Outsourcing Strategies for Small Businesses MyAssignmenthelp.com

Question: Discuss about the Outsourcing Strategies for Small Businesses. Answer: Introduction: Business outsourcing is whereby a business enterprise decides to use a third party to carry out its business operations which would be carried out in the business environment. Usually, many businesses outsource because they want to reduce their costs of production by reducing the costs incurred when conducting operations that do not play a great role in keeping it market or maintaining its market position. Additionally, the outsourcing decision is made according to the size of the business as well as the resources available for the business to use in its production (Sonfield, 2014). Therefore, the business has to decide what benefits it is likely going to receive from the outsourcing. Apart from saving costs or money, some businesses also have the objective of saving time and resources that are available for use. Generally, outsourcing is an activity that is carried out by most of the information technology businesses or the other industries that often use information technology to c onduct their business operations. Despite the fact that it is very beneficial for businesses to outsource, the activity still carries some challenges and disadvantages that come in handy. Therefore, this research is definitely going to discuss the advantages and disadvantages of business outsourcing. There are different types of outsourcing processes which are: the back office outsourcing and the front office outsourcing. The back office outsourcing gives the business an opportunity to control and manage tasks like information or data entering, processing of the customer payments, conducting surveys, accounting support to name a few of them (Awino et al, 2014). Therefore, it generally involves carrying out of activities such as billing, purchasing and business operations management. The front office activities include carrying out customer responses e.g. through the phone, emailing, text messaging, fax, social media responses among other types of communication methods. Therefore, it basically deals with the services that regard customers interactions and customer relations; e.g. marketing and technical support aspects. Reasons for Business Outsourcing Just as mentioned earlier, different businesses decide to outsource because of certain various reasons. Some of the most common reasons for outsourcing include the following: Desire to save production costs through any means possible, especially in regard with overhead and labor costs Desire to save time especially the external business operations To achieve the objective of efficiency improvement To be able to increase and improve its production rates and levels To be able to get a chance to focus and concentrate on its main products or services as well as its main functions as a business in that industry. Just as mentioned earlier, business outsourcing is a major activity or practice for some businesses. It is a business strategy that is capable of helping a businesss functions, processes, operations and decision to be used by other businesses. This means that they two parties have to create an agreement with conditions and rules to adhere to. However, outsourcing is a great idea for some businesses, it has its advantages and disadvantages as well just like any other business strategy (Mugurusi et al, 2013). Most of these advantages and disadvantages relate to four of the main business operations which are: the accounting operations, Sales, marketing and the human resource operations. Therefore, the following are some of the advantages and disadvantages. Some businesses outsource to reduce the cost of carrying out some operations. Therefore, when a business outsources, there is a high of it reducing the cost of product or service production. This is simply because there will be less labor costs for employee compensation, saves office space and office expenses, saves a large amount of money that would be used to cater for the employees and any other equipment or material needed for their support (Whitley et al, 2011). With this in mind, businesses are able to use the saved money to develop and expand its operations in many other areas that are more important. Focus On Core Business Operations A business is able to exist in its market for long only when it is capable of attaining a competitive advantage over its competitors in the market. This is easily achieved when a business specializes on a certain product or service for specific customer or market share. Therefore, to be able to achieve this, some businesses prefer to outsource so that they can have more time to focus on their expertise and core business operations. When business does not outsource, the chances of its concentration and focus being directed towards another business or function is very high. Therefore, through outsourcing, they are able to specialize on their core operation which leads to more success and better objective achievement. Many large business are divided into many different departments or division that are responsible for specific duties and responsibilities. However, other organizational departments require expertise, skill and experience to be successful. Some of these departments or aspects include: marketing department, accounting department, sales department and the human resource departments. These are some of the most vital and sensitive departments of any business organization (Lacity et al, 2013). Therefore their need to be managed and control by professional personnel so that they can give the required results or they can be effective. Therefore, a business that outsources for the sake of these or any of these departments will certainly increase the quality of its product or service. For instance, some businesses may lack the funds to hire a personal HR management team. Therefore, it becomes easier for the business to work closely with a recruiting agency who are capable of helping the busine ss in hiring of the employees. The business should therefore ensure that the agency is qualified and has the experience of hiring for the positions that it needs. However, in this case the business must clearly identify and state its requirements, interests and needs from the candidates. In this kind of process, the agency or recruiting organization gets paid only when they have completed the hiring process. This is in relation to the fact that the business will not be dealing directly with the service providers. By considering customer satisfaction, it relates to the fact that the business will be able to get trained and experienced personnel to work for it. Basically, this is in regard with the employees who