OBJECTIVES
As a person with knowledge of outsourcing, the author has always brought up to his superiors the viability of strategy formation regarding the analysis of this issue and at times fail to understand the reasons or logic behind certain strategic implementations imposed on it.
By delving into this project paper, the author intends to have better insights into how outsourcing in relation to jobs overseas is thought up, formulated and then imparted down. The author hopes to have an in-depth understanding as to how the process of outsourcing enables US companies and organizations to compete effectively and profitably in this era of internationalization where competition is extremely intense.
In order to reinforce the learning objectives, two key focal issues were focussed upon, i.e. innovation and diversity. Innovation was discussed with regards to outsourcing where it was renowned for its developmental capabilities to constantly innovate. Diversity came under strategic thinking and formation as the author considered the diverse culture, political climate, economic surroundings, social environment, technological settings, government policies and legal systems in order to better understand the issues being discussed.
EXECUTIVE BRIEF
This essay utilized the status of the US job market and its companies as the model organizations to review their present stands regarding the outsourcing of jobs overseas and how they dealt with critical situations. From the analysis, key trends in the outsourcing processes were then identified, how they worked and their effectiveness in dealing with critical situations was ascertained. The paper then moved on to assess these outsourcing strategies of most outsourcing companies with regard to their suitability to critical situations, during which the internal capabilities of these outsourcing strategies in relation to the strategy being followed by most outsourcing companies were determined also. An overall analysis of the performance and effectiveness of outsourcing of jobs overseas was also conducted to assess and compare the capabilities of these strategies with those of others. Gaps in the outsourcing of jobs overseas were then identified.
Finally, several choices of strategies to improve the outsourcing of jobs overseas as effective means in critical situations were recommended and evaluated in terms of appropriateness to the issues reviewed, feasibility in carrying out the options and acceptability within the key stakeholders and decision makers. Several key implementation issues related to managing strategic change were also addressed as well.
INTRODUCTION
Nowadays businesses are cutting back on operations to focus on the core business, reorganizing their business norms through downsizing, restructuring or reengineering, as well as contracting out various functions and tasks. Commonly known as outsourcing, this particular business trend had started in the manufacturing business in the early 1980s, mainly as a means of cutting back staff and savings on wages. Krajewski and Ritzman (2002) define outsourcing as the allotment of work to suppliers and distributors to provide needed services and materials to perform those processes that the organizations do not perform themselves. To put it simply, outsourcing means going outside your organization to get a job done. While such a definition is easy to comprehend, knowing when and how to outsource is much more complex. Modern businesses must consider several factors when thinking about outsourcing. Not only do they have to consider functions that are traditionally outsourced but also the rapid evolution of information technology (IT) requirements (Hormozi, Hostetler, & Middleton, 2003).
Often a task is considered for outsourcing if the work performed by a consultant would require hiring additional staff if it were done in-house (Ryans, 1996). Moreover, work-handled by a former employee who may perform a specific service is also considered as outsourcing. The term outsourcing may be new to the business; however, the practice of it is not (Hormozi, Hostetler, & Middleton, 2003). Historically, numerous businesses have enlisted the help of outside experts to assist with tasks too cumbersome to complete in-house. Legal and financial experts, along with countless other specialists, have long been called on to assist businesses in areas outside their core competencies. Outsourcing (Jones, 2000) has been a common term for approximately 20 years.
There are many reasons for outsourcing in a company or an organization. The decision of businesses to outsource is mainly based on cost, set-up time and the availability of the expertise. The most common reasons for outsourcing are the needs for expertise, that is due to lack of learning curve and re-creating; manpower, for having not enough staff; time requirements, because of the limited time available to accomplish the job; needed for economics, owing an overall cost savings; shifting of responsibility as for deniability; and removing of stumbling blocks in keeping the work for flowing.
Outsourcing, according to current literature, is a business trend that will most likely continue in the coming years (Ryans, 1996). At present, there are two types of outsourced services of which include technology and business processes. Each can be inert partial to the subsequent areas. The first type of outsourcing is the technology services. This type covers the electronic commerce, infrastructure networks, software applications, telecommunications and website development and hosting. The second type of outsourcing is the business process outsourcing. Under this type of outsourcing are customer contacts (customer relations management), equipment, finance/accounting, human resources, logistics, procurement/supply chain management and security.
