strategy outsourcing company

Chapter - 1

INTRODUCTIONOUTSOURCING:-

Historical BackgroundOutsourcing dates back to the 1970s. Initially it only involved

IT-related issues, but gradually more and more enterprises

realized that they could not be experts in more than one or two

fields. This Conclusion made them get rid of various areas of

activity and entrust them to specialists. According to a survey

by Fortune magazine, over 90% of business organizations today take

advantage of external

Service providers, and in the European market alone the 2001

estimate of such services was US$27 billion, which is growing

from year to year. Originally, outsourcing was only used by large

Corporations, but nowadays it is becoming more and more popular

among small-sized enterprises.

The broader use of outsourcing in the industrial market results

from the build-up of competitive Pressures and progressing

globalization as the environment becomes increasingly complex,

faster And faster advancement of technology, with the consequent

changes in the conditions in which any Given enterprise

functions, necessitate the search for more and newer methods

which keep one ahead of one’s competitors. In the past the key to

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success was bulk; today the importance of high quality is

growing. In the past the key to success was the bulk, today the

importance of high quality is growing.

As the managerial paradigm shifts from .bigger is better. to lean

and mean. and from .high-volume. To .high-value, Companies are

being forced to identify exactly where they have the greatest

competitive advantage, and to redefine their organizational

structures to maximize that advantage. An increasingly common way

for organizations to try and increase their .flexibility. And

generate .high value

is through outsourcing . This situation requires precise

identification of the line of

Business one wishes to follow (ensuring a competitive advantage)

and a careful analysis of its weak and strong points one

important result of this process is a recognition and

reassessment of those activities which are not core. In

particular, whether these non-core activities should be carried

out by the organization itself (make) or outsourced to a

specialist third party (buy)

Each enterprise that wants to outsource some of its activities

must determine:

1. What tasks should be accomplished in-house;

2. What tasks should be accomplished through strategic

partnerships; and

2

3. What tasks should be contracted out (outsourced) to third-

party specialists.

The decision to commission some processes to an external provider

is strategic in nature, and it can largely determine a firm’s

future; it must therefore be well-thought-out and informed.

Outsourcing sometimes involves transferring employees and assets

from one firm to another, but not always. Outsourcing is also

used to describe the practice of handing over control of public

services to for-profit corporations.

Outsourcing includes both foreign and domestic contracting, and

sometimes includes off shoring or relocating a business function

to another country. Financial savings from lower international

labor rates is a big motivation for outsourcing /off shoring.

The opposite of outsourcing is called insourcing, which entails

bringing processes handled by third-party firms in-house, and is

sometimes accomplished via vertical integration. However, a

business can provide a contract service to another business

without necessarily in-sourcing that business process.

Outsourcing occurs when a company purchases products or services

from an outside supplier, rather than performing the same work

within its own facilities, in order to cut costs. The decision to

outsource is a major strategic one for most companies, since it

involves weighing the potential cost savings against the

consequences of a loss in control over the product or service.

Some common examples of outsourcing include manufacturing of

3

http://en.wikipedia.org/wiki/Vertical_integration

http://en.wikipedia.org/wiki/Insourcing

http://en.wikipedia.org/wiki/Offshoring

http://en.wikipedia.org/wiki/For-profit

http://en.wikipedia.org/wiki/Public_services

http://en.wikipedia.org/wiki/Public_services

components, computer programming services, tax compliance and

other accounting functions, training administration, customer

service, transportation of products, benefits and compensation

planning, payroll, and other human resource functions. A

relatively new trend in outsourcing is employee leasing, in which

specialized vendors recruit, hire, train, and pay their clients'

employees, as well as arrange health care coverage and other

benefits.

The growth in outsourcing in recent years is partly the result of

a general shift in business philosophy. Prior to the mid-1980s,

many companies sought to acquire other companies and diversify

their business interests in order to reduce risk. As more

companies discovered that there were limited advantages to

running a large group of unrelated businesses, however, many

began to divest subsidiaries and refocus their efforts on one or

a few closely related areas of business. Companies tried to

identify or develop a "core competence," a unique combination of

experience and expertise that would provide a source of

competitive advantage in a given industry. All aspects of the

company's operations were aligned around the core competence, and

any activities or functions that were not considered necessary to

preserve it were then outsourced. Today, outsourcing is embraced

by companies of all sizes and industry orientations. As analysts

Tom Osmond commented in Employee Benefit News, "Many companies have

decided that transactional and administrative functions are

4

neither core competencies nor value-added activities. In fact,

some companies are putting themselves at risk as a result of

using outdated technology and not complying with government

regulations. Vendors, by focusing on administration as part of

their business model, provide better service enforced by

contracts and service-level agreements."

Successful outsourcing requires a strong understanding of the

organization's capabilities and future direction. As William R.

King explained in Information Systems Management, "decisions regarding

outsourcing significant functions are among the most strategic

that can be made by an organization, because they address the

basic organizational choice of the functions for which internal

expertise is developed and nurtured and those for which such

expertise is purchased. These are basic decisions regarding

organizational design." Outsourcing based only upon a comparison

of costs can lead companies to miss opportunities to gain

knowledge that might lead to the development of new products or

technologies.

Outsourcing can be undertaken to varying degrees, ranging from

total outsourcing to selective outsourcing. Total outsourcing may

involve dismantling entire departments or divisions and

transferring the employees, facilities, equipment, and complete

responsibility for a product or function to an outside vendor. In

contrast, selective outsourcing may target a single, time-

consuming task within a department, such as preparing the payroll

5

or manufacturing a minor component that can be handled more

efficiently by an outside specialist.

