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Assignment

Of

Organizational Development

Assignment 2

SUBMITTED BY- SUBMITTED TO –Miss Gurnoor Brar

NAME – PRASHANT PRIYADARSHI

CLASS- BBA (HONS) MBA

ROLL NO- A20

SUB- ORGANIZATIONAL DEVLOPMENT


ABSTRACT
Outsourcing has helped many industries reduce costs and increase profits. But businesses have
not yet been able to convey the real-time benefits of outsourcing. This has led to increased
sensitivity to the outsourcing of jobs, which have seemingly led to loss of employment
opportunities in the local economic system. “Seemingly” as this is not the case. For short while it
may seem that people are losing their jobs to outsourcing, but in the long run, as profits rise, the
economy improves and with that new jobs are created.

OUTSOURCING
Outsourcing is often defined as the delegation of non-core operations or jobs from internal
production to an external entity that specializes in that operation. Outsourcing is a business
decision that is often made to focus on core competences. It also implies transferring jobs to
another country, either by hiring local subcontractors or building a facility in an area where labor
is cheap. It became a popular buzzword in business and management in the 1990s.

Outsourcing has really made its mark in the business entities. The decision to outsource is like
the decision to expand a business overseas, to incorporate computer technology, or to hire new
workers. Outsourcing can change the way companies do business-through people, process and
technology. Whether B2B or B2C, whether SMS’s or large diversified companies or small home
offices, every company can leverage the power of outsourcing for business transformation.
Lately however, the concept of outsourcing has been criticized. The negative attitude towards
outsourcing have been mostly discussed by masses in the US and UK, due to unemployment in
the mentioned countries. People in countries like the US, feel that outsourcing is threat to their
economy. Economist Thomas Sowell from the University of Chicago said “anything that
increases economic efficiency, whether by outsourcing or a hundred other things, is likely to cost
somebody's job. There are other problems too.

Problem of unemployment
It cannot be denied that the immediate effects of outsourcing such as lay-offs as well as the
shifting of production and jobs to foreign locations causes problems for both low and high-end
employees.

Quality problem
As "outsourced" workers are not the paid agents of the company, it is argued that there is less
incentive for the agent to show loyalty or work ethic in its representation of said Company. It has
been therefore argued that quality levels of customer service and technical support of outsourced
tasks are lower than where they have remained 'in-house'.

Other problems
These include unfavorable contract lengths, loss of competitive edge, problems in contract
renewal, contractual misunderstandings, foreign accents and irritated customers, unions,
employees etc.
But this trend is not entirely damaging, there several marked benefits associated with it.

Focus on core business


Back office operations of a company require high maintenance and specialized attention. Yet
most of them are critical for the company's everyday activities. By outsourcing their back office
operations businesses can concentrate on their core competencies while their back office
operations are being managed smoothly by a specialized third party company.

Cost and Efficiency saving


Lowering the overall cost of the service to the business. This involves defining quality levels, re-
pricing, re-negotiation and cost-restructuring.

Staffing Flexibility
Access to larger talent pool and sustainable source of skills. This increase quality as well as
quantity of goods.

Increase in Business
By employing skilled manpower in larger numbers at lower costs companies can really increase
their productivity. This in turn would result in better customer satisfaction and increased
profitability.
Competitive Advantage
In today’s fast paced global economy a company needs to provide high-quality services at cheap
prices to its customers in order to retain them. Outsourcing in this case can help the company
maintain lower rates with better service solutions, thereby giving them a better market position.

Tax Benefits
By selecting the right BPO destination companies can save up on taxes and can improve their
margins.
The Outsourcing market is estimated to grow tremendously in the coming years with an
increasing number of companies planning to outsource and as the number of companies are
rising, there will be large variety and less risks as businesses will have more experience and
clearer objectives.

Review of literature
Is outsourcing a good idea for small businesses?

 By William King

Hiring an outsider firm or an individual, to carry out some of your business work is known as
outsourcing. Outsource happens to be a debatable practice because of the advantages and
disadvantages it holds. Outsourcing industry (especially offshore outsourcing) gained momentum
with the amazing growth in communication technologies and internet. Today, a number of
businesses in US, Canada or UK employ offshore outsourcing, much to the dismay of local
workforce (that’s the reason why in near future we might see some jurisdictions being imposed
on businesses looking to outsource their work to some offshore company).

There are many reasons for companies who decide to hire outsourcing companies instead of
hiring and training their own staff.