Advantages of Outsourcing
Outsourcing has many benefits (Ryans, 1996). These includes freeing up management resources, sharing costs, creating integrated networks, building new organization structures, training staff, and interfacing with other information systems. It offers a company functional specialization and flexibility. For years, companies have been outsourcing payroll and accounting functions but only recently have they discovered the benefits of relinquishing control over their IT departments.
Specifically, Yost and Harmon (2002) identify Enrol Corporation’s 1989 0 million contract as the first important IT outsourcing arrangement, while Benamati and Rajkumar (2002) credit Kodak similarly, noting its 1989 landmark move to outsource IT needs. To keep pace with the information technology advances of the last decade, many large organizations have chosen to outsource the departments that handle their information systems and network services. Companies embracing IT outsourcing have benefited from the expertise and technological capabilities of their vendors, but they have had to deal with decreased control as well. For example, four case studies presented by Peled (2000) demonstrate the highly influential role IT vendors can play in the development of public projects. Rather than merely working to meet the needs of the bureaucrats employing them, these vendors incorporated elements of their own political agendas into their work.
Disadvantages of Outsourcing
Still, some of the drawbacks of outsourcing include difficulties in maintaining confidentiality, retaining control and confronting transition problems. At present, issues on the outsourcing of IT professionals have been raised. Disadvantages identified in outsourcing have significantly affected other nations, that effort and ideas are being integrated together so as to prevent outsourcing. In this paper, emphasis on the significance of self-leadership in the prevention of outsourcing is highlighted. The discussion evolves mainly on the assessment of collaboration and leadership in increasing productivity among individuals, their efficacy and various requirements.
Outsourcing: Purchasing and Buying
Buyers and purchasing agents in the outsourcing process are tasked to evaluate suppliers on the basis of price, quality and service support. They review catalogs as well as industry and company publications in order to help them in their search for the right suppliers. Fortunately for them, a majority of this information can be easily accessed in the Internet. They also do some researching about the reputation and background of the suppliers and may also do some advertisements regarding the foreseen purchase actions in the hope of soliciting bids. At meetings and conferences, they perform the examination of products and services, the evaluation of the productive and distributive capabilities of suppliers, and the discussion of business considerations that have the possibility of influencing the purchasing decision. As soon as all valuable information about the suppliers is gathered, the placement of orders and contracts are started to be awarded to those suppliers who are able to meet the needs of the purchasers. The typical contracts range for several years and may even have the stipulations of the range of prices, which would allow the purchasers to reorder whenever necessary.
In some companies, however, there is a clear distinction between the work of a buyer and that of a purchasing manager. Purchasing agents and buyers focus mainly on the daily purchasing tasks. They specialize in wines. Purchasing agents perform the tracking of the conditions of the markets, trends in prices, as well as the future of the wine markets. Purchasing managers, on the other hand, are in charge of the more complex and critical wine purchases and handles a team of purchasing agents.
Outsourcing: Production Planning
Production planning is a necessary function within the outsourcing process. In manufacturing companies this process is often very difficult because of the fast rate of change and the occurrences of unplanned events. Most outsourcing companies use several methodologies depending on the rate of demand of the customer and the price of the product / service. Nevertheless, the objectives of outsourcing companies for every transaction do not change: efficiency and effectiveness.
Production planning is being implemented by most outsourcing companies in order for their activities and resources to be coordinated over time. These enable the outsourcing companies to achieve their goals with minimal resource utilization. Production planning also enables outsourcing companies to monitor the progress of their plans at regular intervals and maintain their control over operations. Production planning within outsourcing companies involves four elements: scheduling, labor planning, equipment planning, and cost planning.
- Scheduling involves the specification of the beginning, the length or the duration, and end of the planned activities.
- Labor planning involves allocating the necessary personnel and delegation of responsibilities and resources
- Equipment planning involves identifying the types and needs in terms of equipments.
