Impact of Outsourcing on Business-Free-Samples-Myassignmenthelp

Question: Discuss about the Outsourcing on IBMs Business. Answer: Literature Review Outsourcing allows companies to transfer their secondary tasks to other organisations, such as accounting, legislative task, monitoring activities and manufacturing task. Outsourcing the secondary task provide different benefits to the enterprise including less expenditure on activities, efficiency in work, and increase in quality of customer services. According to Gobble (2013), along with different rewards, there are numerous challenges that a company faces while outsourcing their business tasks like, no managerial control, loss in reputation and high competition. IBM or International Business Machines Company was founded in 1911 by Charles Flint. It is an American technology corporation which operates in cloud services, hardware manufacturing, and information technology industry. Many of the secondary business activities are outsourced by IBM in different countries like Malaysia, Indonesia, Thailand, and India. The company operates more than 40 information centers which allow them to delegate their work with security and efficiency (Gennaro, Gentry and Parno 2010). Advantage of Outsourcing In modern time numerous organisations choose the option of outsourcing their secondary tasks due to its benefits. Globalisation has allowed companies to enhance their operations by outsourcing noncore tasks to third parties. Various companies use outsourcing to expand their business. Reduction in Costs The main reason for outsourcing a business activity is to reduce the costs of operations for the business. The cost for establishing offices, hiring employees, providing training and managing are high in developed countries. Therefore, corporations prefer to outsource their activities to different companies in order to reduce their expenditures. There are different companies who provide services of outsourcing in various countries. IBM uses the strategy of outsourcing to reduce their operating expenses. It helps IBM to gain a competitive advantage over its competition (Oshri, Kotlarsky and Willcocks 2015). Performance of Tasks through Experts The research conducted by Wang, Ren, and Wang (2011) concluded that, usually, the outsourcing company hires expert and skilled employees to perform their tasks; allowing companies to enhance the quality of their services. Instead of hiring new employees and providing them training, the cost of outsourcing such work is significantly lower. Organisations such as Tesco use the expertise of other companies to enhancing their service quality. IBM has enhanced their customer satisfaction rate through this process (Grimpe and Kaiser 2010). Efficiency in Companys Operation By removing the focus from the secondary task, a company can enhance their productivity of the workplace. The employees of organisation can focus their attention on their primary tasks which enhance the growth of the organisation. IBMs operation structure allows its employees to focus on the primary task and they transfer their secondary tasks to another organisation. Focus on Core Activities According to Gewald (2010), outsourcing allows companies to focus on their primary tasks by transferring secondary tasks to another company. IBM use outsourcing to focus on their primary activities such as maintain cloud networks and manufacturing technical hardware components. The company transferred its customer service tasks to other companies which enhance the quality of their primary tasks. Quality of Customer Service The paper of Hsuan and Mahnke (2011) provided that, outsourcing the work allows the company to transfer their tasks to field experts. This ensures the high quality of customer satisfaction rate. The company does not have to incur high expenditure over enhancing the quality of customer service. IBM outsourced its information technology customer service to other companies, which allows the organisation to provide high-quality customer service at lower cost. Disadvantages of Outsourcing Outsourcing is a beneficial strategy for organisations to reduce expenditure and gain an advantage over the competition, but there are certain challenges that a corporation faces during outsourcing process. These challenges can harm the reputation and financial status of a company. No control over Management According to Tayauova (2012), outsourcing a task to another company reduce the managerial control over the operation of the business. The management of organisation cannot interfere in daily activities of the outsourcing company. The implementation of new policies and maintain a standard of quality is difficult for organisations while outsourcing. Many companies outsourced to the organisations of different countries, therefore government regulations stop companies from implementing their policies in outsourcing organisation. IBM faces the same issues since they outsourced a large part of their activities in Malaysia, Indonesia, and India. The lack of managerial control can hamper the quality of services of the organisation. Danger of New Competition In modern times, outsourcing strategy is applied by numerous organisations. In order to gain competitive advantage and reduce expenditure, the list of outsourcing companies has expanded. This creates new competition in the outsourcing market since a large number of companies are outsourcing. IBM faces the same difficulty when its competitor Dell and Hewlett-Packard started outsourcing their IT services, as provided in the book of Willcocks and Cullen (2013). Bad Publicity Outsourcing the business can create a bad reputation of the organisation since the company is providing jobs to a different country instead of its domestic country. Many people lost a job due to outsourcing in countries such as United States, United Kingdom and Australia, which makes it difficult for companies to outsource their business tasks (Abu-Musa 2011). Data leak Outsourcing a business task has a significant risk of data theft or leakage. Organisations have to provide their sensitive data to outsourcing company for working such as accounting