Advantages And Disadvantages Of Outsourcing: A Case Study Of Hewlett Company

Advantages of Outsourcing

Outsourcing is considered as one of the important technique which is considered by many companies in the present era. By considering this method, the emphasis is given on the overall cost so that it can be reduced by transferring the functions of the company to the other party. The organizations outsource the overall services so that efficiency of the employees can be maintained. By focusing on this strategy, it has been examined that operating costs and also profits are achieved which impact on the growth of the company (Aubert, Kishore & Iriyama, 2015).

The functions are also outsourced so that it can be simple for the company to manage the entire activities. When the activities are outsourced it has been seen that overall level of satisfaction of the customers can be affected.  There are any companies who are considering the outsourcing method as it can help to enhance the overall market share. In the paper the discussion will be made on the Hewlett Company who focuses on outsourcing the functions.  This report will emphasize on the advantages and disadvantages related to outsourcing a function to the other company.

In this report the focus will be given on evaluating the advantages and disadvantages of the functions that are given by the company to the third party. The objective is to evaluate the advantages and disadvantages of Hewlett Company.

It has been investigated that outsourcing is one of the important activities that are considered by the company to manage the overall work. In this report, the Hewlett Company is selected in context to advantages and disadvantages of outsourcing. The report will also emphasize on the strategies that should be considered so that company can achieve success in the market.  

According to Plugge & Bouwman 2017, outsourcing is considered as a technique which is considered by majority of the organizations in the present era. It has been seen that company take help from the other company so that activities can be managed and can be completed with efficiency. It is necessary for the company to focus on this technique as it can help to complete the activities in an effective manner. By focusing on online and offline medium, the operations can be outsourced easily. The involvement of the third party is seen and the activities are transferred to be completed on time. It is necessary for the company to consider this technique as it can help to achieve large market share.

Cost Saving

Hewlett is considered as the biggest companies in the IT sector. Headquarter of the company is in Palo, California. The operations which take places in the organization are related to information technology and cloud programming. The company has also emphasized on outsourcing the functions to the third company so that it can be completed on time with efficiency (Dhar, 2012).

According to González, Gascó & Llopis 2016, the technique of outsourcing is considered as an internal process of the company and the company decides the third party to outsource the activities.  The overall operations of the company are controlled by thee third party so that it can be easy to achieve positive outcome. It also emphasizes on minimizing the entire operational costs. There are many choices that can be taken into consideration so that work efficiency can be maintained. Hewlett emphasizes on transferring the operations to other company so that it can be easy to manage and also it reduce the workload of the company. Hewlett is one of the largest organizations that emphasizes on outsourcing the activities to the third party so that it can be easy to complete the activities on time with minimization of the operational cost. It can be investigated that when operations are transferred to the third party and if the third party does not complete it in a proper manner then it can give adverse impact on the growth of company.

According to Eggert, Böhm & Cramer 2017, the objective to outsource the activities to third party is related with maintain the overall service quality so that satisfaction level can be enhanced. It also impacts the opportunities which are concerned with employment in context to skills and experience.  It is important to consider the strategies so that operations can take place smoothly.  The focus should also be given on the strategies that can help the end users to manage the internal structure. Hewlett focuses on outsourcing the activities like human resource management, technical process and service management.

 According to Rajaeian, Cater-Steel & Lane 2017, Outsourcing is considered as a function that can help to the company to grow in the competitive market. In the present era, there are companies who focus on outsourcing the activities so that it can be managed and completed with proper efficiency. The advantages that can be derived by outsourcing the activities to the other company are many like.

Cost saving

Skill Acquisition

By outsourcing the function of the company it can be simple to minimize the entire operational cost. According to Gospel & Sako 2010, it has been analyzed that when activities are outsourced to the third party the company saves cost in context to salary expense, work expenses and also manufacturing expenses. If countries are developed then it has been evaluated that cost of giving the facilities is cheap in outside the countries. It also helps the company to attain the cost advantage and it gives impact on the overall growth of the company.

 According to Handley & Angst 2015, by transferring the activities to the third party, it has been analyzed that company can also manage and consider different aspects which are beneficial to grow. When outsourcing of the activities are taken into consideration then it has been seen that resources in the business can be improved and also changes can be made in the entire function of the company. The organization focuses on manufacturing the hardware and the data is also given to the third party so that activities can be conducted in a proper manner.

Skill Acquisition

 According to Lahiri 2016, the activities which are outsourced help the other companies to have specialization in a particular sector. It is necessary for the employees to have proper knowledge and skills so that operations can take place in the right manner. This also helps the company to manage the entire operations of the company with efficiency.

