Outsourcing- Merits and Demerits - Thesis Example

OUTSOURCING- MERITS AND DEMERITS Outsourcing has become a permanent reality and way of life. There are merits and demerits for it.It is a fact that larger corporate make huge profits by outsourcing works in bulk. They also save expenses of infrastructure and overheads. But the point to be noted is that outsourcing is not handing over an activity because the parent company cannot complete with its own resources and manpower. It is actually giving work contracts to outside agencies just for fast development of the company. And, this is usually done only in hours of need. The volume of outsourcing also depends on the requirement. Outsourcing need not be a long term agreement. It may be a contract for a fixed tenure with strict conditions and remuneration. There may be facilities for the parent company to overview the progress going on in the outsourced work. It may be either on-site or off-site. Everything should go in accordance with the conditions of the contract signed between both the parties and each of them can bring to the notice of the other if any negligence or wrongdoings occur from any corner. This actually helps to assure and retain quality all through the functioning of outsourcing. Outsourcing refers to delegating back end functions that are necessary to run an establishment but are not a part of the core business. If we observe the market the trends in outsourcing could be understood clearly. It grows in bad times because companies want to reduce expenses. It grows in good times because companies want to grow. With the concentration on core business capabilities, many companies are outsourcing certain functions to experts. Outsourcing is done in areas like engineering, finance, health, accounting, human resources, etc. Anyway, a company goes for outsourcing means nothing but it is in the path of growth. Globalization, mergers and acquisitions are responsible for outsourcing. By outsourcing, companies get an idea of the cost of running their operations. Advantages: 1) Help cost reduction. 2) Helps the company to concentrate on its main business.3) Enables to obtain outside expertise: That expert from other companies provide the needed guidance and skills. 4) Helps to meet constantly changing customer demands. 5) Facilitates revenue increases: Large multinational companies are investing in captive BPO units in supplier countries in multiple locations, to reduce risk and control quality. Robert Klepper and Wendell Jones points out that those who take decision should keep in mind so many things in mind. The basic fact is that managers responsible to decide on outsourcing are responsible to explain the advantages the organization is going to make. Besides, the doubts and suspicions that may naturally arise in the minds of stakeholders, suppliers, customers as well as staff could be cleared. According to Mr. Shiva Ramani (as cited http://www.thesspa.com/sspanews/June07/article6.asp) expects the following from stakeholders:"1. Perform a Thorough Self-Analysis2. Look at Strategic Benefits, Not Just Business 3. Skill Availability & Management4)Project Management & Un-interrupted Communication5).Quality Commitment" So many merits may be pointed out on outsourcing. The first and foremost positive thing is that the parent company will get more time to concentrate on strategically important subjects rather than getting hooked up around the day-to-day hassles of specialized jobs. Then comes the availability of top-notch resources. This can be made use of the company as and when required. Outsourcing helps to bring down operational costs by a considerable margin and this is being counted as one of the most striking advantages of outsourcing. Now comes the negative sides of outsourcing. It is feared that outsourcing results in quality failure in general. Also security will be at risk. The fear is not exaggeration in all cases. Some experts even point out that the economic security of each country involved may be affected. Coming to risk in outsourcing. No doubt, if the contract is not between two genuine parties the rate of risk is so high. If a genuine client falls in the trap of a cheat, he may loose even his whole business or venture. According toKenneth Getz & Rachael Zuckerman (as cited in http://www.contractpharma.com/articles/2008/06/clinical-research-outsourcing): One particular risk that must be mitigated in strategic partnerships is the unlikely event of a relationship termination. Given the time-consuming care that must be taken to select the right partner provider, a termination will no doubt be highly disruptive. Due diligence Assessment: According to Anthony Plewes (as cited in http://www.continuityforum.org/news/outsourcing0124): The first step in risk mitigation is to carry out due diligence on the outsourcing service provider. Amongst other information, this will help identify whether the outsourcer has the capacity to carry out the work and whether it will be sufficiently financially stable to service the contract for its entire length. There was a time when outsourcing to certain underdeveloped countries was not acceptable. The simple reason is nothing but lack of basic necessities like computer, internet connection and the like. Even electricity was not there in all parts of certain countries.Qualified hands were limited. Their techno-commercial knowledge was poor. They were not familiar with English language itself, leave alone accent and style.With limited resources it was quite to difficult to run outsourcing agencies and it presents no guarantee to the group which gives bulk of work. Think of a situation where the party which outsources the work finds it difficult to communicate with the agency to which work has been given. There may be a hundreds of reasons for communication failure. All those may be genuine also. But this is not a fitting answer for the stress that the concerned parties are going to undergo. Naturally there was risk. But by this time, luckily things have changed. Most modern technology is available in most of the countries. Basic requirements for outsourcing, including power and net connectivity has become common in cheaper rates. It is getting more cheaper and accessible day-by-day. To conclude, it can be summed up that outsourcing has vastly benefited countries like India. Many qualified young professionals have been lucky to get very attractive jobs in IT, ITES and BPO field. Countries like USA, from where outsourcing is done are also benefited as they get the work done at much cheaper rate at no risk to quality and efficiency. As a result more companies have started outsourcing to countries like India. For the youngsters such a job is the first step towards their career growth. "References" Anthony, Plewes (2008, January 23). Due diligence assessment. From http://www.continuityforum.org/news/outsourcing0124 Arun Prabhudesai, (2009, October 27). Top 10 Riskiest Outsourcing locations in the world. From http://trak.in/Tags/Business/outsourcing/ Benefits.(n.d.)fromhttp://www.outsource2india.com/whyutsource/articles/benefit_outsourcing.ap Bpo Merits:(2006, 11 October) from http://callcenter.mixph.com/what-is-outsourcing-top-10-reasons-to-outsource/ Buki, James. (2009, 6 October). Outsourcing - Definition ofOutsourcing. From http://operationstech.about.com/od/glossary/g/Outsourcing.htm Current trend:(n.d.) from http://www.outsource2india.com/trends/future_outsourcing.asp Cynthia M Robertson (2000March22)Impacted.from http://www.stormingmedia.us/67/6794/A679493.html Jones, Wendelland Klepper, Robert (2008, February 12) A Summary of the Key Concepts from Outsourcing Information Technology Systems and Services from http://ww.businessforum.com/woj01.html Kenneth, Getz and Rachael, Zuckerman(June 2008)Risk in Clinical Trial Monitoring Function. From http://www.contractpharma.com/articles/2008/06/clinical-research-outsourcing Makhnach Olga(2007 April 09) Pros and cons. From http://ezinearticles.com/Pros-and-Cons-of-Outsourcing&id=519756 Makhnach, O. (2007, April 9). Pros and Cons of Outsourcing. From http://ezinearticles.com/Pros-and-Cons-of-Outsourcing&id=519756 Mary Thomas (2009 July 16) Definition of Outsourcing - What Outsourcing Really Means. From http://ezinearticles.com/Definition-of-Outsourcing---What-Outsourcing-Really-Means&id=2621426 Nagaraja, Srivatsan (2009, June 22) the Real Deal: Nagaraja Srivatsan on Rethinking Product Development in Life Sciences. from http://dealarchitect.typepad.com/deal_architect/2009/06/the-real-deal-nagaraja-srivatsan-on-rethinking-product-development-in-life-sciences.html Outsourcing projects. (n.d.) from http://www.outsourcing.org/ Ramani, Shiva (June 2007) Outsourcing Technical Support 11 Steps to Ensure Your Success. From http://www.thesspa.com/sspanews/June07/article6.asp Subjective assessment (2006 Dec14). Fromhttp://vudat.msu.edu/subjective_assess/ Read More