Outsourcing for Small Businesses:

Outsourcing has particularly helped entrepreneurs and small businesses, allowing them to
outsource some of their business work while they can focus on their strengths. For example, a
company which is good at web marketing might outsource the web development work to another
company because customers are looking for a complete package instead of dealing with different
vendors themselves. Similarly, a small business can simply outsource the tasks like recruiting,
book keeping or PR management because the cost of hiring and training full time professionals
can sometime exceed the cost incurred for outsourcing.

Cost saving is unarguably the biggest advantage associated with outsourcing but it is not the only
one. Outsourcing can help in speeding up the process of establishing a new business or launching
a new product. At times it helps in improving quality. In our example above, you can see how
the outsourcing of web design or development work to a third party can provide better results to
the customers as compared to trying and coming up with a mediocre website (because you are
not an expert at web designing). It also allows you to excel in your respective field instead of
spending time in learning all of the required skills yourself.

Disadvantages:

Outsourcing doesn’t always result in superior quality products or services. In fact it’s quite the
opposite when you are outsourcing to an offshore company in a low cost zone, in that case
quality becomes the biggest concern. These companies, in their bid to save cost, compromise on
the quality. Therefore, you must choose the outsourcing company carefully instead of going for
the one with lowest quotes. Once you start outsourcing your work, you must put in place some
proper quality check measures to ensure the quality.

The Other Risks in Offshoring


By- Effie Sha

It’s not just theft of corporate secrets that you need to worry about.

Data theft has always been the big worry in outsourcing and offshoring. There are armed guard
outside the doors of many outsourcing companies and heavy security even inside.

But the bigger threat may have less to do breaking into the building and stealing intellectual
property than the plume of smoke emerging from a volcano in Iceland or a terrorist attack in
India. Outsourcing and offshoring operations can be wreaked havoc by natural disasters,
geopolitical unrest and infrastructure breakdowns. Even worse, they almost surprise the
companies doing business there.

"If there's a city outage for the outsourcing operation, very few companies have ever planned for
that," says Sudin Apte, principal analyst in Forrester Research's ( FORR - news -
 people ) IT services sourcing and vendor management research group. "When they talk about
business continuity and disaster recovery, they focus on infrastructure and applications and how
those can be moved from one city to another. Process knowledge and people are seldom included
in the plan."

Apte, who is based in India, is seeing these problems firsthand. He says the risk of annual
flooding in Mumbai is much more serious than theft of corporate secrets. But while companies
routinely plan their data center recovery, they don't have the same kind of follow-through when
it comes to their outsourcing operations.

So how can they reduce the risk of problems with outsourcing or offshoring? Here are some of
Forrester's suggestions:

–Fully understand the people, resources and the process involved in an operation. Most
companies care the cost savings or lots of expertise gained through contracting out an operation
such as application development or management-or by locating it somewhere else under their
own management-but they don't know what's involved in running that operation. It requires
people and a deep understanding of the process to make it work smoothly, and you can't easily
change it from one location to the next if you don't plan for it beforehand.

–Hedge your bets the same way you'd hedge the risk in a financial portfolio. Suggest a service
provider to add other locations so that if something happens in one, work can continue without
too long disruption in another. Manufacturing companies have learned a lesson during the 2003
SARS in China, which almost shut down all commerce for several months, that the best way is
adding operations in other countries. Unfortunately, it isn't always possible in IT because the
skilled labor pool in India is significantly larger than it is in other countries. If it is not possible in
other countries, then try in other parts of the same country.

–Understand the costs of downtime and build that into the financial model. Many companies
keep eyes on outsourcer's infrastructure. They need to look deeper into the infrastructure of the
city where the outsourcer is located and any potential problems that might happen there.

This isn't something companies would even raise an eyebrow about on their home turf. It's part
of good business management practices. Yet it's surprising how it gets swept under the carpet
when it moves beyond the direct oversight of a corporation.

"If you pull out all the wires from the walls in any company, they won't survive more than eight
or nine minutes, no matter where they are," says Apte. "But only 10% to 15% of all the
companies doing offshoring understand all the risks. Those are the mature offshore buyers.
They've gone through this for the past 10 or 15 years. Others understand the risk only partly."

Reasons Why Businesses Find Outsourcing Extremely Beneficial


By - By Craig
Outsourcing has now become a household name in a lot of businesses as most have come to
realize the benefits of delegating tasks to outside providers. However – not unlike grade school –
just because everybody has one doesn’t mean you should rush out and get yourself one too. It’s
imperative that you spend time making sure and evaluating this significant decision first. Quality
partnerships and success will eventually follow.

