LEEDS MET INDIA, BHOPAL

TITLE: - OUTSOURCING
NAME: - AKANSHA KALRA
DEGREE: - BA (HONS) BUSINESS AND MANAGEMENT
COURSE NAME: - ORGANISATION AND ENVIRONMENT
COURSE CODE: - 10349

MODULE TUTOR: - DORRON OTTER

DATE OF SUBMISSION: - 13TH NOVEMBER 2009
CONTENTS:

1. ABSTRACT

2. INTRODUCTION

3. CONCLUSION

4. BIBLIOGRAPHY
ABSTRACT

Outsourcing has helped many industries reduce costs and increase profits. But businesses have
not yet been able to convey the real-time benefits of outsourcing. This has led to increased
sensitivity to the outsourcing of jobs, which have seemingly led to loss of employment
opportunities in the local economic system. “Seemingly” as this is not the case. For short while it
may seem that people are losing their jobs to outsourcing, but in the long run, as profits rise, the
economy improves and with that new jobs are created.

OUTSOURCING

Outsourcing is often defined as the delegation of non-core operations or jobs from internal
production to an external entity that specializes in that operation. Outsourcing is a business
decision that is often made to focus on core competences. It also implies transferring jobs to
another country, either by hiring local subcontractors or building a facility in an area where labor
is cheap. It became a popular buzzword in business and management in the 1990s.

Outsourcing has really made its mark in the business entities. The decision to outsource is like
the decision to expand a business overseas, to incorporate computer technology, or to hire new
workers. Outsourcing can change the way companies do business-through people, process and
technology. Whether B2B or B2C, whether SMS’s or large diversified companies or small home
offices, every company can leverage the power of outsourcing for business transformation.

Lately however, the concept of outsourcing has been criticized. The negative attitude towards
outsourcing have been mostly discussed by masses in the US and UK, due to unemployment in
the mentioned countries. People in countries like the US, feel that outsourcing is threat to their
economy. Economist Thomas Sowell from the University of Chicago said “anything that
increases economic efficiency, whether by outsourcing or a hundred other things, is likely to cost
somebody's job. There are other problems too.

Problem of unemployment
It cannot be denied that the immediate affects of outsourcing such as lay-offs as well as the
shifting of production and jobs to foreign locations causes problems for both low and high-end
employees.

Quality problem

As "outsourced" workers are not the paid agents of the company, it is argued that there is less
incentive for the agent to show loyalty or work ethic in its representation of said Company. It has
been therefore argued that quality levels of customer service and technical support of outsourced
tasks are lower than where they have remained 'in-house'.

Other problems

These include unfavorable contract lengths, loss of competitive edge, problems in contract
renewal, contractual misunderstandings, foreign accents and irritated customers, unions,
employees etc.

But this trend is not entirely damaging, there several marked benefits associated with it.

Focus on core business

Back office operations of a company require high maintenance and specialized attention. Yet
most of them are critical for the company's everyday activities. By outsourcing their back office
operations businesses can concentrate on their core competencies while their back office
operations are being managed smoothly by a specialized third party company.

Cost and Efficiency saving

Lowering the overall cost of the service to the business. This involves defining quality levels, re-
pricing, re-negotiation and cost-restructuring.

Staffing Flexibility

Access to larger talent pool and sustainable source of skills. This increase quality as well as
quantity of goods.

Increase in Business
By employing skilled manpower in larger numbers at lower costs companies can really increase
their productivity. This in turn would result in better customer satisfaction and increased
profitability.

Competitive Advantage

In today’s fast paced global economy a company needs to provide high-quality services at cheap
prices to its customers in order to retain them. Outsourcing in this case can help the company
maintain lower rates with better service solutions, thereby giving them a better market position.

Tax Benefits

By selecting the right BPO destination companies can save up on taxes and can improve their
margins.

The Outsourcing market is estimated to grow tremendously in the coming years with an
increasing number of companies planning to outsource and as the number of companies are
rising, there will be large variety and less risks as businesses will have more experience and
clearer objectives.

CONCLUSION

As competition is increasing day by day, outsourcing is becoming need of the hour. To remain
competitive a company needs to maintain both quality and low prices and outsourcing is the best
way out to handle this situation. Though in short run, outsourcing seems damaging for people in
developed countries but in long run the overall economy improves and new jobs are also created.
 BIBLIOGRAPHY

• Arguments for outsourcing. (2007).Available from: <http://www.spiritus-

temporis.com/outsourcing/arguments-for-outsourcing.html>. [Accessed 11 Nov 2009].
• Cyber Futuristics (n.d) Pros and cons of Outsourcing [internet], cyfuture. Available from:
< http://www.cyfuture.com/pro-and-cons-of-outsourcing.html>. [Accessed 12 Nov
2009].
• Jestin, P. (2006). Outsourcing Is Beneficial, Says IDC Study. Available from:
<http://www.blogsource.org/2006/11/outsourcing_is_.html>. [Accessed 10 Nov 2009]
• Outsource2india (n.d.) The advantages and disadvantages of outsourcing [internet],
outsource2india.Available from: <
 http://www.outsource2india.com/why_outsource/articles/advantages-disadvantages-
outsourcing.asp>. [Accessed 9 Nov 2009]
• Shrivastav, P. (2007). Outsourcing. Available from:
<http://www.scribd.com/doc/9760596/Outsourcing>. [Accessed 11 Nov 2009].