Advantages and Disadvantages of Off-Shoring Business - Case Study Example

RUNNING HEAD: Off-Shoring Business Description of Off-Shoring Business, People Management and Recommendations Name: Instructor: Course Unit: Date: Table of Contents: Executive Summary……………………………………………………………………….. 3 Introduction………………………………………………………………………………... 4 History of Off-Shoring…………………………………………………………………….. 5 Advantages and Disadvantages of Off-Shoring Business…………………………………. 6 People Management………………………………………………………………………... 9 Recommendations………………………………………………………………………….. 12 Conclusion…………………………………………………………………………………. 14 References………………………………………………………………………………….. 15 Executive Summary: Aggressive demands are convincing lots of organizations to think about off-shoring some of their processes for instance information technology, and accounting, customer and marketing services. Several have already moved application enhancement as far as China, and Eastern Europe. What is propagating this inclination? The desirability of low-cost, high-quality labour is just too persuasive to resist for many businesses. Invigoratingly the escalating potentials that they place on information technology have an effect to realization of the business objectives, off-shoring presents ensnare of being proficient to put together and sustain a greater number of processes for the same resources. Given the sine qua non reimbursement, the verdict to offshore appears apparent for a good number of CEOs. On the other hand, the unforeseen challenges of succumbing to off-shoring are now starting to be entirely understood. This paper takes you through the connotations of offshore business, hence it’s of assistance to help you make a decision of whether or not off-shore is perfect for you, at the same time it identifies the challenges of off-shoring business and offers recommendations to help combat them if at all you decide to off-shore. Introduction: This case study report labours to elaborate the meaning of off-shoring business, the different categories, its history, advantages and disadvantages, areas of people management to consider and lastly recommendations. It purely leaves you to select your own whether to off-shore or not to. Off-shoring business involves the employment of institutions and/or employees to carry out company undertakings in a foreign country. For instance, a company can manufacture and put on the market mobile phone handsets in Australia, however use off-shoring to handle its clients care services and technical support phone lines. Globalization and the recent advancements in the Internet have contributed enormously in the role of off-shoring, they have not only permitted companies to off-shore work to supplementary organizations and appoint employees that are in distant areas, but also made it possible to take into service freelance human resources from different corners of the globe, thus getting tasks accomplished at considerably lower costs (Rutherford & Mobley 2005, p. 93) The act of off-shoring is frequently categorized into four major groups; the information technology group, which entails the overseas off-shoring of a company's information technology; the business process group, which involves business course of action off-shoring, which can take account of call centre management, accounting services, and marketing; the software research and development group, which involves software development falls; and the knowledge process group, which characteristically engages processes that have need of a higher intensity of skilfulness, for instance interpreting research’s results and investments. Business organizations off-shore their business processes because of factors like; deficiency in expatriates; accessibility of cheaper labour, and capacity and practicability to give attention to other fundamental business process. History of Off-shoring: Off-shoring is not a new idea as scores of us think. Thousands of years ago, our intimates had embraced the need for off-shoring .They became conscious that it would be impractical for them to accomplish all their requirements by themselves, thus depended on an important person to provide for them. Those individuals possessed dedicated expertise, which facilitated them to do the work expediently, cheaper and more professionally. Nevertheless, on the road to Industrial Revolution, organizations virtually on no account depended on off-shoring to monitor for instance, their transactions, and legal affairs. The organizations instead executed all of their duties by themselves.  The Industrial Revolution in Europe granted to a great extent impetus to the advancement of off-shoring. It emerged with multiple amplifications in the manufacture of commodities and provision of services; there was readily-available market which made businesses incomes to soar into new heights that had not been experienced previously. These lead companies to off-shore for activities that included; insurance and legal requirements, but these specialized organizations were within the nation and not abroad (Swoyer 2004). The advancement of off-shoring commenced in mid of 20th century which had lots of economic and political evolutions pooled with the improvement of quicker means of transport. The transport network was increased and thus distances between the market and producers reduced. The production of low costing products like electronic merchandise, were off-shored to less developed nations. Scores of nations in Asia had been liberated, thus off-shoring was an embraced development as it promoted the on the rise financial systems by increasing employment and revenue levels of the workers. The advancement in information and computer technology facilitated the conveying of off-shoring to the next stage in the off-shoring history. During the 1990s, various organizations started to off-shore activities that were indispensable for them, although these did not incorporate their major activities. Off-shored activities included staff, data processing, and bookkeeping. Notably the organizations still adhered on to possession and management of major activities. With the recent development of globalization and advancement in internet services organizations are lobbying towards joint ventures. This has an implication that outsized organizations are geared up to off-shore even their major activities to service providers if it implies better incomes for them. Off-shoring is at present an essential component of any outsized business. Regardless of its hullabaloos