Research Paper on Outsourcing and Insourcing
Out-sourcing and In-sourcing
Making sourcing decisions within an organization is considered to be a very significant aspect, which is often referred to as strategic decisions in regard to the kind of services or products will at the end be provided internally or externally. In-sourcing is a strategic decision making process that leads to utilization of experts from a different company employed as a turnkey global extension of the workforce and workplace of a company. This decision takes place without moving the project management and the existing decision-making control measures to an outside provider. In this mode of sourcing, the business in general is empowered with offshore development capital and the existing settlements that are attached directly with the process of project management (Belohlavek, 2007, p65).
Outsourcing on the other hand is when the business function, such as a particular process, task, role or process, to another individual, who in this case is taken as a third party over a significant period of time. Control over the overall function is taken by the third-party organization and it turns out to be in charge the operation and success of the process. It is clearly understood that outsourcing begun as an accepted means of contracting previously done work within an identified company to a provider who is an outsider. This person must be the one who specializes in the existing job or operation. Therefore, outsourcing involves the process of transferring a noteworthy amount of management control and decision-making to another different organization (Murugan, 2007, p.102).
The following are the common advantages of outsourcing:
I Focus on Core Activities
In times that growth is rapidly experienced, expansion is also experienced in the company’s back-office operations of a company. Such kind of expansion sometimes may start consuming the available resources, such as humankind and financial, at the expense of the main activities that have brought success to the company in general. When outsourcing is carried out over the identified activities, refocusing is critically allowed or enhanced over those identified business activities that are considered significant without surrendering the overall quality.
II Cost And Efficiency Savings
Through outsourcing, the company is able to carry out a number of functions within the office in an effective and successful way in achieving such results. This helps in having an effective costs and efficiency saving.
III Reduced Overhead
Overhead costs that are realized by performing a certain function of back-office are normally considered to be extremely high. For the purpose of trying to make sure that such functions within the office are easily moved, and at the end the overhead will be reduced.
IV Operational Control
Outsourcing is supposed to be considered in operations where costs have been found to be running out of management source. Various departments and units that may have developed over time into uncontrolled and also poorly managed regions are found to being main motivators for outsourcing. Also through this process, the company involved in outsourcing is able to bring in better management skills.
V Staffing Flexibility
Outsourcing has a way to allow better operations that normally have seasonal or recurring demands when it comes to the case of resource utilization. Where additional resources are brought in at the times of need and then release when the work is done.
VI Risk management and continuity
At times there is an increase in demand of employees and a company hires new ones due to the sudden rush in demand. After a while the company does not need the services of the employees and are forced to fire them and when demand of employees rises they do the same thing. In order to avoid this distrustful experience a company is advised to outsource for the skills.
Example; A company’s accountant gets involved in a car accident and the assistant is on a month long leave you advised to outsource.
VII Internal staff development.
A company’s staff may acquire new skills from outsource on an area they didn’t know or understand fully. This will help the company not to need to outsource the next they want that task completed
I Hidden costs
You pay only for the services and products being offered as per the contract to the outsourcing company. Any other cost that may be incurred not in the contract is you that pay for it. Also in making of the contract you will need to hire a lawyer who you have to pay.
II Loss of managerial control
When any task or function is given to another company the managerial control is lost to the outsourcing company. This is a company driven to making profit and the completion of the task at hand as per the contract.
III Threat to Security and Confidentiality
In each and every company there are secrets confidential information and even secret code numbers used only by some few people this are very important details that should remain in the company alone and at times you are forced to share this details with the outsourced company. Some of these companies go ahead to misuse such information and its good come up with consequences to be met by those who bleach rules set by contract. This information may include pay rolls medical reports pin numbers and many more
IV Quality Problems
That’s what highly drives outsourcing companies. Due to this fact they tend to give under quality products and services by cutting down costs in their production methods as long as they are working under the contract rules and regulations. You end up loosing a lot at the end of the task you tasked out to the company
V Tied to the Financial Well-Being of another Company
By outsourcing a task or various tasks to a company, you now work under their financial aid and budgets. So in case of a financial constrain in the outsourcing company you will be affected as much as they are with the task you had given to them. Any business has financial problems hence it’s not uncommon for an outsourcing company to go bankrupt or being closed.
VI Bad Publicity and Ill-Will
People have different opinions on different situations and when it’s on outsourcing people who get the jobs are the people who see the good side and those that the jobs are snatched away from them have a totally different opinion on the idea.
Advantages of In-sourcing
I High degree of control
The company that is in sourcing is highly involved in decision making and are in the managerial position in any task
II Ability to oversee the entire program
An in sourcing company is able to be available from the beginning of the task to the end and is well detailed about the whole task
III Economies of scale and/or scope
With every business activity they are involved they are in expansion and also go ahead in acquiring profit and more knowledge gathered. This really helps in the growth of a business by making more profit and acquiring new contacts in the process.
Disadvantages of In-sourcing
I In-sourcing require strategic Flexibility.
You cannot just hire permanent people for a task scheduled for a short period of time hence you need to utilize the labor force available to them.
II Required high investment
You need a lot of money to be invested and only those who can afford it are able to invest and enjoy the good fruits of outsourcing.
III Loss of access to superior products and services offered by potential suppliers
You end up losing access to other products due to the reliability of inside corporate labor at your disposal. In spite of different disadvantages in outsourcing, it is the new trend to follow in the harsh environments of business, as it really helps improve a business.
Reasons for Delegation of Management Authority
In organizations people perform as unit so as to accomplish a task, and they do this by utilizing one another’s ability and comprehend one another in completion of tasks. Ones success lies upon the success of other peoples in an organization hence the success of any manager is determined by how well people are working as unit and producing positive results. Therefore, delegation of authority is the art of sharing of power or the stated authority for the purpose of performing a certain task in an effective manner. The following are viable reasons as to why delegation of management authority is carried out (Schniederjans, Schniederjans & Schniederjans, 2005, p.106).
