in dire need of jobs for their growing populations but they need to be in secure jobs without being exploited by companies from industrialized world. Interestingly, Ralph Lauren did make a $156 million deal with Addidas to make the company a major sponsor for the U.S Olympic team during London 2012 Olympics; since Ralph Lauren has been providing sportswear for the British Olympic and Paralympic Associations; it has its own exclusive licensing rights for all sportswear sold at London 2012 venues and stores. With respect to Adidas, it is not in a dominating situation as compared to Ralph Lauren; since Adidas does not really manufacture majority of its products within the U.K and Europe. While the Olympics is such a major event in the history of the world, it should be no surprise that outsourcing is a common strategy used; yes there are those who will not support the idea of China manufacturing the official uniform for the U.S Olympic team but that’s probably what the U.S Olympic team thought was best for them, opting for cheap labor and reaping the benefits of outsourcing (Raina, 2012) This view could be shared by what happened in the U.K after the ‘Made in Britain’ brand supposedly created in Britain, designed in Britain for London Olympics 2012 was not actually made in Britain. While the figures are soaring high as to how the Olympic Delivery Authority reaped £6billion worth of games contracts available to UK companies; around 91% of the Olympic souvenirs aren’t even manufactured in Britain; no surprises for guessing, China has been responsible for doing so, where it is accounted to have manufactured two thirds of the 194 products. The answer to such a situation: Britain opted for a cheaper and cheerful production, Olympic contracts have left Britain in two ways; firstly when LOCOG (Official London Olympic Committee) selected foreign companies over home-based companies for some Olympic contracts. This was followed by when UK companies did use some of the Olympic contracts which it eventually decided to outsource to foreign companies, this has made the U.K. reconsider if it does justice to the label ‘Made in Britain’ at all ( Tripathi, 2012) Challenges When examining the challenges faced by outsourcing, this comes down to organizational change with outsourcing, it can be observed in terms of outsourcing as an organizational change process; the kind of impact of a decision to outsource a specific business exercise on the team workers and the organization they are working under will take place during the actual execution phase. When comparing outsourcing like other strategies, it is only possible to accomplish its key goals via a promising and fruitful organizational change process. Even though there is limited literature available on how to go about managing the change process of such certain kind, there are numerous lessons that can be derived from literature on how organizational changes tend to downsize and switch to mergers that clearly stress the urge for a transparent flow of communication that needs to be open and takes place in a timely manner. In addition to this, there is the value of providing the relevant form of support to employees on an individual manner that would help them deal with any concerns, anxieties, issues and sentiments and the significance of maintaining equality. Whilst downsizing can be seen as a far more impressive and vivid event from the view point of the employee as once the control would end they do not have any secondary job they can take up. On the other side, in regards to mergers they are least likely to be trenchant and concise since the level of employment tends to remain with stability and it would not impact the work location, work contacts and content as a whole (Roe, Smeelen & Hoefeld, n.d) The cultural differences challenge Interestingly, one of the key aspects when implementing outsourcing in any business organization is taking into consideration the cultural differences which can make or break the deal. Kvedaraviciene & Boguslauskas (2010) examine the underestimated significance of cultural differences in outsourcing arrangements, they points out how it was essential to maintain a sense of sensitivity towards different cultural backgrounds and the very need for adaptability in behavior was imperative when handling and dealing with providers from different cultures. It could be observed cultural differences were labelled as one of the major reasons why outsourcing deals were undergoing possible problems. There are physical hindrances, i.e. facilities and infrastructure which tend to be taken care of however there are other issues which are known as “soft issues”, i.e. cultural differences which are seen as a major challenge. They refer to the research study conducted by Accenture which demonstrates about 69% of all outsourcing deals simply failed or failed to materialize as a whole due to the lack of cultural sensitivity and compatibility between the client and vendor and there was poor relationship management. Within onshore outsourcing