It’s a logical process of first figuring out what drives you to do something in order to know
where exactly you’re driving to. In most outsourcing decisions, there are usually nine key factors
that affect business owners in deciding to hire outside companies to do some of the work in their
organization. Run through these nine and figure out which one applies to your company:

Hasten the re-engineering of the business. Most businesses want to re-engineer in order to
have dramatic improvements in some of the most important performance indicators such as
service, quality, cost, and momentum. Often, though, the necessity to invest in the efficiency of a
business contradicts the necessity to invest in its core part. The constant holding off of those non-
core needs affects the efficiency of the operation and, in the long run, affects the productivity.
Outsourcing a non-core need to a competent outside provider can give you the benefits of re-
engineering.

Be able to hire top-notch skills. World-class service providers have professionals trained and
expert in different fields; technology, personnel, etc. They also have knowledge and use of the
newest technology that will give more advantage to a business.

Get more use of your other resources. Especially manpower. Outsourcing some non-core
functions can give you an opportunity to get your other resources to be of help in some other
essential factors in the business, like focusing on the customer. No need to lose some of your
customers due to inadequate service and follow through. When you can free up some of your
employees’ time, there will be more focus given to the customer.

Reassess functions that cause issues. If your business is in trouble or you want to relinquish a
management role, outsourcing might not be one of your options. This is one of the things people
misunderstand. Not all functions can be passed on to an outside provider. If the function is
considered problematic or out of control, instead of outsourcing it, there might be a need to
reevaluate first. Look for the main issue. If you pass duties without being clear about
expectations or requirements, outsourcing might not be a solution but an additional problem.

Improve the focus of the organization. When non-core tasks are done by an outside service
provider, it gives the company the freedom to focus more on its core needs and functions.

Make use of capital funds. Management sometimes have a difficult time deciding if they should
even spend precious capital on non-core needs when there’s also a need to invest on core
functions. Outsourcing helps in reducing the need to cut the capital to spend on non-core needs.

Spend less on operating costs. Businesses that rely on themselves to do research, development,
and marketing spend a hefty amount, which they then pass to the customer. Outsourcing helps
them save on their operating costs.

Lessen risk. When a company tries to keep up with all the new technologies and other factors
that affect its efficiency, there is always a considerable amount of risk involved. Markets,
competition, technology – all these change at a very high speed. Investing is required in keeping
up, which then adds to the risk. However, outside providers keep up with the technology
regularly not just for one client but for many so the risk is reduced and is not just focused on one
company.

Get to resources not found internally. A lot of start-up companies don’t have all the needed
resources to gain more customers. Outsourcing provides them with the needed resources that
they do not yet have and have it used in the most efficient way possible.

Research has shown that of the nine main drivers why businesses choose to outsource, the most
popular one is cost reduction. Let’s face it, why spend so much on something you can have done
as, if not more, efficiently in a considerably reasonable price?
Facts and figures (secondary Data)
Outsourcing

 Benefits
1) Reduction of in house staffing requirements
2) Smaller investment in capital equipment
3) More flexibility in meeting changing requirements and adopting new technology
4) More predictable cost structure

 Risks
1) Too much dependence on vendors
2) High costs associated with vendor fees and profit structure
3) Employment of contractors who don’t understand the operation and culture of
healthcare organization

Businesses nowadays often choose to hire or outsource employees from outside offshoring
companies. The term outsourcing refers to the process of renting employees from other
companies. The workers can be hired temporarily, or they can be outsourced on a regular basis
depending on the project. During the last ten years, it has become even more common to hire
whole firms or the so-called dedicated teams for receiving the services of offshore workers. This
business practice can be advantageous to the firm; nevertheless it can be a great disadvantage to
others. Employees outsourcing potentially hides many profits which can be gained by means of
hiring professional workers. The business usually hires highly qualified and professional
employees when needed and who stop working for the outsourcer at the end of the project. In
this case the business does not have to spend any extra time and money on upgrading the
technology and training of the current staff. At the same time the present staff are gradually kept
on the sidelines, and may be disposed of in the long run. Often, the present employees become
less competitive in comparison with the workers offshore and even lose their jobs. The experts
are particularly concerned with the problem and predict that many American gifted young men
and women will simply become unemployed because of the extreme popularity of their offshore
competitors.

