Advantages and disadvantages of outsourcing business functions

This process is not only undertaken in the profit-oriented organizations alone but also by the government where government transfers some of the public services to the private enterprise. Outsourcing can be undertaken in both domestic and foreign market. In outsourcing, there is always a contract where the two organizations agree and sign the terms and conditions of the contract involving exchange of services and related payments. Outsourcing business function has both advantages and disadvantages to both organizations. This research project therefore aims at reviewing and analyzing various literatures by different scholars concerning the advantages and disadvantage of outsourcing business functions and identifying gaps in the literature that need to be filled. Moreover, even though of more scholars doing research on the advantages and the disadvantages of outsourcing business functions, there is always a gap left due to innovation and advancements of the technology calling for study to be done to fill the gap.

Therefore, after reviewing the literature of various scholars, the researcher will identify a gap in the literature which needs to be filled hence adding to the body of literature. Comparing and contrasting the advantages Outsourcing is a strategy in the organization that involves movement of some of business functions, procedures, activities and decision-making process to the outside service providers. Power (2006) found out that outsourcing enables the firm to concentrate on its core activities and minimizing the operational costs hence ensuring competitive advantage to the firm. Outsourcing some of business functions will allow organization to focus on fundamental activities that are profitable to the organization (Mclvor, 2005). This helps the organization to reduce its hiring costs as the third party service provider is contracted only when the activity is required or the service is needed.

Outsourcing reduces operational costs to a greater extent as the costs of hiring and training some employees to undertake a certain function is highly reduced (Belcourt, 2006). For instance, the cost of hiring and training security personnel to aid the organization in maintaining security is very high. In order to reduce this costs, the organization may decide to contract a third party which is the firm which specialized in offering security services to the organizations and institutions hence minimizing costs of training. Every organization has its own core activity for its operation. On the other hand (Wu et al, 2005) argues that outsourcing may lead to failure of the organization as the outsourced firm may not be focusing on the main objective of the outsourcing firm.

Comparing and contrasting the Disadvantages Despite many advantages of outsourcing business functions, disadvantages on the same are still in evitable. First, after signing the contract, the outsourcing organization losses control over the functions to the contracted firm. When there is problem affecting the function outsourced, the top management cannot take control over them until the contract has expired (Sackey, 2017). Handling the responsibilities to the third party service provider is risk to the organization since any mistakes done by the employees of the outsourced organization calls for their management to handle but not the management of the outsourcing organization (Tayauova, 2012). A contract is always available for the process of outsourcing to take place. Once the contract has been signed, it binds the two organizations (outsourcing organization and outsourced organization) together and the terms and conditions of the contract have to be adhered to be the both firms.

If by any means, there are additional cost incurred by the outsourced organization which are not covered in the contract, the outsourced organization has to bear them as additional losses (Bragg, 2006). Therefore, the both firms should study the terms and conditions and the functions to be undertaken before signing the contract. Outsourcing has its challenges as far as additional costs are concerned. In return, the organization loses its goodwill to the customer and starts declining or finally exists in the market. Therefore, effective communication is very important to all organization to ensure everybody is satisfied and there is a good understanding between employees and also to the customers (Lee & Choi, 2011). Every organization has set its strategies and objectives that has to be meet at a certain period.

When an organization has outsourced its functions to the third party, the employees of the outsourced organization may not be knowledgeable about the main objectives of the firm hence may not be working towards meeting such set target (Belcourt, 2006). This might lead to confusion in the firm since not all employees are moving in the same direction towards achieving common target. Another argument has been established where there are group of researchers who conclude that outsourcing leads to additional costs to the firm as other argue that it minimizes the costs. Due to this variation in the conclusion, a critical research has to be undertaken to establish the real facts of these challenging. Potential gaps in the literature review Despite having more researcher who have carried out research on advantages and the disadvantages of outsourcing business function, there is always a gap in the literature review.

Therefore after analyzing the literature review from various articles and studies of various scholars the researcher has found out that there is no study conducted on the establishment of the most advantageous and disadvantageous impact for outsourcing business function. Therefore, a research study has to be undertaken to establish the most advantageous and the most disadvantageous impact of outsourcing business functions thus filling the gap. The researcher further established that there are various reasons that may lead the organization to outsource some of its business function. These reasons vary from one organization to another. One of the reason which might force the organization to outsource one or more functions is the size of the firm. If the firm is small and wish to reach more customers and expand its market share, it can decide to outsource some of the functions so as to focus on the core functions which if more profitable to the firm compared to the outsourced function(s).

References Anikin, B.  The Service Industries Journal, 31(11), pp. Belcourt, M. Outsourcing—The benefits and the risks.  Human resource management review, 16(2), pp. Bragg, S. Dolgui, A. , and Proth, J. -M. Supply Chain Engineering: Useful Methods and Techniques. Springer, London. Outsourcing decision support: a survey of benefits, risks, and decision factors.  Supply Chain Management: an international journal, 11(6), pp. Lee, J. N. and Choi, B. and Cao, Q. I. N. G. Strategic and tactical perception differences of outsourcing goal achievement: an empirical study. Understanding the advantages of open innovation practices in corporate venturing in terms of real options.  Creativity and innovation management, 17(4), pp. Wu, F. , Li, H. Z. Outsourcing timing, contract selection and negotiation. International Journal of Production Research, 48(2), 305–326. Yang, C. , Wacker, J. G.