The paper 'Outsourcing in Business Firms' is a great example of a Business Essay. Outsourcing describes the process of contracting some of a company’ s functions to an external company. This means that some of the tasks that would otherwise be handled by the company’ s own team of personnel are given to a contracted firm. Where this is done with members of another country, it is called offshore outsourcing. Any business, small or large, may decide to outsource in order to streamline its assets for the best advantage and therefore enable the company to meet its target goals and objectives (Hill, 2009.p. 304).
This paper seeks to assert the vital role and importance of outsourcing in today’ s business world. Thus for most companies and economies, outsourcing cannot just be a matter of convenience but is rather convenient indeed. The paper will also analyze key challenges facing outsourcing while putting a special emphasis on the possible solutions based on Kaplan Norton’ s Sore Card. Outsourcing has become a routine in most business organizations. Organizations decide to outsource various tasks due to some important reasons such as cutting down operating costs, getting access to dynamic capabilities, enhancing company focus, and saving internal resources for other important purposes.
The invention of technologies and dynamic market changes has called for outsourcing in business organizations. Outsourcing helps ensure efficiency and continuity in business since in the business world, workers may not always guarantee living up to expectations. For instance, expanding information technology and the development of new business models has had substantial impacts on the sort of out sousing relationships applied in different business models (Engardio, 2006). It is true to state that some companies have engaged in strategic outsourcing of mainly “ non-core” activities.
This implies that these activities are not a constituent part of the particular company’ s distinctive competencies and thus do not substantially affect the company’ s competitive advantage. The company will resort to outsourcing in order to gain immediate access to specialized professionals for the functions being outsourced hence eliminate the need to train personnel for these functions. This is very important as it helps enhance the company’ s product differentiation (Hill, 2009.p. 306). Furthermore, by outsourcing, the company is able to concentrate on more important activities rather than get involved in every single activity.
This is important because companies outsource with an aim to strengthen their business models so as to enhance profitability. Quite a number of companies have engaged in outsourcing and especially so in manufacturing functions. For instance, Gap Inc. does not make its jeans and clothing, Nike does not make its own shoes, and even Apple Inc. , does not make any of its products (Hill, 2009.p. 304). Having mentioned that most companies engage in outsourcing manufacturing functions, it is necessary to note also that a lot more different “ noncore” functions are usually outsourced.
For example, over the years, both Microsoft and Dell have totally outsourced their customer technical support teams and have established qualified customer support operations in India at only a fraction of pay compared to the US team. Another example is where BP outsourced to Exult (a San Antonio Company) a substantial part of its human resource function through a 5-year deal at an estimated cost of $600 million, and in a few years after this deal, Exult was given a 10 years HRM contract by the Bank of America to cover all the150000 employees of the Bank at a cost of $1.1 billion.
In yet another outsourcing deal worth $4 billion, American Express fully outsourced its IT functions to IBM for a seven-year term (Hill, 2009.p. 304).
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