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Outsourcing vs Offshoring (Essay Sample)


Outsourcing and off-shoring pros and cons

Outsource versus offshore
Question 1
Outsourcing has been a source of debate in the recent years, particularly in human resources. Moreover, it is becoming an increasingly famous practice for both big and small businesses today. Outsourcing entails contracting with another firm or person to undertake a certain task, for example, an insurance firm may outsource its landscaping and janitorial operations to companies, which specialize in these kinds of work. This is because; these firms are not related to insurance or strategic to insurance business. In the outsourcing process, those outside companies, which offer outsourcing services are third-party providers, or as they are more often referred, service providers. The outside service provider will have the role of maintaining, as well as running delegated business processes, such as supplying some products in a daily basis. In the business environment, outsourcing is considered long-term, and at the same time short-term solutions to attain effectiveness in business operations. Any business process, therefore, may be outsourced to outside service providers. Other business processes, which can be outsourced, include web design and maintenance, marketing, IT maintenance, web hosting, recruitment, accounts management, distribution, logistics, editing, and switch board.
Advantages of Outsourcing
There are several advantages that outsourcing presents to companies. Firstly, it assists companies to reduce costs as well as expenditure. As a result, this gives business a competitive advantage. It also benefits the customers of a given company because it gives high quality products at low prices with superior customer service. It implies, therefore that, outsourcing lowers the capital expenditure of the firm by allowing outside providers to purchase products on behalf of the company. Secondly, outsourcing lowers management worries by allowing outside providers to recruit and hire personnel, who will be charged with the responsibility of finishing the business process. Outsourcing also offers a company the capacity to access competent and trained manpower at reasonable prices thus, increasing productivity. Consequently, outsourcing increases productivity of the company since the company will be able the afford huge number of skilled personnel to raise its productivity. This will lead to competitive advantage, as the skilled personnel will offer high quality products, hence high revenues. In addition, outsourcing allows companies to focus on their primary competence as well as streamline its business operations. The competition amongst the outside providers is another advantage to outsourcing because they have become more efficient, as well as competitive, to get more jobs.
Disadvantages of Outsourcing
Though outsourcing has several advantages, business must too look at disadvantages and risks, which outsourcing may pose. Firstly, the company that has outsourced its operations could not have full control on management of its operations. This is because; the external provider will manage all the business operations. Secondly, when the outside provider becomes bankrupt, or exits the business, it will mean a loss to the company. This may further result to looking for another outside provider, which will be and expensive undertaking. In addition, outsourcing entails the loss of flexibility in responding to change in business conditions, as well as lack of external and internal customer focus. Consequently, outsourcing places business' confidentiality and security at risk.
When services are outsourced to companies situated in other nations, or foreign countries or agencies, it is regarded as offshoring. Offshoring is undertaken by a company, which might legitimately move offshore for the purposes of tax avoidance or to enjoy relaxed regulations. On the other hand, outsourcing is undertaken within a country to lower risks, increase quality of products, and cut costs.
Question 2
Although offshoring has been around for several years, present trends are raising its profile. The most significant is the change in the types of jobs that are being moved overseas. Nonetheless, the changing nature of both the economies, and the workforce of countries where jobs are being sent are too, adding weight to the notion, that offshoring has the prospective to noticeably influence the jobs outlook. The idea of offshoring is not new; however, it has become a high-profile theme over the last year, chiefly because so many of the jobs leaving the nation are comparatively high-paying white-collar jobs. Offshoring is fundamentally about the cost of human capital—classically the biggest cost line item in most firms is personnel—and due to that, the human resource function plays an essential role in both the decision to move jobs abroad and in managing the process, once it has been started. Nevertheless, as anyone reading regarding offshoring in the latest news stories knows, the trend is contentious. As a result, HR professionals might find themselves at the center of a growing debate concerning the costs as well as benefits of offshoring jobs. When offshoring has set it, HR practitioners will need to deal with the outcome of offshoring and the possible negative impact it could have on the self-esteem of those personnel who have managed to hold on to their jobs.
The outsourcing of services requires a complex series of trade-offs: cost savings versus growth, speed versus quality of service delivery, and maintaining organizational cohesion versus knowledge and innovation. Vendors and organizations have inherently conflicting objectives, putting the latter's objective for innovation, cost savings, and quality at risk.
Recommendations and Strategies
In a highly dynamic, interrelated, and competitive capitalist environment, the only general principle companies should abide by is that of corporate rationality. According to the theory, every managerial action should be decided on by making a choice, which optimizes both economic efficiency (ratio of revenues to costs) and profitability. These conditions, which promise the greatest production of shareholder value.
Before undertaking both offshoring and outsourcing, there is, need to undertake intense research on the company or country that will undertake the business processes. The company that will be outsourced should have outstanding reputation in the field of outsourcing. This implies that it should be known to have good ethical practices and a strong financial background. On the other hand, the countries that will participate in the offshore process should have a stable economy and friendly regulations (Ron & Anil 44).
Question 3
Offshore Debate
Offshoring has been a contentious issue that spurs heated debate amongst economists. Some of the theories are connected to the theme of free trade. This theory sees offshoring as benefiting both the destination and origin nation through free trade, offering jobs to the destination nation, and reducing costs of goods and services to the origin nation. This makes both sides see augmented gross domestic product (GDP). In addition, the total number of jobs rises in both nations because those personnel in the origin nation that lost their jobs can move to higher-value jobs because their nations can gain a comparative advantage. On the other side, wage erosion, as well as job losses in developed nations have sparked resistance to offshoring. Experts dispute that the quality of any new jobs in developed nations is less than the jobs lost, and recommends lesser pay. Economists in opposition to offshoring claim that currency manipulation by governments and their central banks lead to differences in labor costs, fashioning a false impression of comparative advantage.
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