Outsourcing as a strategic tool - Lab Report Example

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Outsourcing as a strategic tool has gained widespread acceptance by global organizations around the world
Outsourcing, which has become a popular trend among the major industries, is a process in which an organization or a company hands over some of its internal operations to a third party…
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Outsourcing as a strategic tool
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"Outsourcing as a strategic tool"

Download file to see previous pages Past organizations still hire service providers to handle diverse business functions. But now many organizations prefer to outsource whole operations to another company or firm. These outsourcing companies are most commonly known as Business Process Outsourcing (BPO) and Information Technology Outsourcing (ITO)”.
BPO includes outsourcinng of human resource, call center, finance and accounting and even processing activities. Payroll administration, recruitment, training and selection of employees etc are the major human resource jobs outsourced. The countries mostly involvd in outsourcing are the US, Europe and Japan while the countries that fulfill these outsourcing jobs are mainly developing countries like India and China. The jobs that any organization generally outsources are data entry jobs, technical support staff, customer service jobs, accounting or financial jobs and writing jobs which usually consist of proofreading and copywriting. To identify jobs or functions that are outsourced, three organizations in three different sectors are taken into consideration- Bank of America from the financial industry, Microsoft from the IT industry and Ford Motor from the automobile industry.
Bank of America:
The Bank of America, which is one of the largest banks in the country, is a public company in the financial sector. The Bank of America has adopted outsourcing as a method or tool to meet its strategic goals. This bank first outsourced its IT department and gave its network operation to EDS in India in order to reduce its cost of labour because “a recent study found employees in the U.S. and Europe cost $150,000 a year in salary, benefits and other costs such as real estate. The same jobs can be done in India or somewhere else for $50,000” (Smith 2007, para. 4). Later, the Bank of America outsourced its BPO services to Accenture. The BPO services outsourced by the Bank of America mainly include human resource jobs, which are mainly carried out in the states of Hyderabad, Gurgaon and Mumbai in India. “Bank of America signed a 10-year contract with Exult Inc. to manage much of the bank’s HR function” (Noe et al. 2007, p. 46). The Bank of America had opened two outsourcing centres in India, the first being located at Hyderabad, was established in mid 2004. It has become a grand success for them than they opened the other one in Mumbai. The bank also deals with the method of offshore insourcing for which it had opened a center as a wholly owned subsidiary in another country. One such example is its subsidiary in Hyderabad, India which was set up in 1960 with a strategy of expanding its business. Due to the success of the Hyderabad branch, three more branches were opened in India. The bank of America also signed a collaborative outsourcing agreement with JLL and TCC with respect to providing real estate services to the bank which is an instance of domestic outsourcing. “The new contract with JLL and TCC consolidates Bank of America's real estate service providers from five to two” (Lyne 2001, para. 3). Microsoft: Microsoft, a public multinational corporation in America, is the most prominent business in the IT industry. Microsoft leads the industry by introducing new technologies and providing a wide range of services. Outsourcing is a major technique adopted by Microsoft in its development. Microsoft has adopted outsourcing techniques in various fields. An example of such an activity is the outsourcing ...Download file to see next pagesRead More
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Strategic Outsourcing

The author states that the justification for outsourcing looks very straight forward and in the early days the process was thorough and well thought through. By contracting out services to a third party, organisations could reduce their operating costs and refocus their efforts and remaining resources on their core competencies.

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