Outsourcing: Joint venture, Nearshore, Back Source, and Switch Vendor - Essay Example

Like any other business setting, to succeed, outsourcing requires developing various important factors that will improve the performance of employees. These factors may include provision of incentives, awarding benefits, and setting of ideal targets that will motivate the employees towards the achievement of organizational goals. It is however worth noting that punitive measures for failure should also be set. Setting punitive measures would improve performance since employees would be careful to meet the set expectations whilst still avoiding failure. The application of outsourcing can be an important factor towards the improvement of a firm’s performance and quality. In fact, Whitten and Leidner point out that outsourcing can determine the “product quality, service quality, relationship quality and the switching costs” of a company’s products (2006). As such, outsourcing is generally an important strategy that can determine the success of an organization. Essentially, due to the development or organizational skills and technological developments, the competition among organizations has increased significantly. To avoid losses, many companies have opted to enter in to contracts and partnerships through the act of outsourcing. Generally, to enter these contracts, there are various costs that each organization has to cater for. These costs generally arise due to the payments made in respect to offshore government policies, agreements and negotiations as well as legal aspect matters among others. Notably important, in many instances, the costs of the partnership contract will be lower in huge and established corporations such as GlobShop, and higher in smaller organizations. Generally speaking, established organizations such as GlobShop are usually offered better investment programs and incentives as compared to the less established ones. Equally important, the monitoring and evaluation of performance in any organization helps in the acknowledgement of ambiguities that may lead to failure of the outsourcing. To ensure that an outsourcing venture is successful, organizations should consistently conduct meetings to discuss and review the set goals and targets. These meetings will also ensure that the organizations keep a consistent work towards attaining specific objectives thus enabling employees and managers to consistently keep track of their performance. Furthermore, joint venture outsourcing enables the organizations under partnership to increase returns and reduce costs significantly. However, lack of careful management may lead to losses and contractual differences that might result to the need for back sourcing. According to Whitten and Leidner, the joint outsourcing venture between IBM Corporation and JP Morgan Chase & Co. which had earlier been projected to last for up to seven years, was terminated only after two years entered ended its outsourcing relationship with IBM Corporation after only two years (2006). It is therefore important for partners to clarify there expectations to each other before entering to an outsourcing venture. Correspondingly, to ensure a healthy and functional business relationship with ISS, GlobShop clarified there expectations for consistency and quality service provision (Ranganathan, Krishnan & Glickman, 2007). This therefore implies that it is important for any firms entering into an outsourcing venture to present their expectations to the partners. Doing this will ensure that emerging issues could be identified and dealt with accordingly, thus reducing the chances of business failure. It is also worth noting that other factors such as maintaining consistent communication and carrying out regular evaluations could be important towards achieving a successful outsourcing relationship. Remarkably, in order for a joint outsourcing venture to thrive, factors such as cultural variations should be examined, particularly for a company operating beyond geographical borders. Understanding the culture of the consumers or clients will enable the organization to function efficiently without interfering with or violating the daily beliefs of the customers and clients. In addition, besides understanding the cultural practices and beliefs of the stakeholders, it is also important for the partners to have a clear understanding of the cultural perspective of one another. This could be an important step towards forming an ideal business relationship. Bedsides cultural knowledge, distance proximity and geographical differences also play a huge role more so in the success and determination of a nearshore or offshore business (Carmel and Abbott, 2007). This can be arguably due to the fact that different geographical locations are inhabited by people with different cultural beliefs and practices. Thus, to ensure the success of the outsourcing venture, partners should create an atmosphere that will enable clients to easily relate with the organization. One of the strategies to that GlobShop has used to bridge the cultural gap has been through the implementation of various projects that will improve lives of individuals within the offshore. In addition, the company’s focus on quality production has also enabled the clients to successfully relate with the business products. Normally, due to technological advancements and environmental changes over