Objectives of the Paper
Discuss about the Cloud Computing and IT Infrastructure Outsourcing.
For the purpose of receiving growth in the business environment that is competitive in nature, the outsourcing can be one of the best strategies to follow in the market. In order to run the business activities smoothly, the business can outsource their functions related to the operations of the company in the foreign markets as well as in the domestic markets (Solli-Sæther et al., 2015). As stated by Schniederjans et al., (2015), outsourcing is one of the most significant aspects with the help of which the business can provide the their one or more operational functions to the other organizations who has advantage of producing the service or the products with cost advantage and thus can help the organization to gain competitive advantage in the marketplace (Schniederjans et al., 2015). Moreover, Dolenc (2010) has also stated that outsourcing is a cooperative strategy and also a part of the strategy of the business which can help in the reduction of the employees of the organization and thus the organization can save the cost or expenditure of the business.
IBM is an American MNC that belongs in the technology industry and is headquartered in Armonk in New York. As of the last quarter of 2017, there are more than 380,000 employees that work under the organization and IBM also covers a large area of 177 countries where mostly they outsource their services (Singh, 2011). This assignment has been focused towards the outsourcing process of IBM and will focus upon the evaluation of whether the outsourcing activities of IBM are providing them with competitive advantage in the market or not.
There are a few objectives that have been set by the researcher of the project and reaching these objectives of the project will help the researcher to fulfill the aims of the project. The objectives that have been set by the researcher are mentioned below:
- To evaluate the advantages of outsourcing as a business activity in IBM.
- To scrutinize the disadvantages of outsourcing as a business activity in IBM.
- To find out whether outsourcing helps the business to earn revenue for IBM or not.
Towards the last decade, the outsourcing as an activity of the business has gained its ground and it is the process with the help of which the company outsources or provide their operational departments or any other department to another business that has advantage in terms of cost of producing the same and thus can provide the business with advantage for staying ahead in the competition (Geis, 2010). Thus, this assignment has been focused towards understanding outsourcing as activity for the business whether it provides IBM with a competitive advantage in the market or IBM is at a disadvantaged position by using outsourcing as an activity.
Advantages of Outsourcing in Business – Case Study of IBM
As stated by Aubert et al., (2012), the growth of the business in the market and also the market share of the company along with the revenue of the company are sometimes dependent upon the activities such as outsourcing (Aubert et al., 2012). In order to conduct the activities of the organization in an effective way, it is sometimes noteworthy for the organization to outsource some of their business functions and as it can be seen that a few of the times, the other business has the advantage in terms of cost of providing the services or the products, the activities are outsourced to other organizations. Moreover, Koo et al., (2017) has mentioned that it sometimes becomes necessary for the companies to outsource their activities due to the fact that the human resource sometimes faces difficulty in handling the business process and in IBM also the same problems persist in some of the departments of the organization and thus, those activities are outsourced to the foreign countries (Koo et al., 2017).
IBM provides their outsourcing to the third parties who deliver the works at time which helps the company to earn good revenue from the market and thus provides IBM with competitive advantage in the marketplace. There are a variety of functions that are there in IBM which are outsourced to the third party providers so that all the functions can run smoothly in the organization and thus IBM can get advantage in the marketplace as well.
IBM outsources most of their production and services to India as well as in Singapore which help the business to manger their activities well and division of the works among other firms help the company to control their market and also diversify their risk as well. Lee et al., (2017) in his research has opined that with the help of the process of outsourcing, the business processes are mostly outsourced to the third party and thus an effective control is gained over the business (Lee et al., 2017). But there are many advantages as well as disadvantages of the process of outsourcing in the business and outsourcing advantages and the disadvantages in IBM will be mentioned in the below section:
According to Gerbl et al., (2015), the procedure of outsourcing can be defined as one of the best process of survival in the competitive market in order to rean cost advantage for the organization in terms of production and services (Gerbl et al., 2015). There are a few advantage of outsourcing that IBM is provided with as mentioned in the sections below:
Disadvantages of Outsourcing in Business – Case Study of IBM
During the time the work is provided to the third party vendors by IBM it is ensured that timely delivery of the work is ensured and thus it helps IBM to maintain the work efficiency and preserve the overall processes of the organization. As stated by Pani et al., (2015), the projects that IBM management feels that it will be difficult for them to complete, are provided to the third party vendors and thus IBM is able to maintain the reputation of the company with delivering the projects at time to their clients (Pani et al., 2015). By outsourcing the processes or the projects of the business IBM is able to focus upon the internal activities of the business and it then becomes easy for them to maintain the other activities of the organization. Thus, outsourcing helps in increasing the productivioty of the organization and also increases the overall organization competency.