data, customers details, and project informations. Since the organisation has no material control over the policies of another company, their data remain in the danger of leakage. IBM has similar problems since they have to share their customers information with another company. The company has to maintain strict policies to avoid any data leakage (Caruth, Haden and Caruth 2013). Difficulty of Language According to Gospel and Sako (2010), usually, companies outsourced their business to the organisation of different countries. But the company serve its services to domestic customers. Therefore, if customers call for any information they can get frustrated due to the accent of call operator. IBM outsourced its activities in Malaysia, Thailand, and India where the employees have thick accents, which could be a frustration for companys customers to comprehend. Employees Dismissal The paper of Dolgui and Proth (2013) provided that, many companies required to dismiss their employees while outsourcing their business to another company because they are no longer essential in the organisation. Many employees despise the idea of outsourcing since they see many peoples lose their jobs in outsourcing process. Workers unions of developed countries protest against the organisations that outsourced their business tasks to another under developed countries. These protests harm the reputation of the company. While in case of outsourcing companies, since they have a large amount of labour available at lower prices, they hire them at the time of peak load, and they dismiss them. This affects the living of those labours that are depending on the organisation. In recent news published by The Economic Times, IBM is dismissing more than five thousand employees from their data centers in India. The managerial decisions like this harm the reputation of the corporation (Dayama 2017). Unknown Future Expenses Organisations usually formed a full proof contract while outsourcing their business activities, but since these companies are situated in other countries, the company can face expenditures outside the contracts. The government regulations, economic factors, and culture are different in other countries; therefore, companies can face hidden expenses while dealing with organisations. IBM outsource their business tasks to the companies of Malaysia, India, and Thailand, therefore their marketing conditions can affect the business of IBM (Hsu, Liou and Chuang 2013). Effect of Outsourcing on IBMs Business IBM has been outsourcing their business activates for a long time, which helps them enhance their products quality and customers services. The company benefits from outsourcing their IT services and gained a competitive advantage. Many other competitors of IBM such as Dell and Hewlett-Packard have implemented the same policies in their organisation, but the efficiency of IBM outsourcing is significantly better than its competitors. In order to ascertain the benefits of outsourcing, IBM conducted research over different companies who outsourced their business and other who did not outsource. In the research, there were 56 companies, of which 18 were the client of IBM. The research concluded a relationship between business enhancement and outsourcing of IT services. Following were the outcome of research (IBM 2010): Enhancement in Return on assets: The research concluded that the companies, who outsourced their IT services, enhanced their percentage of return on assets by more than 16 percent. Before the outsourcing, the rate for those companies was below 7.5 percent of market standards. Reduction in Expenses: The companies who outsourced see a reduction in selling, managerial and general expenses as compared to its competitors. The expenses of outsourcing enterprises were below 4.2 percent then the marketing standard. EBIT: The earnings before income and tax of outsourcing companies were raised by 11.8 percent as compared to its competitors. Longer Agreement Higher Benefits: The companies with more than one year of outsourcing agreement were most likely to enhance they are earning as compared to companies with less than one year of the contract. Around 54 percent of companies with outsourcing agreement of one year or less seen a lower growth in profit. As compared to 71 percent companies with more than one year of the outsourcing agreement, whose income enhanced. The outcome of research proved the benefits of outsourcing in different organisations. Many companies such as Flour, Accenture, and Teleperformance have seen growth in their business due to the outsourcing of their task. The customers benefits also since the quality of services enhanced significantly. Outsourcing a business activity allow flexibility in an organisation which assists in its development. IBM has successfully implemented the outsourcing strategy in their business model, which allows them to enhance their growth. The company provides a high level of facilities to its customers and the flexibility allows them to focus on their core activities. The enterprise provides a quality work environment to its employees which enhance their productivity. The outsourcing strategy allows IBM to gain competitive advantage and sustained their future growth. Conclusion Conclusively it can be said that outsourcing a business can benefit an organisation in many ways. It has various advantages such as flexibility, lower costs, and high quality of services to customers. Various organisations have implemented this strategy in their business model to gain a competitive advantage over their competitors. But there are several disadvantages of outsourcing as well, such as no managerial control, hidden costs, and increase in competition. The company should analyse the market before implementing the outsourcing strategy. IBM has been successful in their outsourcing procedure since the company gained an advantage over its competitors. References Abu-Musa, A.A., 2011. Exploring Information Systems/Technology Outsourcing in Saudi Organizations: An Empirical Study.Journal of accounting, business management,18(2). 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