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How outsourcing could be accomplished in ways that improve employee acceptance and reactions to change - Research Paper Example

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Download file to see previous pages The paper tells that in today’s global world, outsourcing jobs is increasingly a fact of life. Outsourcing may be necessary to retain a competitive advantage, as other firms are outsourcing to take advantage of lower costs and higher quality. That said, outsourcing may not always be acceptable to the affected employees. Employees may be cynical about the changes brought about by the outsourcing, which leads to decreased employee morale. There are ways that firms should approach outsourcing decisions, namely communicating directly with employees in an effective manner. There are also ways not to approach outsourcing, which involves blindsiding employees and lying to them, as OzBank, the case study detailed below, approached their outsourcing. Moreover, appointing an effective, transformational leader to guide the process is essential. Guang Qu et al. researched what characteristics regarding IT firms made the firms more likely to outsourcing. They found that industry munificence and dynamism was positively correlated with the amount of outsourcing done by the individual firms in the industry. On the other hand, industry concentration is negatively correlated with outsourcing, due to the power and resources such firms have. They also found that high capital intensive industries are less likely to downsize than low capital intensive industries. This is because high capital intensive industries do not put a premium on risky and novel practices, which outsourcing is considered to be. Cox et al. (2011) also studied outsourcing with regards to IT firms. They identified two different categories of IT outsourcing – IT outsourcing with regards to core value-chain operations, and IT outsourcing with regards to support activities. The main outsourcing in the core value chain operations is distribution, whereas, with support activities, human resource management and facilities management are the two main support activities which involve outsourcing. They state that firms outsource because they want to retain a competitive advantage, including costs savings and quality improvement. Outsourcing may also increase flexibility of the firm, as well as restructure the firms’ costs. The focus of their study is on IT firms which are in the public sector, as opposed to the private sector, and the research method was case studies with semi-structured interviews. They found that, with the firms in the public sector, that the cost savings was the most important factor in the decision to outsource, and that the firms which did outsource found that there was also a quality advantage to doing so. This is because there is generally a larger pool of skilled workers to draw upon when a firm outsources. That said, there might be a disadvantage to firms which outsource due to industry perception of these firms. Oh et al. (2006) studied this factor. They found that, with regards to investors, one half of the investors in IT firms responded negatively to announcements that the IT firm would be outsourcing, and one half of the firms reacted positively. The positive reactions came when the level of transactional risk for the firm was low, and the opposite when the level of transactional risk was high. The key drivers for negative reactions were “the relative size of the contract, the inability to monitor the vendor’s performance, the asset specificity of the IT outsourced resources, and the relative size of the vendor” (Oh et al., 2006, p. 299). Lee et al. (2000) further studied information systems (IS) outsourcing. They identified five research issues with regards to this. The first was why firms used outsourcing for acquisition. In particular, a firm must decide whether to make or buy developed technology. The next issue is the motivation for outsourcing. Lee et al. (2000) notes that there are inherent advantages and disadvantages to outsourcing. The advantages include cost reduction and quality enhancement. The disadvantages include loss of control, loss of qualified personnel and loss of flexibility. The third ...Download file to see next pagesRead More
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