Plugge et al., (2016) has also stated that outsourcing is an activity that is undertaken by the businesses so that they are able to share the risk of the organization with that of the third party vendors who are provided with the opportunity to handle the projects (Plugge et al., 2016). It has been observed by several other authors who have stated in their researches that outsourcing helps the companies to share the risk with third party that can decrease their chances of facing the loss alone. More effective production can be carried out by IBM with the help of handling the projects to the third parties and thus it helps the business to rean competitive advantage in the market with sharing the risks with other firms in forms of diversification. IBM enters into contract with third parties in the marketplace of other countries such as Singapore and India in order to let the companies handle their projects and thus shares the risk of suffering the loss alone in the market.
Gerbl et al., (2015) has ted that outsourcing can also help in decreasing the operational costs of the organization along with decreasing the cost of recruitment (Gerbl et al., 2015). He further went on explaining this factor of the business that when the projects are outsourced to the third party at less cost by keeping the profit, it can help in de creasing the operational cost of the organization as the businesses can cut the prices of raw materials, human resources well as time taken in order to complete the project.
Risks Associated with Outsourcing and Solutions
Moreover, it has also been stated by Kasemsap (2016) that outsourcing to other third party vendors can also saves the cost of recruitment due to the fact that less human power is necessary for the organization as less operational aspects are handled by the firms (Kasemsap, 2016). Thus it can be stated that with the help of outsourcing the business activities, IBM can save the cost of the organization in terms of operational as well as in terms of recruiting the human resources necessary to conduct the works.
It is as per the comments of Gospel et al., (2010) we can understand that with the help of outsourcing the production and operational aspects of the organization, the management can maintain the focus upon the core business activities (Gospel et al., 2010). In IBM, generally most of the functions of the business are outsourced like human resource functions of the organization and also the manufacturing or the services of the organization. Thus the business can maintain their focus upon the core activities of the business and with the help of business strategy; they are able to maintain the core aspects of the business. With the help of maintenance of the strategies of the core business, the business will be able to focus upon providing the customers with great service and also focus upon gaining the satisfaction of their clients.
While there are advantages that IBM earns with the help of outsourcing their business processes, there are a few drawbacks of this activity as well which has been mentioned below:
From the journals and articles written by the previous scholars, it can be known that keeping the data of the organization safe is one of the drawbacks of the organization. When the business outsources their production and human resource to other organization, the data also gets transferred to other organizations as well and thus, if the other organization that works in partnership is not honest, then there are chances of getting the data leaked in the market which can hamper the reputation of the organization and also loss of client base of the organization (Garofolo et al., 2010). IBM has huge risk in this aspect as they outsource their production as well as human resource facilities to third party vendors.
According to Rajaeian et al., (2017) one of the major drawbacks of the procedure of outsourcing is that the clients or the customers get lack of attention when the processes of business are outsourced to the third party (Rajaeian et al., 2017). Due to the fact that the major processes of IBM are outsourced form production to human resource, the employees that handle the customer queries do not belong to IBM and thus the business can lose control over their customers and when the customer gets less focus from the company, they feel dissatisfied and thus it can hamper the business reputation. Moreover requirements of the customers are also left in the hands of the employees that belong to outside of the organization and thus loss of reputation might happen due to lack of customer focus.
Conclusion
Most important aspect of the process of outsourcing is that the third party vendors are delegated the processes of the business and they handle the query of the customer and deliver the projects to them (Lester et al., 2010). But whenever the business handles the project to the organization itself, the project is delivered to the clients by the organization and the control is shifted to the business from third parties. Thus, if there is anything wrong that happened in the project, then the full responsibility of the project goes to the parent company or the company which outsources the production., Thus, IBM also has a disadvantage in this region as they believe in outsourcing the production of the business to third party vendors and whenever the project is delivered by the third party vendors to IBM, they have the full control over the project and if the project is delivered wrong, the client might feel dissatisfied and full blame is then to be taken by IBM management and this is one of the most noteworthy drawbacks of outsourcing process (Gonzalez et al., 2010).
One of the main aim with which the research has been prepared is formed into a question in this part of the research as cited below:
- What are the advantages and drawbacks of outsourcing in IBM?
There are a few secondary questions as well that has been formed from the research undertaken as cited below:
- Is it true that outsourcing helps IBM to earn revenue in the business?
- What is the impact of outsourcing upon the business activity of IBM?
- What are the risks that IBM faces due to implementation of outsourcing in their business strategy?
For the purpose of collection of quantitative data, questionnaire has been formed and the sample size has been kept to 50 employees that will be surveyed in IBM. With the help of distribution of questionnaire through email, the data will be collected from the respondents that will be analyzed with the help of statistical tool such as SPSS and will also be analyzed with the assistance of MS Excel and chart, bar and pie diagrams. Moreover there will be 10 questions that will be asked top the respondents that will be close ended with MCQ options.