- Cost planning involves determining the costs and the possibility of their occurrence.
Outsourcing: Supply Chain Management
Supply Chain Management in most outsourcing companies involves working across multiple enterprises in an effort to limit the supply chain time of delivering products and services to the consumers.
The uncertainty of demands in supply chains within outsourcing companies is easily solved through the implementation of faster response times. The product supply chain of most outsourcing companies has the luxury of longer lead times in terms of batch production of products in order to meet the demands. Most supply chains of outsourcing companies are moving in a position to support faster changes of demand by the consumers (Chopra 2001, p. 45).
Because of the agile supply chain of most outsourcing companies, they are able to enjoy so many advantages. As mentioned above, the supply chain analysis tends to shorten the supply chain itself. Also, this will significantly reduce company inventories. Forecasting, scheduling and planning, on the other hand, will significantly improve.
Critical Outsourcing Improvement Factors
For outsourcing companies to become a viable player in the industry, the following improvement factors are critical:
· Financial Stability
Financial stability is crucial especially in the pursuit of outsourcing of overseas jobs and other development activities. In any job market, it is important to remain updated with the latest developments to be able to stay competitive in the market.
· Human Resource Performance
The outsourcing of the best human resources overseas comes as a result of well-funded outsourcing management and development activities. The strong performance of outsourced personnel in the overseas market could also be linked to their effectiveness. However, outsourcing companies have to be aware of the positioning in terms of process so as to maintain satisfactory profits margin and remain competitive in the market.
· Outsourcing Strategy and Distribution
High job market awareness among the employers overseas has created the need for aggressive marketing and outsourcing, and access to strong distribution channels is critical for the outsourcing of new personnel.
Benefits of Efficient Outsourcing of Jobs Overseas
· Economies of Scale and Scope in quality and able human resources.
· Unique Quality Human Resources owing to heavy emphasis on Effective Outsourcing Strategies
An outsourcing company’s commitment to outsourcing & development activities has always been one of the top strategies to remain competitive in the market.
· Differentiated Personnel / Human Resources
Through the outsourcing of differentiated personnel originating from the outsourcing and development activities, the outsourcing company is able to create its own firm-specific advantages. The continuous pursuit of outsourcing and development processes enables the outsourcing company to produce a steady stream of originally differentiated personnel / human resources which makes it difficult for competitors to find substitutes. Because of this differentiated approach, the outsourcing company is able to outsource their human resources worldwide, which enables them in turn to maximize the returns on outsourcing and development expenditures.
Outsourcing of Overseas Jobs in the United States
In lieu of the present developments in the US society, there have been significant visions of outsourcing that evolved. A majority of these learning visions are based on the idea that outsourcing of jobs overseas is a social process where knowledge is denied instead of being acquired passively. Outsourcing, then, transforms into an interactive process. The interaction is being verified through the help of the participants in the outsourcing process such as the US workers and the US government. In this framework, high quality of outsourcing of jobs overseas would mean the continued guidance and support of the active learning process of the public. Obviously, this would call for an intensive and phased guiding strategy.
When in the active pursuit of outsourcing of jobs overseas, the interaction of the US government with the US job market forms an integral part towards its success. Collaboration as a method is gradually being used by the US government nowadays. Through this approach, the US workforce can learn from the outsourced personnel through the imitation of their techniques in the socialization processes. In the process, the US workforce is able to obtain the chance to see their own ideas in a different aspect and therefore be able to take alternatives into consideration. The relative effectiveness of this approach is determined with the capability of the US workforce to continuously challenge their pre-acquired knowledge by trying to adapt to the interpretations of outsourcing.
Aside from the US workforce and the US government, the different resources of outsourcing belong to a third category of factors of a learning environment. Moreover, outsourcing methods have shown signs of significant growth over the past years. Consequently, obtaining knowledge becomes more complicated. This is because the transformation of all this information into knowledge requires the US job market to possess the appropriate reference frameworks. But the US government can certainly help the public transform information into valuable knowledge.
