Why is outsourcing of functions done?

Discuss about the Contracts on Value Capture and Creation.

Outsourcing is one of the best methods that can help the company to grow in the competitive environment. It is seen outsourcing is done on both domestic as well as on international platform so that activities can be conducted smoothly without any hindrances. In this paper, the focus will be given on the advantages and disadvantages of outsourcing the activities to the other party so that goals and objectives can be accomplished.  In this paper, the discussion will be made on IBM.

If the focus is given on the project it is seen that the objective is to evaluate the advantages and disadvantages of outsourcing the activities of IBM. When a company outsources the activities, it is seen that there are many advantages and disadvantages related to outsourcing the activities of the company.

The advantages and disadvantages of outsourcing the activities will be discussed in this paper. In this paper the impact of outsourcing will be discussed that will help the company to conduct the activities accordingly.

According to Aubert, Kishore & Iriyama (2015), outsourcing is a method that helps the company to achieve growth in the market. It is seen that outsourcing helps the company the efficiency of the activities. When the activities are outsourced it is seen that the responsibility is given to the third party so they conduct the activities with more care. It depends on the company efficiency and also the dedication towards the work.

 IBM is one of the companies who is giving more focus on outsourcing the activities to the third party. If the activities are given to the company who is good in conducting the services and also focuses on delivering the services on time, then only growth and profits can be achieved. The functions of the company are outsourced to the company by making an agreement with the third party. In the recent scenario, it is seen that if company outsource the activities then they divide the activities so that proper control can be maintained on the activities.

IBM is known as a largest American international technology that is recognized in 1911. The company deals in many sectors like in cloud programming and in computing. Outsourcing is one of the best approaches that is considered by the company so that the activities which are outsourced can be conducted in a managed form. The company is focusing on outsourcing the activities in Singapore and also in India. It has given a positive impact on the overall growth and on the image of the company (Dhar, 2012).

Maintenance of the technology and infrastructure

According to Koo, Lee, Heng & Park (2017), Outsourcing is a concept with is related to transferring the functions or the internal process of the business to some other party or the third. IBM has more than 40 data centres that are connected with the activities related to IT sector. It is seen that it connected with the functions of the company and by outsourcing the quality and efficiency is more enhanced.

The objective of the company is to outsource the functions so that overall operation cost can be reduced and also image can be maintained in the market. It is seen that when outsourcing is done by one company to the third party that employment rate also increase and growth can be seen in the overall economy. The focus of the company should be more on the strategies that should be implemented so that the activities which are outsourced can give benefit to the company. There are many advantages related to outsourcing the activities in an effective manner.

When the activities are outsourced it is seen that there are many advantages which are achieved by the company.  As it is seen that outsourcing is the best way that helps to achieve competitive advantage. If the company is not focusing on outsourcing the activities then it cannot be possible to achieve goals and objectives in a proper manner.

According to Luong & Stevens (2015), it can be analyzed that functions of the organization are given to the third party so that the experts who have a specialty in the specific field can conduct the activities with efficiency. The functions that are given to the third party are completed by giving emphasis on the quality of the services. IBM focuses on giving the activities to those parties who try to maintain proper quality and their experts conduct the activities with efficiency.

According to McNeill (2015), it can be evaluated that when the company focuses on outsourcing then less emphasis is less on the infrastructure as major responsibility is given by the company to the third party. It is seen that it also assists in investing in the technologies which will help to enhance the growth. Latest technologies are also not important for the company as the activities are outsourced to the specialized person. IBM outsource the activities so that investment in technology and infrastructure can be reduced and growth can be achieved effectively.

The impact is seen in the operational and recruitment costs

At the time of outsourcing the activities by IBM, it is evaluated that focus is given to maintaining the proper of the services which are given to the third company. According to Pani, Mital, Choudhary & Sharma (2015), The projects which are difficult to be completed on time are given to the third party and they complete it with efficiency and on time. Through outsourcing, it can be easy for IBM to give emphasis to the other activities which will be managed internally. This also gives impact on the productivity of the organization. The services which are completed by the third party is delivered on time to the customers which help to enhance the satisfaction level in a proper manner.

