Assessing The Impact Of Outsourcing On Maintaining Competitive Advantage: Example Of Optus In Australia

Overview of Optus in Australia

Outsourcing expands the scope and arena of the companies and organizations. It relates to the outflow of information from the internal environment to the external one. The aspect of outsourcing reflects technological advancement, bestowing the opportunity of enjoying competitive advantage over the contemporary brands. In this process, the companies and organizations need to follow the legislations for averting the instances of cybercrimes (Mao et al. 2016). As a matter of specification, outsourcing reduces the cost of assets, facilities and competencies. This is assistance as the overhead cost is reduced, which enables the staffs to stabilize the financial parameter. This assignment attempts to assess the impact of outsourcing on maintaining competitive advantage through the example of Optus in Australia.

Founded in 1981, Optus is the second largest telecommunications company in Australia. It operates as a subsidiary of Singtel. The industry in which the company executes its operations is the telecommunication industry. Specifically, the company deals with fixed telephony, mobile telephony, internet access, cable television, leased lines and data transmission. According to the annual report of 2013, the annual revenue of the company was recorded as A$8.93 billion (Optus 2018). The net income acquired through the business operations was A$764 million. The presence of more than 10,000 employees results in the provision of efficient telecommunication services to the clients and the customers. 2005 was the era when Optus started outsourcing customer service functions to Convergys through the staffs from diverse backgrounds. Mention can also be made of The Phillippines, where Optus has outsourced its information. 24X7 Inc is one of the other sources, where the services of Optus are outsourced for telephone and chat support. Other outsourcing stations are Singtel and IT Company, NCS in Singapore (Optus 2018).

Based on the aim of assessing the impact of outsourcing on the maintenance of competitive advantage, the following objectives proved helpful in executing the project in an efficient and effective manner:

• To identify the various channels through which Optus outsources the information to the clients and the customers
• To examine the legal compliances and obligatory practices, which are followed for conducting the outsourcing operations in the workplace of Optus
• To assess the impact of outsourcing business of Optus on the maintenance of competitive advantage
• To suggest recommendations, which might prove helpful for improving and upgrading the outsourcing business in the workplace of Optus

                                                                                           Table: Gantt chart

                                                                                (Source: Created by the researcher)

Objectives of the Project

The project goes to the extent to conducting literature review for assessing the impact of outsourcing business on maintenance of the competitive advantage. In this, theoretical considerations expand the scope and arena of the project. The conceptual framework enhances the knowledge of the readers regarding the interrelationship between the variables of the research topic. Incorporating the opinions of the scholars into the project is an initiative to shed light on the different connotation on the impact of outsourcing business on the maintenance of competitive advantage in the workplace of companies like Optus (Huo et al. 2016).

Assessing the gaps in the literature, results in the projection of incapability towards addressing the project topic. Critical approach towards this direction is assistance in terms of enhancing the scope and arena related to the subject matter of the project. Within this, challenges related to the outsourcing gains an important position, as it helps in seeking effective solutions for improving and upgrading the parameter. Prior to the challenges, mention needs to be made of the areas of outsourcing (Uluskan, Joines and Godfrey 2016). This is directly related to the expansion of the scope and area of the project.

At the initial stage, insight is provided into the different connotations of “outsourcing”, which proves beneficial in expanding the knowledge horizons related to transmission of information from one source to other. Insight into these connotations helps the readers to acquire understanding regarding the impact of outsourcing on the overall business of companies like Optus. As a matter of specification, the project makes the readers aware of the diversified use of technology towards execution of the workplace operations. The challenges make the businesspersons aware of the complexities, which they might face in the process of outsourcing business (Rodríguez and Nieto 2016).  The financial aspect within this is a conscious approach of the project in terms of maintaining the balance between the operations.

From various researches conducted, it has been found that the outsourcing activities are important aspects of improving the ability to gain competitive advantage and at the same time ensure value proposition to enhance the revenue generation of the company within the telecommunications industry in Australia. With the outsourcing activities, there are increased numbers of skills and abilities of the external product development contractors. The suppliers have also gained improved skills and knowledge to develop core competencies, furthermore overcome the challenges that are faced to create greater scopes of sustaining in the competitive business environment. With the huge advancement in technology and communication, it has become easier for the companies to utilise their strengths to innovate and outsource the business to keep up pace with the latest advancements, furthermore make investments whenever and wherever necessary (Liu and Tyagi 2017). With the development of partners, the outsourcing of business has helped in entering new markets and provides the firm with better flexibility to respond to the financial burdens and respond properly to the opportunistically new markets. The outsourcing of business has helped the business to focus on prioritising on the core competencies and develop the skills to add more values and benefits to the customers.