location is seen as a subordinate issue in selecting the highly competent provider. On the other hand, in the case of near shoring and offshoring context, the significance of location is less valuable as there is a selection of countries which can decide various extraordinary advantages or disadvantages. In the article titled “6 outsourcing challenges for 2013” it highlights the six challenges faced by the outsourcing industry for the year 2013. Firstly, countries such as India and China which are known for their outsourcing hubs and labelled as “outsourcing giants” are simply faced with a very uncertain economy where there is a desperate need to evaluate the seller’s financial health and their competence to overcome the harsh economic patch for a continuous partnership. It is within this context, it is essential for outsources to be very careful when it comes to selecting the potential vendors- where small sized vendors are most likely to wind up their businesses in case the situation gets overwhelmingly challenging for them to handle. Secondly, there have been changes in outsourcing laws; within this context, it can be observed due to economic crisis and on-going local and regional political changes they compel certain changes towards the outsourcing laws globally. It is important therefore for outsourcers to keep an eye out on the on-going changes in laws. Thirdly, it is important the decision to outsourcing or not should come down to up-keeping the national interest and economy by near-shoring that would contribute to cultural and geographic benefits. Fourthly, it is important to ensure that the service provider adheres to eco-friendly or greener norms for a healthy green environment which is the responsibility of the service provider. Fifthly, understanding the new participating economies; within this context, whilst most and more emerging economies are struggling to be a part of the outsourcing bandwagon, it is imperative the competition mandates have to be far more profitable and worthwhile however they have their share of hidden challenges. Sixth, partnering with service providers: within this context, it refers to having a better understanding and partnering and focusing on broadening the business in the service provider’s country (6 Outsourcing challenges 2013, n.d) Despite these challenges; outsourcing is still live and active, the question is why? Outsourcing is cost effective, leads to improved customer service, analyzes the daily work progression, and pay only on deliveries is guaranteed, releases burden of equipping the office with software sand hardwares as well as unnecessarily personnel as service can be outsourced online and a business is guaranteed to get experts (Insights Into, 2012). Research Design Sampling In terms of creating a sample or survey for the purpose of fulfilling the research methodology aspect, I have chosen to design a questionnaire with open and close ended questions (see Aappendix 1b) that would be distributed to specific companies in U.A.E. for data collection that have adopted outsourcing in their organizations. I chose to contact 4 leading organizations in the U.A.E for the purpose of fulfilling these criteria. The questionnaire comprises of relevant questions to the outlaid objectives in this study. In terms of local demographics, this is flexible as it can be anything ranged from the business organizations situated in Abu Dhabi and Dubai as these are the leading hubs for commercial purpose. In addition, the questionnaire was designed to be completed with either by an HR or a CEO of the organization due to the need of accuracy of the information. The respondents were given a letter of consent that ensured the information gathered was at will (Appendix 1a). Two organizations were contacted over the phone as they were quite far and time of research was limited and urged to be forwarded the questionnaire over email and did send back upon completion although their names were withheld as per request. Bearing in mind the busy schedule of the HR’s and CEO’s in any institution, the questionnaire was only estimated to take about 20-30 minutes of their valuable time. Following the ethical consideration of any related research, the university research committee did grant us an official ethical letter to carry out the research a factor which made this study achieve its outlaid objectives. References 1. 6 Outsourcing Challenges for 2013. Retrieved 28th September, 2013. From: 2. Abound Resources: Insights Into 2012:Credit Unions Balance Growth, Efficiency and compliance retrieved from http://www.anyhoursolutions.com/news/WhitePaper-CU_Call_Center_Outsourcing_8_Reasons.pdf 10/12/2013 3. Kvedaraviciene, G & Boguslauskas, V (2010) Underestimated importance of cultural difference in outsourcing arrangements. Retrieved from: 4. Raina, J (2012) Olympic outsourcing shows real clothing cost. Retrieved from:http://www.krdo.com/sports/2012-olympics/Olympic-outsourcing-shows-real-clothing-cost/-/12407202/15584830/-/2l5iq0/-/index.html> 5. Roe, R & Smeelen, M & Hoefeld, C. Outsourcing and Organizational change: an employee perspective. Retrieved 29th September, 2013. from: 6. Tripathi, S (2012) Not Made in Britain: How the Olympics got outsourced overseas. Retrieved 27th September, 2013. from: APPENDIX 1A: QUESTIONNAIRE OUTSOURCING IN UAE Introduction and Invitation My name is .................. and I am currently undertaking my...............