Project objective
Discuss about the Advantages and Disadvantages of Outsourcing Business Functions in your chosen business.
Outsourcing is the practice which is done so that activities can be conducted smoothly. It is seen that it consist of both foreign and domestic contracting. The third party is involved in this process and it helps the company to accomplish goals and objectives easily. It is seen that by considering these strategies the company can easily improve the working pattern and can also attain large customer base.
Outsourcing is a process which is considered by many companies in the present scenario. So, in this report, a proper discussion will be made of the advantages and disadvantages of outsourcing a function to the other party or the company. The company which is selected for this report is Kingston.
The objective of this paper is to analyze the disadvantages and advantages of outsourcing the functions of Kingston. It is seen that outsourcing can give the opportunity to the company to enhance the market share in an effective manner.
In this report, the discussion will be made in the process of outsourcing the functions. Advantages and disadvantages of outsourcing will be elaborated by giving focus on Kingston. Strategies will also be discussed in this report which will help the company to enhance the growth in the market.
Outsourcing is a process which is taken into consideration by the organization so that they can conduct the activities with efficiency. According to Fu et al., (2016), it is seen that outsourcing is done so that the company can share the responsibility with another party. It is seen that if outsourcing is done with a trustworthy company then it can be easy to achieve profits and growth in the market. Outsourcing not only increases the efficiency but also give impact on the overall profits achieved by the company. Functions of the company are outsourced on various platforms like an online and offline medium. It is essential for the organization to give responsibility so that activities can be conducted in a managed way.
It can be analyzed that Kingston is an American company which focuses on developing, manufacturing and focuses on selling the flash memory products in the market. It is seen that the company was established in 1987 in the United States. The company outsources many activities which are giving growth in the market. Functions related to contact with the customers through call centers and also cloud programming is outsourced which helps the company to conduct the activities with more efficiency.
Project scope
Outsourcing the functions of the company is related to the top management. When top management takes the decision to outsource the activities then only the contract is made with the third party. The third party takes the responsibility to conduct the activities in a right way. Operational cost also affected when outsourcing of the functions are done. The overall cost can be minimized. Kingston also considers this method and outsources the activities to the third party. The activities which are outsourced to the third party are manufacturing and also human resource activities (Butler and Callahan, 2014).
To minimize the overall cost the company it is seen that the functions are transferred to the other company so that goals and objectives can be achieved. Strategies at the time of outsourcing the activities help the company to conduct with efficiency and also with achieving overall profits. It is seen that if proper strategies are not considered then it can be difficult to conduct the activities in a smooth manner. If the company considers proper strategies then it can be evaluated that customers are also satisfied and happy with the overall services which are achieved (Guarino et al., 2015).
Kingston tries to improve the services which are given to the customers by considering the technique of outsourcing. At the time of outsourcing the activities, it is seen that proper analysis is done of the market conditions so that growth can be achieved in the market. The company focuses on outsourcing the services to the company who are expert in that field. Like in technical process Kingston outsource the company the functions to the third party.
It is evaluated that outsourcing is a method that helps the company in many ways. It offers many advantages to the company and it is only the reason that big companies give more emphasis on outsourcing the functions. The advantages are:
Expertise in the field
According to Lioukas, Reuer, and Zollo (2016), it is seen that the activities are outsourced to the companies or to the people who have specialization in that field. It is important that the activities which are outsourced should be completed properly. The activities that are outsourced to the company have some special technologies and also techniques which make activities better. When the activities are outsourced to the experts then it is seen that improvisation is seen on the quality and also the activities are conducted easily on time.
Literature review
Increased the efficiency
When Kingston outsources the activities, it is analyzed that the activities are conducted with proper quality. In business practices, the complex projects are also delivered on time to the customers. So, it can be easy for the company to conduct the activities with proper knowledge and also by having the proper focus on the domain. This helps to enhance the productivity of the company and also gives contribution in the bottom line. Through this company is maintaining an organizational structure and also proper assurance is done of delivering the services on time to the customers (Rost, 2016).
Infrastructure and technology safety
According to Rekik, Boukadi, and Ben-Abdallah (2017), when activities are outsourced it is analyzed that the requirement of infrastructure investment is not so much as the responsibility is taken into consideration by the company to whom the activities are outsourced. It also helps to develop proper infrastructure that will be beneficial for the company. The infrastructure of Kingston is also saved as the activities are outsourced to the third party.
Advantage of cost
According to Schermann et al., (2016), one of the benefits that are achieved by outsourcing is cost savings. It is seen that company saves the cost by giving focus on outsourcing the overall activities. Sometimes it is seen that there is the third party who manages the overall salary of the employees. Kingston achieves competitive advantage by outsourcing the activities in the market where the competition level is high.
At the time of outsourcing the activities, it is seen that the company can give emphasis to the core business activities. It is seen that it is not possible to manage all the activities together so when the activities are outsourced then it can help the company to enhance the market share in a proper manner. Kingston emphasizes on the outsourcing the activities as it helps the company to conduct the activities in a proper manner.