Strategic Options for the US Job Market
Deriving from the analysis between the US job market and the impacts of outsourcing of jobs overseas, many strategic options would become imperative. It is therefore essential to evaluate these strategic options as to whether they are appropriate to the issues addressed, whether they are feasible enough to be implemented and their acceptability to key stakeholders.
A. US Job Market Level Strategy
There is definitely a need to reconcile both the inside-out and outside-in capabilities of the US job market. While its outsourcing strategy for jobs overseas involves focusing on its core competencies with job market position following its resource base, the US job market will be put into a disadvantageous position should it choose to neglect both the macro as well as the micro job market environment. Therefore, the US government and its job market has to be aware of the latest changes in outsourcing processes, as well as changes in political, economic, legal and even demographic trends in order to develop the outside-in capabilities, such as job market sensing, customer linking, channel bonding and technology monitoring.
The advantages enjoyed by the US job market may come in the form of increased revenues. Knowing what the job market demands and the latest trends could help the US government fully exploit its research and development capabilities to come out with outsourcing strategies which are not only cost-effective but also high in quality. The strategic option can even be used as marketing tool where the focus is on staying close to the US workers and listening to their feedbacks. On the flip side of the coin, there will be huge mobilization of resources involved, and the associated risks bestowed on the US government.
Nevertheless, the mentioned strategic option seems the most practical in the wake of globalization, since there is a sudden shift towards a more integrated and independent world job market. The key stakeholders too should not have any objections so long as the US job market’s core strengths are not threatened. By virtue of the US job market’s centralized control of its business, it is being expected that major barriers should not exist in carrying out such an option except additional time may be required given the scope and span of the operations.
Understanding the strategic importance of outsourcing is something that the US job market has to be familiar with. It normally practices a centralized and globally scaled configuration of operations and capabilities. This allows information dissemination to be retained.
B. Network Level Strategy
There are various strategic options available for the US job market. These are enumerated as follows:
· Tie up with various local outsourcing companies
· Collaborate with major competitors
RECOMMENDATIONS
A tie-up or merger with various local outsourcing companies offers tremendous benefits in terms of access to their policies concerning outsourcing of jobs overseas, infrastructure and even their human resources. However, the US job market must not lose sight of its core competencies while pursuing these tie-ups. Otherwise, the image of the US job market might be put in jeopardy.
Meanwhile, the collaboration of the US job market with its major competitors can be seen as a ridiculous move at first. However, upon close examination, this move could pave the way for the US job market to improve even more its chances of outsourcing its personnel overseas. The bottom line is both sides would be able significantly gain in such an alliance. The US job market’s strengths in human resource development combined with the outsourcing capabilities of its competitors can transform them suddenly into an unbeatable force to reckon with. One possible setback, however, is the differences in the cultures of the outsourcing companies involved. Another possible setback could be whether any of the US job market’s competitors has the need to form alliances.
In terms of appropriateness, both options are able to directly address the current issues mentioned. However, the question remains whether the US job market could be able to implement any of these options, and whether these options can be acceptable to the key stakeholders. Any merger or alliances may also involve the sharing of expertise. The US job market has traditionally relied on the inside-out approach. It is important to note that any merger transactions would have many implications on the US job market’s values and culture as well as the resources. The key stakeholders definitely would be concerned with such options and need to be convinced of the positive aspects.
CONCLUSION
The results of the analysis carried out on the process of outsourcing jobs overseas among US companies indicated very significant effects, even amidst the threats of unrest. Therefore, we could conclude that the process of outsourcing jobs overseas among US companies could still be expected to improve faster than average.
The review of the US job market’s capabilities and resources revealed very little inconsistencies regarding their overall outsourcing strategies. This is coherent with their traditional inside-out approach. However, the need to reconcile both the inside-out and outside-in approaches becomes imperative now for the US job market.
The analysis among the US job market environment as well as its capabilities revealed certain gaps, most of which are biased towards the environment. However, these gaps paved the way towards determining a number of recommended strategic options to secure its competitiveness.
Also, the US job market has to find a balance between adherence to internal forces within the management and to the changing forces of the environment in order to implement such strategic options.
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