One more issue, dealing with pros and cons of outsourcing, is the fact that the companies hiring
staff abroad do not have to pay any kind of federal or state taxes for these employees. The
outsourcing companies take care of it themselves. This is an essential advantage for the
businesses, seeking to reduce the operational costs. Also, the outsourced employees do not ask
for benefits or compensations. Such cost-reduction plans are great for any company, wanting to
succeed. On the other hand, the tax institutes don’t get the taxes they should be getting, which
means that certain branches of national welfare will suffer from the loss of resources.
Taking into account the pros and cons of outsourcing, certain states in the USA have already
decided to impose restrictions or even put bans on the usage of offshore outsourcing. Whatever
the decision, it should be made wisely, considering all the pros and cons of outsourcing practice.

The Advantages and Disadvantages of Outsourcing

Organizations who are interested in outsourcing are often curious to know more about
advantages and disadvantages of offshoring. By gaining insight about both the good and bad of
outsourcing, organizations can decide if outsourcing is right for them. Most organization jump
headlong into outsourcing, without actually finding out if outsourcing is good for their business.
Before outsourcing, ensure that you are aware about the pros and cons of outsourcing.
The advantages and disadvantages of outsourcing can help your organization decide if
outsourcing is right for your business. The following is a list of the advantages and disadvantages
of outsourcing:

The Advantages of Outsourcing

 Outsourcing your non-core activities will give you more time to concentrate on your core
business processes
 Offshoring can give you access to professional, expert and high-quality services
 With outsourcing your organization can experience increased efficiency and productivity in
non-core business processes
 Outsourcing can help you streamline your business operations
 Offshore outsourcing can help you save on time, effort, manpower, operating costs and training
costs amongst others
 Outsourcing can make your organization more flexible to change
 You can experience an increased control of your business with outsourcing
 Your organization can save on investing in the latest technology, software and infrastructure as
your outsourcing partner would be investing in these
 Outsourcing can give you assurance that your business processes are being carried out
efficiently, proficiently and within a fast turnaround time
 Offshoring can help your organization save on capital expenditures
 By outsourcing, your company can save on management problems as your offshore partner will
be managing the team who does your work
 By outsourcing, you can cater to the new and challenging demands of your customers
 Outsourcing can help your organization to free up its cash flow
 Sharing your business risks is possible with outsourcing
 Outsourcing can give your business a competitive advantage as you will be able to increase
productivity in all the areas of your business
 Outsourcing can help your organization to cut is operational costs to more than half

If you want your organization to stay ahead of competition, concentrate on core competencies
and make use of the latest technologies, then outsourcing can help your organization achieve all
this and more. In outsourcing, the advantages of outsourcing are more than the disadvantages of
outsourcing. The pros of outsourcing have driven more organization to step into offshoring and
experience the benefits that it has to offer.

The Disadvantages of Outsourcing:-

 At times, it is more cost-effective to conduct a particular business process, rather than


outsourcing it
 While outsourcing services such as payroll processing services and tax preparation services,
your outsourcing provider will be able to see your company’s confidential information and
hence there is a threat to security and confidentiality in outsourcing
 When you begin to outsource your business processes, you might find it difficult to manage the
offshore provider when compared to managing processes within your organization
 Offshoring can create potential redundancies for your organization
 In case, your offshore service provider becomes bankrupt or goes out of business, your
organization will have to immediately move your business processes in-house or find another
outsourcing provider
 The employees in your organization might not like the idea of you outsourcing your processes
and they might express lack of interest or lack of quality at work
 Your outsourcing provider might not be only providing services for your organization. Since
your provider might be catering to the needs of several companies, there might be not be
complete devotion to you and your company
 By outsourcing, you might forget to cater to the needs of your valuable customers as your focus
will be on the business process that is outsourced
 In outsourcing, you may lose your control over the process that is outsourced
 Outsourcing, though cost-effective, might have hidden costs, such as the legal costs incurred
while signing a contract between companies. You might also have to spend a lot of time and
effort in getting the contract signed
 With outsourcing, your organization might suffer from a lack of customer focus
 There can be several disadvantages in outsourcing, such as, renewing contracts,
misunderstanding of the contract, lack of communication, poor quality and delayed services
amongst others.