According to Gorla and Somers (2014), Kingston focuses more on outsourcing the manufacturing of hardware and the information so that information can be managed properly. This also helps the company to maintain the standards in the business as it is seen that by the division of the activities it can be conducted with more efficiency (Schwalbe, 2015).
By outsourcing the activities it can be analyzed that the activities can be conducted with the proper guidance of the supervisors who are expert in that particular field. According to Kodali et al., (2017), the employee of the company tries to give their best towards the activities which are outsourced as it helps to maximize their business. They make use of the latest technologies which help to maximize the satisfaction level of the customers. Training is also given to the employees so that activities can be conducted with efficiency.
Why is outsourcing done?
According to Zhai and Xiao (2015), it is seen that when activities are outsourced to the third party it is completed with proper care and also the company who is outsourcing the activities saves time so that proper quality can be offered to the customers.
Kingston focuses on minimizing the overall operational cost and recruitment cost by outsourcing the activities. According to Sobhani, Wahab, and Neumann (2016), it is seen that outsourcing helps to conduct the activities with minimizing the overall operational and recruitment costs. Kingston has focused on the proper structure so that objectives can be minimized. It is seen that it is an advantage which is achieved by outsourcing the activities.
It is one of the important factors that help to determine the results of a campaign and also analysis the risk. It is a process of business that helps the company to shift the overall responsibilities to the other vendor who is expert in a specific field. They help the company to reduce the risk and also enhance the profits of the company. According to Alexandrova (2015), it is seen that outsourced activities help the company to increase the productivity and also helps to minimize the risk prevailing in the company.
The agreement which is made at the time of outsourcing the activities helps the company to share the risks and also helps the other companies to conduct the activities in the market. This agreement also helps the company to focus on minimizing the risks so that goals and objectives can be achieved in an effective manner. Kingston implements the policies so that quality of the services can be maintained and also growth can be achieved (Hiles and Hon, 2016).
There are also many drawbacks of outsourcing which will be discussed in this section. If there are benefits analyzed that there are also disadvantages of outsourcing the activities.
It is seen that when the activities are outsourced then it consists of the risks which are faced by the company and it also affects the activities. According to Duncan and Duggan (2014), the activities which are outsourced involves human resource, payroll and also the services related to recruitment as in this process it is seen that private information is leaked to the third party.
When private information of the company is leaked out then it gives negative impact on the overall revenue. To maintain the privacy the company has to face many issues and also it is analyzed that to conduct the activities in a safe manner the company takes various measures so that customer satisfaction can be maintained. When the activities are outsourced to the third party it is seen that the information of the company is shared with the third party. It depends on the third party that they keep safe or misuse it. So, in the process of outsourcing, there is a risk of misuse of the private information.
Advantages of outsourcing the functions
According to Silbermayr and Minner (2016), it is seen that the company who is outsourcing the activities has to cater the needs of the company and also in this situation the customer focus can be reduced. It is seen that the outsourcing vendor has to handle many organization tasks so it cannot be possible to complete each and every task with efficiency. This can be the major disadvantage which is faced by the company at the time of outsourcing the functions to the third party. Kingston also gives various activities like manufacturing activities so that it can be completed with efficiency.
According to Wuyts, Rindfleisch, and Citrin (2015), it can be evaluated that when outsourcing is done the outsourcing contract is made in which it is important to consider the rules and regulations so that activities can be conducted in a right direction. Kingston has the ownership of the activities but the managerial control is given to the company to whom the activities are outsourced. Kingston faces the problem at the time of outsourcing the activity to the call centers. So, it is difficult for the company to maintain proper control in the activities just because of outsourcing the activities to the third party.
According to Zhu (2016), when the activities are outsourced the company has to follow the rules and regulations of different countries so that activities can be conducted in a right direction. It can be evaluated that when outsourcing is done it focuses on the services charges as it is seen that company has to face many hidden expenses. There are many legal charges that are considered when the outsourcing of activities is done. Kingston focuses on considering the expenses of different countries so that activities can be outsourced in a right direction and in a proper manner. Also, the policies and rules are implemented by focusing on the organization structure of the company.
According to Oshri, Kotlarsky, and Willcocks (2015), it is analyzed that when the activities are outsourced it can affect the quality of the company. If one center is not performing the activities according to the expectation level hen it can give impact on the overall operations of the company. Also in many countries language obstacles can also take place at the time conducting the operations of the company.
It can be evaluated that customers get frustrated when they are not able to achieve good services from the company. Kingston is outsourcing the activities in India and China. When the customers do not get the good response from the company then it can give dissatisfaction to the customers. The customers expect that company communicates with them in a proper manner so that they can feel satisfied and happy.