numerous organizations are seeking for support from overseas that includes; customer service business, computer software, finance and accounting, medical transcription, and human resource development. Advantages and Disadvantages of Off-Shoring Business: Business and Risk are endemic to each other and they share inverse correlation. Involvement in business requires one to curtail risk and where there is insurmountable risk it collapses. The possibility of losing profits imposed businesses to consider off-shoring, but truth to be told off-shoring has got its own pros and cons. The advantages of off-shoring business include; expediency and proficiency, most of the times responsibilities are off-shored to merchants who concentrate in their area of specialization. The off-shored merchants also have particular paraphernalia and technical proficiency, better than the ones at the off-shoring business. Effectively the responsibilities are accomplished faster and with improved quality production. This also plays the role of rescuing the business from investing in the most up-to-date machinery, software and infrastructure as the off-shoring associate would be investing in these. Off-shoring helps the business management to focus on core business processes rather than the sustaining ones. This indeed facilitates in strengthening the core business process, while at the same occasion saves on time, workforce, effort, operating costs and training expenses among others. Another advantage is risk-sharing, which is amongst the most fundamental factors influential in the result of an operation risk-analysis. Off-shoring some workings of a business process assist to transfer some duties to the off-shored partner. In view of the fact that the off-shored partner is a professional, he will help in tabling your risk-mitigating dynamics in good health. Off-shoring has also got an advantage of minimizing the operational and enrolment costs, because, it avoids the call for employing persons internally; therefore staffing and operational costs are minimized to an immense degree. This is amongst the most important advantages of off-shoring (Mann 2003). Conversely the disadvantages of off-shoring are; the possibility of revealing classified information for instance when a business off-shores for processes like, payroll and conscription services, it involves a threat of exposing confidential business information to an arbitrator. Another disadvantage is coordinating the deliverables, this happens in situations whereby a business does not select an appropriate off-shore partner, thus it experiences setbacks that include, prolonged delivery timeframes, sub-standard quality products and improper classification of tasks. Even though off-shoring is lucrative, at times the concealed costs concerned with securing a contract across international borders may create a severe threat. Off-shoring involves a partnership between two-business organizations that are administered by two diverse sets of principles and cultural variations. Political impasses and unconstructive rules among two nations towards one another might act as a disincentive in obstructing off-shore business lashes, inevitably affecting the business processes. Lack of client focus is another disadvantage the off-shoring business brings fore front for instance, an off-shore partner may be attending to the expertise-needs of several businesses at a point in time. In such circumstances partners might lack comprehensive centre of attention on the business responsibilities. Although the advantages of off-shoring are more than those of its disadvantages, the disadvantages give businesses an opportunity to reflect about what they are entering into. If the business is authentically engrossed in off-shoring, the disadvantages of off-shoring should not be an obstacle to realize the business inspirations. On the other hand, several organizations that are cautious of the management and safety measures that enclose off-shoring are still profiting from the cheaper and far above the ground quality of employment through off-shore in-sourcing. Either course an organization makes a decision on; there are benefits and risks to be experienced, as illustrated in the table below, which compares merits and limitations of in-sourcing and out-sourcing off-shoring: Table Comparing in-sourcing and outsourcing off shore’s: Offshore in-sourcing Offshore outsourcing Advantages Global enterprises can get significant cost benefits from centralizing processes in a geographic location. Better economies of scale and therefore lower costs. Process control remains in-house Access to better and continually enhanced technology. Process knowledge remains with the organization Inherent incentives to improve the process Better security Ability to benchmark to industry and global standards. Limitations Higher costs compared to outsourcing. Less control over process delivery. Slower response to change Presently limited to specific functions within a business process Lack of motivation to improve processes Still nascent and unproven service offerings Initial overtime cost savings become the new “legacy”, and the next level of costs savings can be achieved only through the introduction of improved technology/processes Limited industry and process knowledge (although it is growing). Risks of transferring inherent inefficiencies to the in-sourced centre Relationship management over the long term is crucial to successful outsourcing Source: Gartner research (July 2003), Off-shore In-sourcing versus Off-shore out-sourcing. There is no accurate or incorrect response; about involving an organization in an off-shoring business it’s reliant on establishing the inspirations and objectives of the business and deciding on a strategy that facilitates the business to positively achieve them. Dealt with appropriately, off-shoring can without a doubt bring in the secured cost reductions that are so enthusiastically wanted. Nevertheless malfunction to prevent the upheavals that stretch out at the forefront can just as straightforwardly result in the entire business collapse. People Management: Truth to be told employees in a business are the leading positive feature that business possesses. This is for the reason that, their performance and approach can either lead to the triumph or collapse of the business. People management in a business is the most complicated component of every executive's occupation, because one is obliged to lead, train, stimulate, inspire, and