will be dealing with customers directly. Therefore, during outsourcing process, the business only hires a vendor who in turn gives the responsibility of dealing with customers to its employees. Therefore, in case one of the employees does not show up for work, the vendor take up the responsibility of replacing the employees by themselves. This basically means that the vendor is bound to certain service levels and quality. Therefore, they should ensure that the services are above the specified rates or rather do not go below those levels. Therefore, with this, the businesss customer relations are likely to improve and their satisfaction will increase as well. This is certainly becau se of the high service standards, high qualifications, skilled, experienced and high expertise service standards being used in the production process. Lead To Improved Efficiency Levels Through outsourcing, businesses get an opportunity to be involved with many other businesses. Therefore, they are able to be engaged with many different specialized systems that are capable of improving its efficiency in production. When businesses use modern technology and improved internal systems to run their operations, then their effectiveness and their efficiency levels will definitely increase (Potkany et al, 2016). Therefore, with outsourcing, businesses are able to learn new ideas and know new technological systems that can increase their production and therefore improve its productivity. With the use of such systems, the business operations become easy and can be carried out at a faster rate. When business engage in outsourcing process, they are able to get a large number of business vendors who can offer them the service they need. This means that the business is the one that has to choose whether to hire the vendor or not. However, the business should also consider the fact that the choice should be based on the vendors experience, knowledge, skill and expertise and service relevance to the business operations. In that case, the business would be sure and clear about whatever service it needs and whatever objective they are aiming to achieve (Dekker et al, 2016). When businesses outsource, they get the chance to choose and be flexible about what which vendor they need according to its relevance to the businesss operations. There are other advantages that accrue to business outsourcing process, like: increase in production speed and service offering, easy access to modern and advanced technology and technical support, leads to effective, efficient, quick and accurate business reporting especially when it comes to financial reports and market analysis reports, helps business to save resources that are related to staffing, employee training and employee maintenance. When a business outsources a certain service from a different business, there may be language barrier especially between the customer and the employee. In addition to that, the language barrier can also affect the communication between other employees with the outsourced employee. This is likely going to hinder effective and efficient communication in the organization which may later lead to business failure. For instance, in a customer call center, if an employee is outsourced from a different country that speaks a different language from the businesss home country, then there will be challenges in communication. Lack of Organizational Knowledge Apparently, for an employee to be able to work and be productive in a business, they must have a clear understanding of the business background data, product and also have a passion for the work. However, this is not always the case for most employees who are outsourced. Often are the times that they just a job to get money or pass time (Albors-Garrigos et al, 2014). Therefore, if a business outsources and gets employees who have no idea about the business then the probability of it not achieving its objectives increases which later end with business failure. Just as mentioned earlier, the outsourcing practices and process is done mostly by information technology business or other businesses and industries that use information systems to conduct their business operations. This basically means that most of these business store their information and data in the systems. However, these systems can easily be breached and data stolen or accessed by unauthorized personnel. This is challenge that has been faced by many outsourcing companies whereby the outsourced technicians or employees break the rules and steal the business data that they should not get (Malakoti-Negad, 2016). However, it becomes difficult to even note when the information has been stolen until when they complete their service contract. This becomes a major risks for business and has caused a lot of effects to some of them. Even though outsourcing is a great strategy to reduce employee payments costs and many other benefits that come in handy, overdependence on outsourced service providers is not a good way to go. Some businesses have always preferred outsourcing rather than hiring their own permanent employees. This is likely going to lead to overdependence to service providers which can cause more damage than permanent employment. Basically, it is clear that outsourcing decreases the costs of production by saving funds in different business fields. However, some businesses are used to estimating the costs that they are going to incur to the extent of lowering them to completely low estimates. When businesses underestimate costs, they will later face challenges of looking for other funds to be able to fund the business operations. Therefore, this is likely going to lead to finance crisis and pressures which delay business operation completion. Other disadvantages include the following: risk of product quality exposure, risk of service quality exposure, negative employee public opinion, unfavorable labor policies and laws especially in different countries, constant and inflexible legal compliance and security documentations especially in different countries and various services. Method to be used in Research The topic that I have chosen to use during my research is this topic (advantages and disadvantages of business outsourcing). It is a very important topic for businesses and will play a vital role in helping a large number of them to grow and develop themselves. Also, by doing a research on this topic, businesses will be able to understand the benefits that they are likely going to receive by participating in outsourcing business processes. The research will not only benefit the businesses that are already using outsourcing process but also those that would love to outsource as well. 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