Emphasizes on the core business
Kingston has gained a competitive advantage in the market by outsourcing the services to the third parties. It is analyzed that Kingston has taken feedback from the people who are not connected with the company. It is evaluated by the overall study that there is a connection between the IT services and also improvement is analyzed in the organization. When the IT services are outsourced it is seen that it helps to enhance the activities. According to Bolumole, Grawe, and Daugherty (2016), it is analyzed that Kingston has attained growth in the process of business by introducing various technologies that will help to conduct the activities in a smooth manner. In figure 1, it is seen that company is a second largest company in shipping the products.
Conclusion
By giving focus on the above report it is evaluated that there are various organizations that outsourced the operations. The company has also achieved growth as shown in figure 1. The company also faced many problems which are related to the problem of hidden cost, layoffs and also a risk of quality. The function of outsourcing has created a clear vision that will assist the company in conducting the routine activities in a proper manner. Also, the company is one of the second largest companies who are involved in shipping.
References
Alexandrova, M., 2015. Risk factors in IT outsourcing partnerships: Vendors’ perspective. Global Business Review, 16(5), pp.747-759.
Bolumole, Y.A., Grawe, S.J. and Daugherty, P.J., 2016. Customer service responsiveness in logistics outsourcing contracts: The influence of job autonomy and role clarity among on-site representatives. Transportation Journal, 55(2), pp.124-148.
Butler, M.G. and Callahan, C.M., 2014. Human resource outsourcing: Market and operating performance effects of administrative HR functions. Journal of Business Research, 67(2), pp.218-224.
Duncan, K. and Duggan, E., 2014. A Secure Knowledge Resource Management Theory for IT/IS Outsourcing: The Service Provider Perspective. International Journal of Human Capital and Information Technology Professionals (IJHCITP), 5(1), pp.55-69.
Fu, Z., Ren, K., Shu, J., Sun, X. and Huang, F., 2016. Enabling personalized search over encrypted outsourced data with efficiency improvement. IEEE transactions on parallel and distributed systems, 27(9), pp.2546-2559.
Gorla, N. and Somers, T.M., 2014. The impact of IT outsourcing on information systems success. Information & Management, 51(3), pp.320-335.
Guarino, S., Canlar, E.S., Conti, M., Di Pietro, R. and Solanas, A., 2015. Provable storage medium for data storage outsourcing. IEEE Transactions on Services Computing, 8(6), pp.985-997.
Hiles, A. and Hon, F.B.C.I., 2016. E-Business Service Level Agreements: Strategies for Service Providers, E-Commerce and Outsourcing. Rothstein Publishing.
Kingston., 2018. Kingston Digital Ships Second-most SSDs in Channel Worldwide. [Online] Business wire. Available at:https://www.businesswire.com/news/home/20170320005216/en/Kingston-Digital-Ships-Second-most-SSDs-Channel-Worldwide [Accessed on 23 April, 2018].
Kodali, S.B., Millwood, D.N., Raghav, S. and Vadlamudi, S.B., International Business Machines Corporation, 2017. Information technology resource management. U.S. Patent 9,729,466.
Lioukas, C.S., Reuer, J.J. and Zollo, M., 2016. Effects of information technology capabilities on strategic alliances: Implications for the resource?based view. Journal of Management Studies, 53(2), pp.161-183.
Oshri, I., Kotlarsky, J. and Willcocks, L.P., 2015. The Handbook of Global Outsourcing and Offshoring 3rd Edition. Springer.
Rekik, M., Boukadi, K. and Ben-Abdallah, H., 2017. An end-to-end framework for context-aware business process outsourcing to the cloud. Computers & Electrical Engineering, 63, pp.308-319.
Rost, J., 2016. The insider’s guide to outsourcing risks and rewards. CRC Press.
Schermann, M., Dongus, K., Yetton, P. and Krcmar, H., 2016. The role of transaction cost economics in information technology outsourcing research: a meta-analysis of the choice of contract type. The Journal of Strategic Information Systems, 25(1), pp.32-48.
Schwalbe, K., 2015. Information technology project management. Cengage Learning.
Silbermayr, L. and Minner, S., 2016. Dual sourcing under disruption risk and cost improvement through learning. European Journal of Operational Research, 250(1), pp.226-238.
Sobhani, A., Wahab, M.I.M. and Neumann, P.W., 2016. Integrating ergonomics aspects into operations management performance optimization models: A modeling framework. IIE Transactions on Occupational Ergonomics and Human Factors, 4(1), pp.19-37.
Wuyts, S., Rindfleisch, A. and Citrin, A., 2015. Outsourcing customer support: The role of provider customer focus. Journal of Operations Management, 35, pp.40-55.
Zhai, M. and Xiao, D., 2015, February. Research into the risks of outsourcing human resource management. In Industrial Engineering and Manufacturing Technology: Proceedings of the 2014 International Conference on Industrial Engineering and Manufacturing Technology (ICIEMT 2014), July 10-11, 2014, Shanghai, China (Vol. 4, p. 65). CRC Press.
Zhu, X., 2016. Managing the risks of outsourcing: Time, quality and correlated costs. Transportation Research Part E: Logistics and Transportation Review, 90, pp.121-13
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