- Delegation of management authority eases the challenging jobs that a manager undertakes
Through delegation of management authority, managers become effective in ensuring that their workload is distributed to others, and this works in favor of the manager, thus giving more time to concentrate on other functions of management.
- Creates an environment where subordinates are motivated
When subordinates are motivated and operates within an environment that they appreciate, they are normally encouraged to be effective responsible when they have influence to do things as they wish, but within their responsibility and the policies that govern the business. They turn out to be more interested in whatever they are doing, become initiative and cautious over their safety in the field of work. Therefore, through delegation, employees are positively motivated and thus at the end leading to development of a better profile of manpower.
- Delegation of management authority assists in developing efficiency and immediate actions
Delegation of authority acts as a time saver, a prospect that enables all employees to become effective when dealing with different problems within the system, hence being faster when taking decisions within the existing organizational structures. When dealing with issues to do with routine, it is of prudence that one has to believe in his abilities of doing better than taking the whole matter to the superiors. The reason of this action being that the whole issue heaves the general competence in an Organization.
- Assists in developing morale of employees
Delegation of authority can in one way or another act as a morale boaster on employees, as they are assigned tasks and sustaining authority. They normally think that they are being taken as responsible employees and appreciated of what they are delivering in the organization. The overall impact of this projection is that attitude of all subordinates, especially towards the assigned duties, turns out to be more constructive benefiting.
- It is a way of developing team spirit within staff members
This is achieved with the effect of having effective communication existing between the top management team and other employees. They become answerable to the organization’s top management team, and the top managers on the other hand are responsible for the overall performance of their employees, hence bringing better relations profile and the spirit of everyone in the organization.
- Ensures that cordial relationships within the organization is greatly enhanced
Necessary authority is given out to subordinates only when superiors are able to trust and believe in them concerning better service delivery. The subordinates acknowledge their liability and this expands on the existing working relationships within the organization.
- Delegation of management authority fosters the concept of management development
This is achieved through a process of standing-in as a preparation platform for management and development issues. Learning becomes a paramount issue within this environment, and subordinates gains an opportunity to learn, grow and even develop new significant traits and abilities. Therefore, it acts as a bank that creates a pool of executives, who will in turn, be of great importance to the organization.
Ways in which management policies are influenced by environmental factors
Management policies are sets of regulations that are developed for a given purpose, which allows organizations to manage and track all the happening within an organization, such as duration within which certain information is supposed to be retained or the actions supposed to be taken towards such information. Management policies acts like a legal platform, where all the structure within the organization are directed in a way of complying with the existing legal policy systems, or following the implementation of the existing business procedures within the organization. The following are ways how environmental factors influence management policies (Reda, Reifler & Thatcher, 2005, p.87).
a. Government Policies
It has been found out that every organization normally depends to a large extent, on the structured government policies. Organizations do well in various states where the intention of their governments over the private industry is least. Government policy also assists in shaping how much financial support the organization is supposed to receive. Therefore, it affects the end product of an organization thorough tax-cut, exchange rates, and inflation, as all of them are under the control and evaluation of the government. They are the same policies that establish some of the most crucial economic factors that have been found to be affecting many organizations.
b. Consumers influence
Whenever a business opportunity is created, consumers are always the bottom line of the desired operation. Organizations generate services and goods to sell, but if the power of spending on the side of consumers reduces or become aversive to a certain type of good or service, then an organization is doomed to be affected incalculably. Therefore, it is of importance that all leaders within different organizations are in a position of gauging all changes experience, especially in tastes and preferences of the existing customers. This will assist then in being prepared for any contingency.
Another dynamic that has the possibility to get in the way with the growth of an identified business opportunity is its suppliers. If the suppliers do not have redoubtable competition within their business, it is of high chance that very high prices can be charged, particularly to business premises. If the suppliers fail to deliver their service or goods on time, the creditability of an organization is another aspect that will be affected, and in the end the whole process can be delayed.
Social background play a significant role when it comes to developing prospects of a given business venture. This factor has come to existence with the materialization of multinational organizations and also with their entry in conventional markets.
In the current global market, most of the organizations intensely compete with each other to entice consumers, but all in all, the consumer in this case is in a situation where he or she has many options to opt from. Hence, organizations on their part have to make sure that they are on their toes with all vigilance to counter their rivals.
f. Location and Technology
Geographical circumstances and the right to use technology have been found to be of significance over the overall growth of a business. If access to capital, people, technology, suppliers is difficult to be achieved by a business, then it also hard to merge with their rivals, and this is also hinder the accessibility to better and current technologies. The effect to this occurrence is experienced in the overall production and quality of the products and services, thus creating a significant impact on the development of an organization. Over the years, leaders in various organizations have come up with different ways that are supposed to determine working solution on existing issues for the purpose of anticipating viable changes within the organizational structure. They are also supposed to prepare their organizations to be in a position of enduring unexpected changes within the system.
Belohlavek, P., 2007, The Natural Organization of Outsourcing and In-sourcing, California, USA: Blue Eagle Group.
Murugan, M. S., 2007, Management Principles and Practices, New Delhi, India: New Age International.
Reda, J. F., Reifler, S. & Thatcher, L. G., 2005, Compensation committee handbook, Hoboken, New Jersey: John Wiley and Sons.
Schniederjans, M. J., Schniederjans, A. S. & Schniederjans, D. G., 2005, Outsourcing and in-sourcing in an international context, California, USA: M.E. Sharpe.