Literature Review

Based on the background of research, it has been found that the research focused on the impact created by outsourcing the business on gaining competitive advantage. It is also found that the outsourcing of business has enabled the buyers to hire alumni from the competitors of suppliers and even has allowed to create a positive impact on the supplier firm.

                                                        Figure 1: Diverse applications of outsourcing

                                                                            (Source: Maley et al. 2015)

According to Maley et al. (2015), the competitive advantage is a major aspect that defines the architecture to assess the strategies linked with the organizational behaviors. It has become important for the companies to identify the value chain and think in a strategic way considering the various business activities, relative costs to facilitate the processes of manufacturing and production along with its role in differentiation. The authors of the article presented brief analysis of the necessary reasons for which the businesses outsource its functions such as economic, strategic and technological reasons.

One of the major economic aspects associated with the outsourcing of business has been the anticipation of reducing the costs incurred for managing the business operations and for the development and production of products and services. The companies often wanted to reduce the costs of managing IT and personnel management and even for converting the fixed costs into variable costs (Liu and Tyagi 2017). The costs have been kept controlled with the outsourcing of business, which has exploited the economies of scale and created better scopes for outsourcing the vendors. It has often been the decision of management department of the organizations with proper consultation with the manager and higher authorities of the organization to outsource business through information technology system outsourcing and achieve reduction in costs of managing business operations and processes.

Based on the statements provided by Mohiuddin and Su (2013), the organizations have outsourced their businesses for various strategic reasons too such as for gaining better accessibility to flexible business and enhance the capability of the organizations to respond to changes and use its core competencies effectively too.  The technological factor are also considered such as for gaining access to newer technologies and create a skilled workforce through outsourcing to deliver specialized services, furthermore improve the management’s focus on the core competencies and gain access to technical skills to resolve the knowledge gap too. The outsourcing of business has also helped in allowing the organizations to concentrate on the major procedures and techniques followed to differentiate itself and its products from the competitors in business (Porter and Heppelmann 2014). The outsourcing activities have also facilitated the usage of resources appropriately, which can be further utilized for enhancing the productivity of the organization and generate higher revenue too. Based on the information present in the article provided by Maley et al. (2015), not only the productivity has improved but also the various functions of the organizations have been subjected to greater benefits like improvement in the organizational structure, better flexibility in managing the human resources for the creation of a diverse and effective workforce along with improvement of organizational design.

Impact of Outsourcing on Maintaining Competitive Advantage

Not only the organizational design, processes and outsourcing of vendors has been possible, but also the technological risks are mitigated, which has improved the overall business performance and created improvisation of business processes (Bustinza et al. 2017). This has been beneficial for improving the customers’ services and thus the management of the companies has been benefited through achievement of flexibility in development, implementation and testing. The companies, with the help of outsourcing, have adapted to changes and protected the business from external technical risks, which has enhanced the quality of products and services developed and facilitated innovation all throughout as a whole (Spithoven and Teirlinck 2015).

The outsourcing has been applied to various areas of logistics and supply chain including the transportation, warehousing, management of inventories and information systems management. The logistics operations include transportation that has facilitated the flow of goods and services to the end users, There are many companies like FedEx, Logistics Service, etc. that provide logistics solutions and this has benefited the company to outsource its business functions and manage proper planning of shipments and provide professional assistance to negotiate with the commercial carriers too (König and Spinler 2016). The outsourcing of business when applied in the warehousing areas has created better flexibility in testing the new targeted market segments and this has resulted in improving the customers’ services. With the proper management of outsourcing, the companies have forecasted and identified the demands of customers to deliver products and services accordingly (Kou, Lee and Wei 2015). The outsourcing activities have also created an impact on the costs of inventory carrying and reduced the risk costs too associated with the management of inventories and stocks for the companies in Australia. The outsourcing activities, on the other hand, improved the ability to manage information systems by managing proper freight payments and ensured proper cost accounting and control for improving the tracking, management of inventories and booking (Clampit et al. 2015).