persuade. These roles give the impression of being out of the ordinary, but for a business to flourish the management amalgamates the constructive and unconstructive features of these responsibilities to generate affirmative, prolific employees. Therefore People management, or human resource management, includes the responsibilities of employment, management, and providing constant shore up and course of action for the workers of an organization. These responsibilities can take account of the following areas: recruitment, performance management, employee motivation, training and communication (Dessler et al 1999, p.14). Performance management is the process of generating an employment atmosphere in which the employees are facilitated to execute to the greatest of their abilities. The objectives of performance management are: facilitate in conferring necessities and result-oriented performance principles, outcomes, and procedures; smooth the progress of granting effective point of reference, education, and training; aid in carrying out of quarterly performance progress discussions; help in drawing effective reimbursement and appreciation systems that rewards employees for their involvement; and help in the provision of career advance opportunities for employees(Stone 2002, p.20). Recruitment consists of a set of attributes that an organization uses to attach candidates to the organization. These candidates must be able to have the abilities and skills that will enable the organization achieve its goals. It can be; general recruitment, which involves selection of those candidates who don’t have specific skills; or a specific recruitment, which is mainly for managerial and professional positions. The sources of recruitment can be: internal or external. In the line of managing the employees inside an organization, one must have centre of attention on both recruitment of the accurate employees and receiving the largest part out of them. Innovative human resources must present the organization with unsurpassed capacity accessible that champions the requirements of the business. The business must be able to forecast how new members of staff are able to be utilized to their maximum. In receipt of receiving the most out of the workers, it implies that a business has reliable policies and practices in the business processes to offer its employees with suitable training and development. Training is directed towards maintaining and improving current job performance. Internal approaches to training include orientation; development by level which is provided as an employee raises from level to level; job rotation; apprentice training; coaching; assistant to position; and committees and junior boards. External approaches to training include conventional classroom lectures, seminars, conferences and workshops. Employees’ training can be a very efficient instrument within the occupation of people management. This modus operandi can be utilized to absorb human resources in any enhancement line up within an organization. Authority, liability, and dependability are handed over to them for developing the business processes which are underneath their managerial without foremost having to get hold of authorization from administration previous to implementation of any transformations (Applegate et al 2003, p. 40). Motivation is willingness to exert towards the accomplishment of some goals. It applies to the entire class of drives, desires, needs, wishes, and similar forces. Vroom’s expectancy theory of motivation proposes that people are motivated to reach a goal if they think that the goal is worthwhile and can see that their activities will help them achieve their goals. Equity theory refers to an individual’s subjective judgments about the fairness of the reward received for inputs in comparison with the rewards of others. Reinforcement theory suggests that people are motivated by praise of desirable behaviour; people should participate in setting their goals and should receive regular feedback with recognition and praise. Herzberg’s two facto theories suggests two sets of motivating factors, in one set are the dissatifiers, related to the job context, the absence of these results into dissatisfaction. In the other are the satisfiers, related to the content of the job. Special motivational techniques include; using money, encouraging participation, and improving the quality of working life (Ibid). The complexity of motivation entails a contingency approach that takes into explanation the environmental aspects, as well as the organization ambience. Communication is indispensable element in employees’ relationship. Communication is the exchange of facts, ideas, and opinions to create mutual understanding. It is a sum total of directly or indirectly, consciously or unconsciously transmitted words, attitudes, gestures, actions or feelings. It’s a two-way process, and it’s not complete unless the message has been understood by the receiver and his response becomes known to the sender. Its objectives are; to convey the right message to others, which may be well understood by them so that they may carry on their work effectively; to help coordinate the efforts of those involved in running the business; to help in the development of managerial skills; to develop good industrial relations thus parties can communicate their ideas and to understand others views thus promoting cooperation and good relations; and an effective communication system communicates the policies, practices and programmes to partners so that processes can be accomplished effectively. Channels of communication include: formal communication which is associated with the status of the sender and the receiver. The three forms of formal communication include; downward communication; upward communication; horizontal communication; and diagonal communication (Hof 2004). The above factors are important in that they lay emphasis on the need to look further than remunerations to reflect on benefits, training and other costs before off-shoring and also think about transportation, cultural and other operating expenses associated. They give an insight of how an organization can subdue a number of interferences that emerge from the process of off-shoring by scheming strategies to give support to employees who lose their occupations to off-shoring, prevailing over confrontation from discontented workers and upholding both self-confidence and a constructive reflection amongst the employees