By Marta Jensen
The current business environment has moved towards complexity and competitiveness due to the globalization and internationalization of trade. The competitive nature in the global market has madder business firms to be strategic in their internal structure, production efficiency, marketing and distribution and human resource strategies in order to survive the storm. The internationalization of trade has also been accelerated by technological advancement leading to the emergence of multinational corporations whose powers enable them to shift operations to the international territories. The strategies employed by the companies involve not only the diversification of their operations and internal structures alignment, but also outsourcing essential services which the companies are not well endowed with or which will provided a more efficient operation of the companies, a move that will allow the companies to gain a competitive advantage in the market.
The definition of outsourcing has can be simplified as entering into a contract with an agency outside the firm to carry out the operations of the contracting company as stated in the contract, which could otherwise have been performed by the company’s in-house staff (Lock, p. 149). With the current economic trends (globalization and technological advancement taking shape), the objective of firms is to gain competitive advantage through efficiency, and in this case outsourcing of key functions such as human resource recruitment, customer care help desk functions, laundry and sanitation services, security services, distribution and auditing functions among others has become a priority.
For some time, the subject of outsourcing has been debated widely mostly focusing on the cost benefit analysis of the function. The proponents of outsourcing have highlighted various benefits that a company can derive from the decision which may include cost cutting, production efficiency, specialization, knowledge transfer, resource mobilization and organizational diversification. However, despite these benefits, outsourcing has been criticized on the view that it leads companies’ loss of control of its operations which in turn may result to poor quality of produced goods and services, insensitivity to customer service and erosion of security and confidentiality of the company which is outsourcing. This paper will discuss the view that company outsourcing is good for companies and also bring out the recommendation on how to ensure that outsourcing is effective.
Demerits of outsourcing
Although almost all organizations are shifting to outsourcing as the trend for the 21st century, not all is well as there are some limitations that a company has to encounter. Although some of the negative criticisms are mythical, the truth of the matter is that some of these issues are likely to be felt by the company outsourcing unless clear and strategies are enacted to address them. One of the main negative effects of outsourcing is the loss of reputation of the company due to thirds party dealing especially where the customers fail to relate the products with company itself. In this case, the company loses its touch with the community and this may affect its subsequent ventures since it will have to invest heavily to regain the confidence of the consumers.
Most companies lack adequate processes to validate the outsourced company’s ability to facilitate throughput with the right quality, competitive cost and reasonable timeline as expected by the outsourcing company (Alexander, 2009). The consequence is compromised quality as well as cost and time overruns, and therefore leading to the failure of the whole outsourcing process as the objectives may not be realized effectively and efficiently.
The cost of outsourcing may not be as low ass is expected especially where intellectual property comes into play. For instance, the services of experts in certain fields such as accounting, information technology and legal matters are always expensive due to the fact that the expertise and competent involved is embedded to an individual who may not be ready to share out without proper compensation. Indeed, Bragg, (2001, p.406) claims that outsourcing does not necessarily result to low cost since some functions and processes like internal control and audit require specialized skills which are expensive to outsource.
In some cases, the company may lose control of the outsourced functions due to diverse reasons including negligence, communication barriers and conflict of interests. Where the two companies lose contact with each other, the result may be poor quality of services. Poor communication between the outsourcing and the contracted company may hinder efficient delivery of services especially when it is put to account that the contracted company needs to perform the assigned responsibilities in reference to the company’s mission. For instance, where a company is contracted to provide packaging services to another company, it is mandated to ensure the package and labels reflect the strategies and goals of the company, and there should be continuous communication especially considering that marketing strategies are always dynamic and subject to change. In addition, the outsourcing company is always accountable for the results of the outsourcing process regardless of whether it has control or not and therefore, constant monitoring and participation in decision making on the outsourcing process is essential.
Some outsourced services are very sensitive and require a lot of input by the company to establish the reputation of the outsourced company. Divulging this information may threaten the security of the company through informational and physical risk. For instance, outsourcing of security services requires exposure of company’s security policies and procedures to the contracted firm which may be fatal especially in the event of broken relationship. Indeed, Tipton and Krause (2007) are on the view that some of the company’s information should be confidential and disclosing it to the outsiders may be dangerous to the company in the long run. In addition, the contracted company may also spread the outsourcing company’s strategies to the competitors leading to the company’s loss of market competitiveness as its strategies will be thwarted before they are implemented.
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MLA Style Citation:
Jensen, Marta "Company Outsourcing Is Good For Companies." Company Outsourcing Is Good For Companies. 26 Jun. 2010. uberarticles.com. 28 Feb 2016 <http://uberarticles.com/miscellaneous/company-outsourcing-is-good-for-companies/>.
APA Style Citation:
Jensen, M (2010, June 26). Company Outsourcing Is Good For Companies. Retrieved February 28, 2016, from http://uberarticles.com/miscellaneous/company-outsourcing-is-good-for-companies/
Chicago Style Citation:
Jensen, Marta "Company Outsourcing Is Good For Companies" uberarticles.com. http://uberarticles.com/miscellaneous/company-outsourcing-is-good-for-companies/
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