According to Plugge, Borman & Janssen (2016), it can be evaluated that to share the risk of the company is one of the essential factors that will help both the company to suffer from the risk. The burden is shared with the two parties in a proper manner. It is seen that outsourcing is a method that helps the organization to give the responsibilities to the third party so that they can conduct the activities with more efficiency.

It is evaluated that it is an agreement which is made with the third party and in that agreement, there are many rules and regulations written which is important to be followed so that goals and objectives can be achieved. IBM share the equal risk with the outsourcing company so that proper relation can also be maintained. Also, there are many rules and regulations which are considered at the time of outsourcing the activities to the third party.

IBM give emphasis on reducing the overall cost of activities and also recruitment cost by outsourcing the overall activities of the company. According to Manning, Larsen & Bharati (2015), it can be analyzed that at the time of outsourcing the activities the cost is also shared with the company with whom outsourcing is done. IBM has given emphasis on maintaining proper structure so that overall goals and objectives can be attained. Also, when operational cost is reduced it helps to achieve competitive advantage in a proper manner.

At the time of outsourcing the activities, it can be evaluated that services are delivered and completed with proper guidance of the experts so that satisfaction level can be maintained and also growth can be achieved. According to Miranda & Kavan (2017), it is seen that the workers of the company give focus on maximizing the profits by giving good services to the employees. IBM outsource the activities by doing a proper evaluation of the resources. The technology is also updated which is used as it helps to enhance the productivity level. It is analyzed that to maintain proper skills and resources training is also one of the factors which is taken into consideration so that growth can be achieved.

When the core functions of the company are outsourced it is seen that the company focuses on the overall activities which are conducted in the company. IBM outsource the major portion of the activities like human resource process and manufacturing process which help to manage the overall activities of the company.  It can be analyzed that it is not easy to control and manage the activities and then give best services to the employees so IBM considers this strategy. By focusing on this strategy, it can be easy to manage and give best services to the employees (Gospel & Sako, 2010).

When there are benefits related to outsourcing then there are also drawbacks which are related to outsourcing the functions of the business.

According to Rajaeian, Cater-Steel & Lane (2017), it can be evaluated that when the organization is focusing on outsourcing the activities it is important to focus on the requirements which are given by the company. So, in this case, the attention towards customers get minimized. The outsourcing company manages various tasks and it cannot be simple for them to conduct each task on time and properly.  It is one of the biggest disadvantages that makes the customers dissatisfied with the services offered by the company. IBM offers the activities like manufacturing operations so that it can be completed on time by giving emphasis to the need of the customers.

It can be analyzed to keep the information safe of the party is one of the major tasks. So, when outsourcing is done it is seen that private information is shared with the third party. According to Martin & Poussing (2014), the outsourcing of the activities which is done by IBM is payroll, manufacturing and also sometimes human resource activities. So, it is important for the company to give a contract to make an agreement with the company which keeps the information safe and do not misuse it.

According to Ramanathan & Krishnan (2015), it can be stated that when outsourcing of the activities is completed by the third party it is necessary to consider the rules so that the activities can be conducted according to the objectives. IBM takes the ownership of the services or the activities but it is seen that the control of the activities is given to the third party so that problems which are arising related to control can be minimized in a proper manner. So, when the activities are outsourced there can be various problems like proper control, customers query which is not properly sorted and it can create a negative feeling in the mind of the customers or can give negative impact on the overall image of the company (Wuyts, Rindfleisch & Citrin, 2015).

IBM has achieved a great share in the market with the help of outsourcing the process. It is seen that activities are conducted in a proper manner that helps to enhance the satisfaction level of the customers According to Gorla & Somers (2014), When the activities related to customer queries are outsourced to the other company then it is seen that the experts give focus on solving the queries. This has helped IBM to conduct the activities in a managed form and also in a smooth manner.

In (figure 1) benefits of outsourcing is seen. It is seen that company analyze a slow growth in the overall cost related to selling and general. But SG&A cost of outsourcing is also less than 4.2 if a comparison is made with the competitors. Also, the changes are seen in the rate of return on assets and income before tax (Zhang & Gu, 2013).

Conclusion

By focusing on the above paper, it is seen that there are many companies who outsource the activities. So, by outsourcing they achieve success and there are many disadvantages like information risk and also managerial control. IBM has achieved success through outsourcing the activities and also it is seen that customers services are enhanced effectively.

References

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