time, there are multiple risks associated with outsourcing. Outsourcing risks can lead to the failure of the joint venture as well as erupt inter-state conflicts as in the case of Wiki Leaks (Mutch & Anderson, 2011). Hence, outsourcing could lead to the development of treacherous technologies and wars thus affecting existing peaceful relationships among nations. This could also cause an instability in interactions within the partnership and between the offshore partners and their clients. Equally important, there is the risk of the occurrence of natural disasters which may happen unpredictably and cause huge damages. For instance, occurrence of natural disasters such as earthquakes and tsunamis could lead to destruction of organizational premises, breaking of information transmitters and cables, and other acts that could cause uncertain levels of damage. Moreover, other risk factors such as currency instability and political instability could pose a dangerous threat to the success of an outsourced venture. Usually, at the heart of any successful venture there is a good and effective mutual relationship amongst clients, partners and suppliers. Thus, although the will to succeed might be present within the organization, the venture might not be able to realize success if trust and respect are not mutually wedged. GlobShop has consistently worked towards providing genuine and highly quality work and services to nature a good legal and organizational relationship. Generally, engaging in services that could legally and morally affect the performance of an organization, especially in a country such as India, could lead to the destabilization of the entire venture. As such, GlobShop has used the development of good business relationship among clients and offshore partners as its strategy to be successful in a highly competitive and risky business environment. Typically, over the last decades, organizations have made use of outsourcing as a key strategy to gain competitive advantage as well as to increase their prosperity chances. Usually, there are various reasons that could drive a firm towards the outsourcing decision. Among these reasons could be the firm’s eagerness to cut costs, focus on the core competences and share its organizational risks among others. Nonetheless, outsourcing has arguably “reached its limits” and thus many companies have resorted to alternative sourcing strategies (Matthews & Brueggemann, 2015). Hence, when outsourcing no longer works effectively for an organization, it can as well decide to backsource. According to Lacity and Willcocks 34% of partnerships that are discontinued become subject to backsourcing. Equally, Brown points out that a report by Gartner 56% and 42% of small and mid-sized business respectively undergo backsourcing after the termination of contracts (qtd. in Whitten & Leidner, 2006). As such backsourcing can be an alternative when a partner fails to deliver efficient services and quality products as dictated by the contract. Comparatively, in conjunction, the Social Exchange Theory (SET) Transaction Cost Theory (TCT) illustrate how the quality of products, services, and relationships can lead to the management’s decision on whether to continue outsourcing, to backsource or to switch vendors (Whitten & Leidner, 2006). As such, the SET and TCT theories, identifies the quality of the products, services, and relationships as the main determinants of the efficiency and strength of an outsourcing relationship. It is however worth noting that whereas TCT theory has been used to illustrate the reasons behind an outsourcing arrangement, SET provides an explanation on why the firms can opt to backsource or switch vendors. According to Whitten and Leidner, lowering the transaction costs, to achieve a certain level of “quality in the services or products” provided are among the main reasons of outsourcing (2006). As such, it is arguably true that the motivating factors towards backsoucing are primarily economical. In general, the term switching vendors refers to the decision of the clients to revert to the earlier information technology outsourced undertakings. When a partnership decides to switch vendors, there are other factors that have to be agreed upon, as pertains the outsourcing contract. For instance, switching vendors could lead to further discussion on the termination and renegotiation of the outsourcing contract that is expiring. According to Whitten and Leidner, during the switching of vendors, among the expectations of the clients that are not met include the control of IS activities and the loss of expertise (2006). Hence, in switching of vendors a client decides to terminate the relationship that existed with one vendor in a bid to enter in to new outsourcing contract with another one. Works Cited Carmel, E & Abbott, P 2007, ‘Why ‘nearshore’ means that distance matters’, Communications of the Acm. Matthews, C & Brueggemann, R 2015, Innovation and entrepreneurship: a competency framework. Mutch, J & Anderson, B 2011, Preventing good people from doing bad things: implementing least privilege, Après. Ranganathan, C Krishnan, P & Glickman, R 2007, ‘Crafting and executing an offshore IT sourcing strategy: GlobShop’s experience’, Journal of Information Technology, vol.22, no. 4, p. 440-450. Whitten, D & Leidner, D 2006, Bringing IT Back: An Analysis of the Decision to back source or Switch Vendors. Read More