                                                                                 Figure 2: Challenges to outsourcing

                                                                                      (Source: Khan and Azeem 2014)

Applications of Outsourcing

According to Khan and Azeem (2014), One of the major challenges of outsourcing business is the lack of control on the logistics functions, due to which, the companies often faced difficulties in managing the personnel, hiring practices and policies. There was lack of security measures and even the raw materials and resources were subjected to risks of damage and this has even deteriorated the business performance gradually for many companies (Khan and Azeem 2014). While outsourcing the projects, there has been lack of product performance due to more focus on the costs incurred for the manufacturing and production processes, disruptive services along with lack of innovation and sometimes lack of views and opinions resulting from the creation of diverse workforce due to the outsourcing of human resources. Other challenges included lack of control over the business operations and processes along with the lack of understanding of the potential benefits that have damaged the organizational reputation, brand image and name too. Based on the statement provided by Bachlechner, Thalmann and Maier (2014), the outsourcing of the financial services has also led to violation of regulatory laws, rules and regulations along with the lack of data integrity and confidentiality, which has also hindered the successful management of business operations and processes (Bachlechner, Thalmann and Maier 2014). When the people are outsourced in some other location, a diversified environment is created, which has resulted in higher costs of transition and the costs of savings have also been reduced. The outsourcing activities have become much more difficult for supporting the processes, because those are much leaner and it often has created failure of contract negotiation (Khan and Khan 2014). The clients need a good and flexible outsourcing partner, which does not happen most of the times and due to the management of both costs and services delivered at the same time, it became difficult in many cases to cope up with the emerging technologies and this has made the companies fell short of managing a proper organizational infrastructure and unable to understand the clients; needs and preferences properly too.

One of the major issue or challenge of outsourcing was also the language, cultural and educational differences due to the outsourcing of business functions. The workforce consists of people from different backgrounds with different pay structures and attrition became lower too. In spite of the lower costs incurred, the work quality has been better than the quality of work managed locally, though due to the experience and skills, the people working within the companies had been overqualified for the various tasks that were allocated (Khan and Azeem 2014). This kind of approach had been effective as well for outsourcing the higher level tasks, furthermore allow permission for managing complex projects along with better communication management, overall cost savings and better control on the quality of products and services outsourced.

Factors Contributing to Successful Outsourcing

6. Conclusion: 

This research enhances the knowledge of the readers regarding the impact of outsourcing on maintaining the competitive advantage. The major drive behind this is the challenges to outsourcing. Gaining an insight into the challenges reduces the gaps, which lies in the knowledge of the readers about its implications on maintaining competitive advantage in business. Example of Optus, a telecommunications company is taken for enhancing the awareness towards the role of outsourcing in the workplace aspects. Insight into the current strategic position of the company helps in developing objectives for making appropriate progress with the project related activities. The objectives, further, is assistance in terms of identifying the scope and arenas, which the project covers, bringing diversification into the project. This diversification addresses the hypothetical research question of whether outsourcing has any impact on the maintenance of competitive advantage in business. The scholarly viewpoints, presented in the literature review, presents diversity and broadness towards addressing the overall question, “What is the role of outsourcing in maintaining competitive advantage?”

Literature review enhances the awareness of the readers regarding the interrelationship between the variables of the project topic. Therefore, literature review directly sheds light into the role of outsourcing on maintaining competitive advantage. Challenges in outsourcing make the businesspersons aware of the complexities, which might add vulnerability into the market position. The heading, “areas of outsourcing” is assistance for the businesspersons in terms of the avenues, through which they can expand their business.

Strategic planning, while conducting the outsourcing activities, would prove fruitful in coming out with innovative solutions. This strategic approach towards planning would be the main agent for Optus in terms of achieving competitive advantage over contemporary brands like FedEx, Logistic Service among others.

Adopting wide ranging communication channels would improve the relationship between the staffs of Optus and the clients, suppliers and the other stakeholders and shareholders. Here, an important aspect would be the behaviour exposed by the Optus staffs towards preserving the values. This is crucial, as it is the matter of preserving the reputation of the brand.  A rational approach here can be analysing the cash flow, which is being sent to the external environment. Controlling the operational costs would be has been beneficial in effective management of the staffs of Optus, enhancing efficiency and productivity.  