left behind. This also guides in the securing of an appropriate off-shoring managerial who ought to be a superior integrator, a proficiency that demands expertise in conflict management, group motivation and individual teamwork. These factors also help the business management to comprehend where the business capabilities dwell. For instance one needs to expend more time to widen processes and expertise’s to sustain the essential processes prior off-shoring. It is very easy to lose the reimbursements of an inexpensive off-shore assets by incompetent redraft if necessities are not satisfactorily communicated. If in progress activities are confronted by deficiency of communications, the management could yearn for a re-evaluation of the competence to sustain an off-shore improvement venture. On a regular basis planned consultation calls, and e-mails are essential for administration of these developments (Mann 2003). These assemblies are not only for exchange of information and instituting a comprehensible viewpoint on the status of the off-shoring business, but also for preventing whichever miscommunication that can adversely afflict an off-shore business. In brief the above aspects of people management are of essence in motivating the continuing business process streams and communication methods to maintain off-shored ventures on trail. In extensive provisos it helps the business management to focus on, implementing most excellent practices, dealing with communications tribulations, enchanting exceptional concerns, determining reliance’s, and appraisal of ventures in context. Lastly they do help in combating the major challenges of off-shoring which are; lack of management skills; good process of work specification; and right performance metrics for managing off-shore performance. Recommendations: Managing an off-shore business is different from running a within business, due to the addition of several considerations for instance; distance, time zones, and culture. Hence it is vital to identify the key business processes to off-shore. The aspects to consider when selecting are; is the business process autonomous as much as necessary to be executed in an offshore centre? What are the operational limiting factors that are concentrated in ratio to the independence of the activity? Eventually the significance proposal can go beyond the cost degree of difference if the process acknowledged leads to specialization in a definite area of expertise. It is significant to discover the off-shored process in considerations to short and long-term impacts on the business. A within professional and one with experience in the process area is an aspect to consider. Regard the accessibility of skilled employee’s to initially commence the process. This is advantageous, but not a necessity. The organization should make certain that there are unambiguous processes and metrics in place to monitor the off-shored business. By lack of metrics and processes to monitor, off-shoring can be complicated in smaller organizations where employees are the central part, such as information and technology section. The unambiguous processes and metrics make certain that a process is performed in a homogeneous way, and significant data is distributed within all the parties involved regardless of the two partners’ locations (Kalakota 2004). Employee’s innovativeness is a fundamental input to the achievements of off-shoring. It is essential to recognize significant aspects that motivate employees’, while at the same time guarantying that focus and liability systems are in place. Other factors to observe are; how incomparable to incorporate partners, recognizing the organization and department's vision, mission, organizational structure, roles and responsibilities, appreciating the organization's culture, valuing the pertinent products ahead of an individual responsibility level, interrelating and communicating regularly with different leadership levels and focusing on employees’ career courses. These factors need out of the ordinary centre of attention from off-shore executives to structure and sustain a system while continuing to retain information about the geographical and time zone differences. Also I would strongly recommend establishment of a communication strategy for the organization offshore businesses (Intetics 2004). This must involve innumerable significant communication modus operandi for instance internet conferencing, socializing tools, e-mail, and a document repository. Lastly I would recommend two very important factors to adhere to, these are; to initially perform an internal promptness appraisal to observe if the organization’s existing business processes, infrastructure, and paraphernalia can sustain an offshore development enterprise; and to undertake offshore development with undersized and reasonably low risk, internal application. These two steps can be of assistance to progress all the way through the learning curvature with a lower scale of risk than gambling the organization on an outsized commitment. Conclusion: Successful off-shore business that aims to reap the benefits of off-shoring entails overcoming and planning critical challenges that include; managing requirements; managing quality expectations; and managing remote communication. These implemented and managed in the approved manner, the organizations business costs can be lowered and for instance information technology financial plans more effectively besieged. If you desire to take full advantage of your prospects through off-shoring, you must come within reach of the undertaking as a long-term venture in proficiency, business processes, paraphernalia, and infrastructure. Select an expertise partner that would facilitate in placing the groundwork for a higher intensity of achievement and control, thus uplifting the business a point higher on the application improvement process. Organizing your business in the in here described order will permit you to take a hard-headed analysis of the categories of development business processes that you ought to offshore at the same time promoting you to lessen your risk and compel the quality and triumph of running geographically scattered workforces through superior certainty of the off-shored business delivery course of action. References: Applegate, Lynda, A., Robert, M. & McFarlane, F. W. 2003. Corporate Information Strategy and Management, 6th Edition. McGraw-Hill Irwin, New York. 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