The qualitative data will be collected from the managers of IBM with the help of open ended questions where the mangers will be able to make suggestion regarding what they think. The sample sizes that will be taken for the research are 5 mangers and a face to face interview will be conducted with them in order to obtain the data. Additionally, convenience sampling will be done in this case as the managers are the buys persons. There will be 5 open ended questions that will be asked to the managers and from there the researcher will analyze the data and out it in the research to show the response provided by the mangers of IBM regarding outsourcing activity of the organization.
The hindrances that were faced by the researcher during the study conduction can be stated as the research limitations (Shipman, 2014). There are a few limitations that were faced in this particular research as mentioned below:
Firstly, the researcher got a very little time for the research conduction and thus the research sample has to be kept low due to limited time which is a drawback for the research.
Secondly, the managers that were selected for the research were busy in the organization with their work and thus the data collection process was hampered.
Lastly, there can be bias in the replies that were provided by the respondents and this bias could not be avoided during the process of research.
The research timeline shows the activities of the research that was completed during the 14 weeks of time as depicted in the Appendix of the research.
Conclusion:
The discussion above states the importance of outsourcing s an activity for the business. In spite of many disadvantages of the process of outsourcing ion the business, there are many advantages as well and thus IBM should be able to check from time to time and control the disadvantages of outsourcing in order to take the advantage and earn revenue from the market.
References:
Aubert, B.A., Houde, J.F., Patry, M. and Rivard, S., 2012. A multi-level investigation of information technology outsourcing. The Journal of Strategic Information Systems, 21(3), pp.233-244.
Garofolo, W. and Garofolo, F., 2010. Global outsourcing. Bioanalysis, 2(2), pp.149-152.
Geis, G.S., 2010. An Empirical Examination of Business Outsourcing Transactions. Virginia Law Review, pp.241-300.
Gerbl, M., McIvor, R., Loane, S. and Humphreys, P., 2015. A multi-theory approach to understanding the business process outsourcing decision. Journal of World Business, 50(3), pp.505-518.
Gonzalez, R., Gasco, J. and Llopis, J., 2010. Information systems outsourcing reasons and risks: a new assessment. Industrial Management & Data Systems, 110(2), pp.284-303.
Gospel, H. and Sako, M., 2010. The unbundling of corporate functions: the evolution of shared services and outsourcing in human resource management. Industrial and Corporate Change, 19(5), pp.1367-1396.
Kasemsap, K., 2016. The role of strategic outsourcing in global business. Alor-HernándezG. Sánchez-RamírezC. García-AlcarazJ.(Eds.), Handbook of research on managerial strategies for achieving optimal performance in industrial processes, pp.325-357.
Koo, Y., Lee, J.N., Heng, C.S. and Park, J., 2017. Effect of multi-vendor outsourcing on organizational learning: A social relation perspective. Information & Management, 54(3), pp.396-413.
Lee, G., Shin, G.C., Haney, M.H., Kang, M., Li, S. and Ko, C., 2017. The impact of formal control and guanxi on task conflict in outsourcing relationships in China. Industrial Marketing Management, 62, pp.128-136.
Lester, D.L., Menefee, M.L. and Pestonjee, D., 2010. An information technology services outsourcing alternative: a business model. Journal of Business and Entrepreneurship, 22(1), p.23.
Pani, A.K., Mital, M., Choudhary, P.K. and Sharma, R., 2015. Cloud Computing and IT Infrastructure Outsourcing: A Comparative Study. International Journal of Organizational and Collective Intelligence, 5(4), pp.20-34.
Plugge, A., Borman, M. and Janssen, M., 2016. Strategic manoeuvers in outsourcing arrangements: The need for adapting capability in delivering long-term results. Strategic Outsourcing: An International Journal, 9(2), pp.139-158.
Rajaeian, M.M., Cater-Steel, A. and Lane, M., 2017. A systematic literature review and critical assessment of model-driven decision support for IT outsourcing. Decision Support Systems, 102, pp.42-56.
Schniederjans, M.J., Schniederjans, A.M. and Schniederjans, D.G., 2015. Outsourcing and insourcing in an international context. Routledge.
Shipman, M.D., 2014. The limitations of social research. Routledge.
Singh, N.P., 2011. Critical analysis of expansion strategies of SAP, IBM, Oracle and Microsoft in the area of business intelligence. International Journal of Strategic Information Technology and Applications (IJSITA), 2(2), pp.23-43.
Solli-Sæther, H. and Gottschalk, P., 2015. Stages-of-growth in outsourcing, offshoring and backsourcing: Back to the future?. Journal of Computer Information Systems, 55(2), pp.88-94.
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