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Outsourcing is the process that involve a company deleting some of its in-house operations within its main operations to a third party,thus it can be described as a contracting transaction where one company purchases services from another company,while holding the main operations of the company. The major aim of outsourcing is to cut down unnecessary costs emanating from processes that can be done well and cost effect by another third party than it handled within the main process of production. The company that is giving out its part of the production line give out directives to the company that will do the work for them.
Reasons for outsourcing. The whole concept of outsourcing can be based on efforts to create an economic sound environment for the company in general( Eecap Website,2008),but the arrival to the option of outsourcing can be accelerated by a number of reasons that all end to one objective. Some of the reasons for outsourcing include the following;A company can decide to outsource part of its operations due to the scarcity of workers and resources,and this can be argued from an angle of skilled workers.
A company can also decided to outsource some of its operations if it wants to use its currently available resources efficiently in the profitable main production line and rather outsource other operations like system management,system monitoring and tuning,customer care services,server updating and capacity planning. In Brief, a company is able to concentrate in in its core operations ,while being kept updated in technological changes and developments. Outsourcing enables a business to remain focused in perfecting its main operations other that diversifying its attentions.
This is following by the benefits of specialization,This specialization leads to benefits like development of new products,perfection of the product line,add expertise on the individual involved in a common routine that they are used with ,it improved the level of customer satisfaction,ensures smooth flow of the production cycle,reduce management problems and it ensures quick responses to changes in competence. Outsourcing rescues a company from some overhead expenses like the purchase of new infrastructure,for example purchase of new technology in keeping with the technological platform.
Outsourcing can be induced if a company wants to reduce or do away with operational errors and inefficiencies. The outsourcing services providing company will ensure efficiency in the production cycle given its specialization and investment. Outsourcing also helps a company to attain an international standard which in turn improves its competitiveness in the world market,because it ensure that the company gets the recent updates in the technological advancement and changes that match with the world demand.
Business transformation is also enabled by outsourcing through the frequent monitoring of the market movements. Outsourcing enable a companies to spread its risks,thus acting as a means of risk management,because the risks involved in some of its operations are taken up by the third part who does it on the company’s behalf, as it guarantees access to relevant skills and knowledge.
A large number of firms are outsourcing their Information Technology to third parties and this firms are either to outsource part of their Information technology or outsource the entire information technology. “ The entire outsourcing of the IT system is believed to have not hit the target of outsourcing that rather partial outsourcing of the Information technology”(All business website,2005). Information technology outsourcing has been in generational transformation since 1960s and 1970s,where in the 1980s a new information Technology outsourcing started.
There are three major differences between new old information technology Outsourcing and they are described as follows;First ,the outsourcing was only restricted to small and medium sized firm which did posses their own Information technology system in the old outsourcing,while in the new form of outsourcing it in cooperates all scales of firms ranging from small scale,medium sized to large scale firms .
In the old outsourcing their were very few firms that used to outsource their operational activities and they used to outsource just a small range of and depth of services,compared to the new outsourcing that involves so many firms engaged in outsourcing and seriously engaged in outsourcing to the extend that they outsource a large range and depth of services.
Thirdly, outsourcing in the new era,which is after 1980s,it did not involve the transfer of equipments to the company that is offering the outsourcing services,compared to the old era outsourcing that involved the company in transferring the equipments to a vendor,who shall perform the task on behalf of the company. Global outsourcing is likely to ensure technological transfers to other countries .
The massive movement of manufacturing and related services to other countries outside the country of origin, implies that that the technological improvements in manufacturing process that are innovated and refined as portrayed in the goods produced and the services provided can be developed in other countries with a lot of easy because was they only needed is technology to start of their operations.
Therefore global outsourcing can be viewed as a means of enabling countries which are technologically behind to establish themselves in order to meet the international standards and hence competitiveness of that country perfected. This is also translated in more value added to goods that the country will export ,which is an economic benefits to the country that will lead to improved citizenry welfare in general in that country’s economy.