The disadvantages of offshoring give organizations an opportunity to think about what they are
stepping into. However the disadvantages of outsourcing are less than the advantages of offshore
outsourcing. When outsourcing, you might not experience any of these disadvantages of
offshoring, if you find a reliable outsourcing partner. Before outsourcing take the interests of
your customers and employees into consideration and then make an informed decision. If your
organization is genuinely interested in outsourcing, let not the disadvantages of outsourcing stop
you.
CONCLUSION
I. As competition is increasing day by day, outsourcing is becoming need of the hour. To
remain competitive a company needs to maintain both quality and low prices and
outsourcing are the best way out to handle this situation. Though in short run, outsourcing
seems damaging for people in developed countries but in long run the overall economy
improves and new jobs is also created.

II. Outsourcing is growing into a major opportunity for both global and Indian players.
India, with its intrinsic advantages such as low cost, ready pool of English speaking
manpower and geographic positioning is emerging as a viable destination for outsourcing
companies to set up their businesses. The outsourcing business opportunity is large and
India is likely to garner a larger and larger piece of this pie in the future.

III. Indian outsourcing services providers meanwhile are gaining from the onslaught of
projects coming their way, both from international and domestically located customers.
In terms of processes too, these providers are "moving up the value chain," so to say.
From the tactical and straightforward handling of payroll and benefits, these HR services
providers are moving into the more strategic world of BPO. It enablers are helping
managers free themselves from the drudgery of routine jobs and work towards taking
employee services to a superior level.

IV. In conclusion, outsourcing jobs has many beneficial implications for the US economy.
The more successful US companies are globally the more successful the US economy is.
The success of US companies globally is directly linked to whether they implement the
practice of outsourcing jobs. Accordingly it is paramount the US does not prohibit or
discourage the practice of outsourcing jobs.
Ex - Outsourcing jobs benefits HP and IBM:-
Hewlett Packard and IBM obtain 50% of their revenues from markets outside of the USA. That
HP and IBM are outsourcing jobs is undoubtedly justified when this enables them to increase
their revenues from markets outside of the USA. If HP and IBM stopped outsourcing jobs they
would be out-competed in foreign markets whilst also potentially risk losing the US market

Not Outsourcing jobs could also threat the US domestic market:


Indian companies or other foreign companies outsourcing jobs could also be a threat to US
companies in the US domestic market. If by not outsourcing jobs, American companies can be
out-competed in foreign markets then the same can hold true in the American market.
By not outsourcing jobs, American companies not only potentially lose foreign markets but also
risk losing the US domestic market

Outsourcing jobs reduces cost:

By outsourcing jobs US companies are able to reduce costs for the US consumer. $50 or $200 for
the same software… you decide?

So it’s quite normal to say outsourcing is necessary.

Outsourcing
Since its evolution, India's outsourcing industry has been facing many challenges and
restrictions, which affects the growth of BPO companies and their employees. In order to meet
international quality standards, it is exhibiting new business models from time to time as well as
spending more efforts and funds in training of its employees. The Indian BPO industry is well-
aware that consistency is also important along with customer satisfaction, as it cannot take full
benefits of the potentials only with advantages like lower costs and multi-lingual capabilities.
Further, it can add value to its customers by proactively acquiring domain knowledge of its
client's business. Thus, the need of the hour is to take some useful steps for sound and healthy
development of BPOs/ KPOs in India.
Several steps have been taken by the Government, both at the Central and State level, towards
better management of outsourcing activities in economy and to keep India's position stable as
hub of outsourcing on the global platform. Given this, some of the suggestions can be listed as
follows:

 Develop the talent base by generating/ encouraging enough opportunities for technical
knowledge.
 Design appropriate training programmes for BPO employees.
 Provide broad and essential hands-on experience.
 Improve choices and processes used by companies and make outsourcing easier by
getting more and more organizations moving to the outsourced model.
 Follow proper code of ethics and procedures in recruitment of employees.
 Ensure proper control and quality management systems.
 Enactment of appropriate social security laws.
 Incorporate best practices on health and safety hazards.
 Develop sound work environment with proper safety of women at workplace.

Follow better healthcare policy which involves regular health-checkup of employees and this
feature should be made compulsory.

Develop time management and other strategies so as to encourage healthy lifestyle habits of BPO
employees, like, having proper sleep, preventing fatigue and stress, etc.

Moreover, along with customer care and support services, other service lines should also be
considered in broad manner, such as, of finance, human resource, legal procedure, content
development, etc. Most importantly, there should be joint efforts by both public and private
sectors to keep sustainable India's advantages in outsourcing industry and explore all untapped
areas. Increased innovation and technology adoption should be the guiding force.

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