According to Ramanathan & Krishnan 2015, there are many companies who rather than giving training to the employees of the latest technologies they focus on outsourcing the activities to the third party so that activities can be conducted with efficiency. It also helps the company in reducing the time and expense of the operations and also helps in achieving the overall competitive advantage.    

Operational efficiency

According to Uluskan, Joines & Godfrey 2016, the function of outsourcing helps the company in maintaining the quality of the products or services which are offered in the market. The quality is maintained as activities are outsourced to third party that is beneficial to maintain efficiency in the workplace. The contract related to outsourcing helps the company to focus on maintaining the quality with customer’s satisfaction. It has been investigated that outsourcing of the operations can also help the workers to maintain efficiency towards the organizational activities. in context to Hewlett it has been seen that company implemented a proper structure in the organization that assist in accomplish entire objectives in an effective manner.  

Operational Efficiency

Sharing of risk

According to Oshri, Kotlarsky & Willcocks 2015, It has been examined that agreement in context to outsourcing can assist the company to share the risks of the organization with the third market. When the activities are outsourced then it has been seen that risk is transferred to the third party. It is the responsibility of the third party to maintain the quality of products and services which is given by the company. But if they are not able to complete the activities in an effective manner and also with proper efficiency then the outsourcing company can easily sue or third party have to compensate the loss faced by the company. This also assists the company to share the risks and also restrict the company to follow set rules and regulations so that quality can be maintained.

According to Wuyts, Rindfleisch & Citrin 2015, if quality of the products are maintained than it can be easy to enhance the satisfaction level of the customers. It has been analyzed that Hewlett focuses on implementing the policies so that it can be easy to maintain the quality of the services which are outsourced to the party.  It is important to focus on the policies so that activities can be conducted in a right direction.

If there are many benefits then it has been examined that there are also disadvantages at the time of outsourcing the activities. It has been examined that outsourcing has increased by the companies and with this issues are also faced by the company.

Forfeiture of managerial control

According to Koo, Lee, Heng & Park 2017, it has been analyzed that when contract of outsourcing is given to the third party then with that the responsibilities are also transferred which is important to be followed.  The organization has the ownership but the control related to management is transferred to the third party.  It has been analyzed that if outsourcing company is not able to complete the activities according to the set principles then it can give adverse effect on the entire activities of the company. In context to Hewlett it has been seen that issue was faced in their data centers which is in California. Therefore, it is necessary to have control over the activities so that it can be simple to accomplish objectives and goals.

Hidden expenses

When the activities are outsourced of the company, it has been evaluated that company has to focus on rules and regulations of the countries in which the activities are conducted. According to Kerzner 2018, it has been analyzed that outsourcing contract emphasizes on the overall charges of the services but the organization has many expenses which are hidden. There are also various legal charges that focus on verification the agreement of outsourcing. It has been analyzed that change in the rules of the market off the particular country can affect the overall cost of the company as there are various rules and regulations that should be considered so that organization structure can be maintained.

Sharing of Risk

Obstacle related to language

According to Gurung & Prater 2017, when the activities are outsourced it can affect the overall image and quality of the company. If the activity of one center is outsourced to the third party who is from different country then it can create an obstacle related to language and also customers can be not satisfied with the services of the company. The customers can feel frustrated at the time of contacting with the executive who is using a good accent. Hewlett outsource the operations to Singapore and there are customers who have different accent which can enhance the frustration level of the customers to understand.

It has been seen that there is a connection between the IT services which are outsourced and also improvisation of the function of business, it is important to have effective management system so that performance can be increased. In figure 1 the cities are reflected India and Brazil.

According to the research, it has been analyzed that there are benefits of outsourcing which have affected the various factors of the business.

• Selling, general and administrative costs: By focusing on outsourcing the activities it has been seen that companies have slow growth. The cost related to SG&A was not more than 4.2 points if comparison is made with the competitors (Gorla & Somers, 2014).
• Income before interest and taxes: it has been examined that companies have evaluated the growth in income if comparison is made with the competitors. Therefore, company has attained success in the process of outsourcing.

Conclusion 

By focusing on the entire report, it has been analyzed that there are companies who emphasizes on outsourcing the activities of the company. The advantages are many like reduction in cost, flexibility and also customer’s services enhancement. There are also many organizations that face the problems which are concerned to hidden cost, layoffs and risk quality. Therefore, outsourcing the activities has created a clear and proper guideline that assist in the entire process of outsourcing.

References 

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