On the ground of global outsourcing, a country runs the risk of being technologically behind in the sense that most of its operations are done by multi-national companies in the name of outsourcing. For example too much outsourcing of Information technology applications development and delivery inhibit the country from technologically developing,because they don’t exactly know how to solve their own technological problem,as most of their problems are got solved by the companies from abroad,who are technologically equipped.
One country can only develop technologically on the ground that it is trying to solve its problems and in this case it works under trial and error ,and in the process of trial and error,technological solutions are attained which account for the country’s technological stock hence hence technological advancement which is in this case relevant to the country’s need,as it was developed with purpose of solving a problem.
Therefore,IT applications development and delivery outsourced outside a country normally inhibits a country from technologically developing an d rather become Dependant. Global outsourcing carries a risk of discouraging young,bright and potential innovators who could rather come with noble ideas in an organization that might possibly be translated into technological advancement.
Technology is normally developed in trying to solve organizational problems that arise in the day to day operations in an organization and it is developed by the people who are working within the system by studying and analyzing the daily changes and responses that arise from few changes that they normally make. Once then a company or organization outsource part or all of its operation,this denies a challenge to people who are working with the system in discovering new ways of doing this ,which in turn denies them a chance to exposure and improvement of their expertise in the different fields in which they work.
The people working with a given technological system are limited to work to given scope,for example,they can learn just only on how to operate the system but they can not make any change to the system if it fails to respond to the expected results,unless they consult the outsourcing vendor thus barring them from both career development and improvement of their expertise.
Therefore,Global Outsourcing will discourage young ,bright and potential innovators from engaging in innovative subjects because they will be jobless due to the presence outsourcing. An economy or country that outsource a lot of its operation run a risk of loosing its sovereignty in the sense that most of its operations efficiency will depend on the efficiency and honesty of the outsourcing vendor. There are very sensitive issues in a country like military and economic data,,which are a backbone for the country’s sovereignty.
In a country for example outsource some of its military operations to an international vendor,and specifically the Information technology operations a country runs a risk of it either colonized or the government overthrown if it happens that the outsourcing vendor has other hidden interests other than outsourcing services,because the vendor has the ability and a chance of tampering with the military operations by either making it perform perfectly or deter its operations.
Outsourcing of economic management in a country,places a country at risk economic deterioration ,if it happens that the outsourcing vendor has other interests more than just laying a system for economic efficiency. Outsourcing economic system operations might lead to economic collapse in a country due to lack of patriotism in the outsourcing vendor,because they don’t care so much on what is the aftermath in implementing a given system an economy once they are authorized to perform their task.
There interests might be on their own material gain without considering the effect of the system to the general public and the citizens of that country. An outsourcing vendor may not care about the effects of a given system,as they may only consider meeting their obligations as directed by the outsourcing economy. Therefore, a country run a risk by outsourcing some or all of its operations,by just mere trust that the outsourcing vendor will be just and fair.
A country’s risk to loose sovereignty due to transfer of data to other countries that are outsourcing the country’s companies. The data may be of either economic or military information. The adoption of Outsourcing is not real very fast however good its advantages may sound in the sense that companies are not convinced that their outsourcing vendors are trustworthy,in that they will keep the company’s secrets and strategic plans. Companies that outsource their information technology system run a risk of their secrets and strategic plans leaking to their competitors.
Vendors can easily be attempted to leak information of the company that they are outsourcing for if offered a good return on the giving of this information. Therefore,in a competitive market,the issue of outsourcing some or all operations of the company will lead to in-competitiveness of the company that is outsourcing its operations,if the outsourcing vendor decide to give out the information or the information is made easily available to its competitors. The competitors are likely to counter a company’s strategic plans in time to their advantage.
For example,the design of new products in attempt to arrest the market demand is a very top secret to a company which is likely to determine its competitiveness in the future market. If an information and technology involved in the design of this product is leaked to a competitor, then it is likely that the competitors will either adapt the making of that product earlier than the inventor or design a counter product including the features of the product that the outsourced for company was to produce, as means of taking advantage of the market situation.