References:

Bachlechner, D., Thalmann, S. and Maier, R., 2014. Security and compliance challenges in complex IT outsourcing arrangements: A multi-stakeholder perspective. Computers & Security, 40, pp.38-59.

Conclusion and Recommendations

Bustinza, O.F., Gomes, E., Vendrell?Herrero, F. and Baines, T., 2017. Product–service innovation and performance: the role of collaborative partnerships and R&D intensity. R&D Management.

Chou, S.W., Techatassanasoontorn, A.A. and Hung, I.H., 2015. Understanding commitment in business process outsourcing relationships. Information & Management, 52(1), pp.30-43.

Clampit, J., Kedia, B., Fabian, F. and Gaffney, N., 2015. Offshoring satisfaction: The role of partnership credibility and cultural complementarity. Journal of World Business, 50(1), pp.79-93.

Huo, B., Fu, D., Zhao, X. and Zhu, J., 2016. Curbing opportunism in logistics outsourcing relationships: The role of relational norms and contract. International Journal of Production Economics, 182, pp.293-303.

Khan, A.W. and Khan, S.U., 2014, April. Critical challenges in execution of offshore software outsourcing contract from vendors’ perspective: A systematic literature review. In Information and Communication Systems (ICICS), 2014 5th International Conference on (pp. 1-6). IEEE.

Khan, S.U. and Azeem, M.I., 2014. Intercultural challenges in offshore software development outsourcing relationships: an exploratory study using a systematic literature review. IET software, 8(4), pp.161-173.

König, A. and Spinler, S., 2016. The effect of logistics outsourcing on the supply chain vulnerability of shippers: Development of a conceptual risk management framework. The International Journal of Logistics Management, 27(1), pp.122-141.

Kou, T.C., Lee, B.C. and Wei, C.F., 2015. The role of product lean launch in customer relationships and performance in the high-tech manufacturing industry. International Journal of Operations & Production Management, 35(8), pp.1207-1223.

Liu, Y. and Tyagi, R.K., 2017. Outsourcing to convert fixed costs into variable costs: A competitive analysis. International Journal of Research in Marketing, 34(1), pp.252-264.

Maley, J.F., Kowalkowski, C., Brege, S. and Biggemann, S., 2015. Outsourcing maintenance in complex process industries: Managing firm capabilities in lock-in effect. Asia Pacific Journal of Marketing and Logistics, 27(5), pp.801-825. 

Mangan, J., Lalwani, C. and Lalwani, C.L., 2016. Global logistics and supply chain management. John Wiley & Sons.

Mao, H., Liu, S., Zhang, J. and Deng, Z., 2016. Information technology resource, knowledge management capability, and competitive advantage: The moderating role of resource commitment. International Journal of Information Management, 36(6), pp.1062-1074.

Mohiuddin, M. and Su, Z., 2013. Manufacturing small and medium size enterprise’s offshore outsourcing and competitive advantage: An exploratory study on Canadian offshoring manufacturing SMEs. Journal of Applied Business Research, 29(4), pp.1111-1130.

Optus, S. (2018). Optus – Mobile Phones, NBN, Broadband Internet, TV, Home Phone. [online] Optus.com.au. Available at: https://www.optus.com.au/ [Accessed 22 Aug. 2018].

Porter, M.E. and Heppelmann, J.E., 2014. How smart, connected products are transforming competition. Harvard business review, 92(11), pp.64-88.

Rodríguez, A. and Nieto, M.J., 2016. Does R&D offshoring lead to SME growth? D ifferent governance modes and the mediating role of innovation. Strategic Management Journal, 37(8), pp.1734-1753.

Spithoven, A. and Teirlinck, P., 2015. Internal capabilities, network resources and appropriation mechanisms as determinants of R&D outsourcing. Research Policy, 44(3), pp.711-725.

Uluskan, M., Joines, J.A. and Godfrey, A.B., 2016. Comprehensive insight into supplier quality and the impact of quality strategies of suppliers on outsourcing decisions. Supply Chain Management: An International Journal, 21(1), pp.92-102.

Wan, S.P., Wang, F., Lin, L.L. and Dong, J.Y., 2015. An intuitionistic fuzzy linear programming method for logistics outsourcing provider selection. Knowledge-Based Systems, 82, pp.80-94.

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