(degree) with XXX University. As part of the master degree requirements, I am conducting a research project to examine the core benefits, disadvantages, limitations and challenges faced by different organizations in reference to outsourcing yours organization being one of them I would like to thank you for agreeing to participate in this research project. This questionnaire will take approximately 20 – 30 minutes of your valuable time. Whilst I understands and appreciates that you have pressing priorities competing for your busy schedule, your participation is pivotal to the success of this research. Please take 5 minutes to read the research project information below, and kindly accept to proceed with the questionnaire. Research Project Information In light of number of existing literatures on outsourcing and the current demographic makeup of the UAE workforce, the labour market trends and economic environment, this cross-sectional research using mixed research method (quantitative and qualitative) aims to investigate the benefits, problems, challenges and solution to outsourcing in an organization. The research will be comprised of two simultaneous studies: semi-structured interview with Chief Executive Officers or Human Resources in an organization. Secondary data analysis may be used to supplement the findings. “This project has been evaluated by peer review and judged to be low risk. Consequently, it has been reviewed by the University’s Human Ethics Committees and addressed any concerns in advance”. OUTSOURCING QUESTIONNAIRE PARTICIPANT CONSENT FORM - INDIVIDUAL I have read the Information Sheet and have had the details of the study explained to me. My questions have been answered to my satisfaction, and I understand that I may ask further questions at any time. I agree/ I do not agree (underline your consent choice) to participate in this study under the conditions set out in the Information Sheet. I am participating in this research from “Drop down name of organization or initial”. For the purpose of this research; Outsourcing is defined as a practice employed by an organization in a business arena in which it hires service from a third-party normally located out of the country. APPENDIX 1B: OUTSOURCING QUESTIONNAIRE IN UAE ORGANIZATIONS GENERAL INFORMATIONS Name of the organization/ or initial: Name of the respondent (optional): The respondent designation (HR or CEO) (tick) Date QUESTIONS Q1. Tick the range of the organization’s total manpower 100-250 250-500 500-750 750-1000 1000-5000 5000 and above (specify) Q2. How the organization is geographically spread in UAE 1. Very wide >2regions 2. Wide 2 regions 3. Limited 1 region 4. One location 5. Others specify Q3. Give the different employment modes practiced in the organization (tick where necessary) Part-year, annualize or seasonal Casual Contractual part time Contractual full time Permanent part time Permanent full time Q4. Does the organization outsource any resources (tick) Yes No Q5. What are some of reasons for outsourcing in your organization? Manpower (give range of 100 for example 10-100, 100-200 etc Equipment (specify) Materials (specify) Others ………………specify Q6. In reference to manpower what are the categories the company mostly outsources (tick where necessary) Professional Consultants Professional specialist Formal and experienced Informal and experienced Others specify Q7. In reference to what the organization outsourced what was your take with company which provided outsourced resources (tick where necessary) 1. Satisfactory 2. Average 3. unsatisfactory 4. Others specify: Q8. Please mention what you do expect from: a) Tools, equipment and materials outsourcing company:------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ b) Manpower outsourcing------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ Q9. In your opinion do you think outsourcing is vital to your organization (tick according to your level of choice) 1. Strongly agree 2. Agree 3. Somehow 4. Not important Q10. What are some reasons that make your organization to outsource? Cheap and competent labor Efficient and effective equipment To remain in the business competition Cost efficient Others specify Q11. Do you think your organization can survive without outsourcing (tick) Yes No Q12. Are there some challenges that come with outsourcing (tick) Yes (if yes list some) No Q13. Is there way your organization can work out its system to evade outsourcing of some or all services? Yes (if yes highlight) No. Q14. Any more information under this context you feel you would like to share highlight below. ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ Read More