Outsourcing is believed to within it economic advantages to the outsourcing company but a times the outsourcing vendor might not exactly know what exactly the company needs to improve its performance. The outsourcing vendors are just commissioned to perform some specific tasks and do it their level best. The relevance of the tasks performed by the outsourcing vendor to the entire operational system is less concern to the vendor itself, and their concern is to perform their obligation.
This implies that outsourcing does not necessarily imply good performance because there are other problems which equivalently lead to poor performance other than inefficiencies in some departments of a system that can be outsourced. These problems might include the core management team itself,which is capable of inducing poor performance and not in the information technology. Therefore companies should first identify its downfall before authorizing an outsourcing vendor to avoid duplication of work or unnecessary involvement of the third party in the operations.
Global outsourcing comes with the risk of promoting unemployment in the technology importing processes. Global outsourcing is likely to promote unemployment to the country’s professionals workers,if it exerts a downward pressure on job opportunities,wage and other means of compensation. On the premise that global outsourcing carries imported technological skills in it,there is a likelihood most of the employees in the outsourcing vendor will be foreigner in the the outsourcing company’s country of origin.
This does not either promote employment levels in the country’s economic welfare. Some outsourcing processes impact the number of employment opportunities negatively in the sense that they encourage laying out of workers from a company,who were working with the department that has been outsourced. Conclusion. Outsourcing can be viewed as a means means of company giving out some or all of its operations to a third party who will do it on its behalf.
The purpose of outsourcing is purposely to improve performance of a company either through increased efficiency in the operation system or minimizing the operational costs that aim at increasing the company’s performance. The company that is outsourcing benefit for a number of reasons:Outsourcing alleviate the possibilities of running short of workers because the work is done on behalf of the company,and this can ensure easy access to experts who can perform the work better for the company that just depending on trial and error.
It also ensures that the resources that the resources which are within the company’s demand are well utilized and directed to core functions of its operation thus saving resources that would have been spent in keeping the supportive operations. Outsourcing normally improves the management costs and lead to the increase in the capital fund because capital that could have to be used in providing support operations is set to improve the core operations in a company.
It also enables a company to focus on the main business which improves performance and reliability which comes out of the benefits of specialization. Outsourcing also ensure that there is an accelerated business transformation form one stage of technology to another without being lagging behind technologically, and this is ensured by the outsourcing vendors who are expertise in the area of their operations equipped with the most recent and appropriate technology that ensures favorable performance of the company.
Outsourcing and more especially the global Outsourcing it ensures the keeping of an international standard which make companies being competitive both locally and internationally in trying to the world’s demand for goods and services. Outsourcing can also be viewed as a means of spreading risks,that is a form of risk management,because the outsourcing vendor will be certainly liable for any risks that are in the operations that has been outsourced to it.
Global outsourcing is an indirect importation of technology to a given country,which in turn accelerate development in that country. Despite the advantages of outsourcing its also carries some negative aspects within its which leads to low rate companies deciding to outsource. A country will run a risk of loosing its sovereignty if it outsources most of its operations if it happens that the outsourcing vendor has other motives other than just giving outsourcing services,and mostly if it has a political interest.
Outsourcing discourages innovations with an organization’s because the major participants are not given chance to put their effort in finding solutions to problems that arise within their operations and rather the operations are outsourced to a vendor thus not exhausting an organization’s work force. The company that is outsourcing its operations run a risk of its information including secrets and strategic plans being accessed by its competitors because they are the same vendors who will possibly outsource their competitors operations.
Outsourcing does not necessary guarantee good performance because the outsourcing vendors are just authorized to perform some specific task and it can happen that those operation being outsourced are not the true cause of the company’s downfalls. A country that outsource most of its operations run a risk of being technologically lagging behind while in the countries where its outsourced from keep on technologically developing.