Vendors providing outsourcing services are generally grouped into

two models: Business Process Outsourcing (BPO) and Application

Service Provider (ASP). In the BPO model, major resources and

assets are transferred from the company to the vendor. Under the

ASP model, on the other hand, vendors concentrate on providing

selected services for multiple clients. But as Osmond

told Employee Benefit News, many variations exist within these two

models. "Each vendor has a particular focus and/or point of entry

to the market, particularly in the ASP space," Osmond stated.

"There is also a wide range of pricing models and option. The

good news is that there is a seemingly endless combination of

service, pricing, and delivery, providing a solution for most

situations. The bad news is that it can be difficult to compare

vendors on an apples-to-apples basis."

ADVANTAGES OF OUTSOURCING

Companies that decide to outsource do so for a number of reasons,

all of which are based on realizing gains in business

profitability and efficiency. Principal merits of outsourcing

include the following:

Cost savings: - Many businesses embrace outsourcing as a

way to realize cost savings or better cost control over

the outsourced function. Companies usually outsource to6

a vendor that specializes in a given function and

performs that function more efficiently than the

company could, simply by virtue of transaction volume.

Staffing level:- . Another common reason for outsourcing is

to achieve headcount reductions or minimize the

fluctuations in staffing that may occur due to changes

in demand for a product or service. Companies also

outsource in order to reduce the workload on their

employees (freeing them to take on additional

moneymaking projects for the business), or to provide

more development opportunities for their employees by

freeing them from tedious tasks.

Focus:- Some companies outsource in order to eliminate

distractions and force themselves to concentrate on

their core competencies. This can be a particularly

attractive benefit for start-up firms. Outsourcing can

free the entrepreneur from tedious and time-consuming

tasks, such as payroll, so that he or she can

concentrate on the marketing and sales activities that

are most essential to the firm's long-term growth and

prosperity. "What an outsourcing partner really sells

is focus," wrote Adam Katz-Stone in Baltimore Business

Journal. "In accounting for instance, that is something

that typically is seen as necessary but not essential,

not the core of the business. So you bring in an

outsourcing partner and then you don't have to think

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about that any more. You can focus your energies on

sales, marketing, and all the other things that matter

more."

Morale : - This is an often-overlooked but still notable

benefit that can sometimes be gained by initiating an

outsourcing relationship. "Often a business's lack of

internal expertise or dedication to non-core tasks

results in poor attitudes and ultimately poor

performance," wrote Kevin Grauman in CPA Journal. "This

can lead to overlap and duplication of internal

efforts. An effectively designed and ongoing

communication process emanating from one or more

outsourcers can greatly reduce or eliminate these

duplications."

Flexibility :-Still others outsource to achieve greater

financial flexibility, since the sale of assets that

formerly supported an outsourced function can improve a

company's cash flow. A possible pitfall in this

reasoning is that many vendors demand long-term

contracts, which may reduce flexibility.

Knowledge:- Some experts tout outsourcing of computer

programming and other information technology functions

as a way to gain access to new technology and outside

expertise. This may be of particular benefit to small

businesses, which may not be able to afford to hire

computer experts or develop the in-house expertise to

8

maintain high-level technology. When such tasks are

outsourced, the small business gains access to new

technology that can help it compete with larger

companies.

Accountability:- Outsourcing is predicated on the

understanding—shared by business and vendor alike—that

such arrangements require quality service in exchange

for payment. "Paying for a business service creates the

expectation of performance," stated Grauman.

"Outsourcers are well aware that this accountability is

both practical and legal, with fiscal implications. The

same cannot be said for internally provided functions."

DISADVANTAGES OF OUTSOURCING

Some of the major potential disadvantages to outsourcing include

poor quality control, decreased company loyalty, a lengthy bid

process, and a loss of strategic alignment. All of these concerns

can be addressed and minimized, however, by companies who go

about the outsourcing process in an informed and deliberate

fashion. Info World’s Maggie Biggs counsels businesses to define

"exactly what business processes and/or functions it makes sense

to maintain via a service relationship. Unless you have a lot of

resources to expend, it may make sense to prioritize outsourcing

projects based on the number of benefits you expect to gain from

the arrangement." There may also be inherent advantages of

maintaining certain functions internally. For example, company9

employees may have a better understanding of the industry, and

their vested interests may mean they are more likely to make

decisions in accordance with the company's goals. Indeed, most

analysts discourage companies from outsourcing core functions

that directly affect the products or services that the business

offers.

OTHERS DISADVANTAGES

Dependence on the supplier

Hidden costs

Loss of know-how - losing touch with new technological

breakthroughs that offer opportunities for product and

process innovations

Loss of long-run research and development (R&D)

competitiveness

The risk of co-operating with a dishonest supplier which,

having gained access to knowledge Concerning a firm and its

products, may use it against that firm in the future

Service provider’s lack of necessary capabilities

Communication and coordination difficulties.

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Strategic outsourcing

Strategic outsourcing is the process of engaging the services of

a provider to manage essential tasks that would otherwise be

managed by in-house personnel. This is often done to allow a

business to arrange the use of its assets to best advantage, and

allow the company to move closer to the achievement of its goals.

An outsourcing strategy of this type may be employed by

businesses and other organizations of any size, and normally

helps to reduce the cost of operations as well as allow available

resources to be allocated to the other necessary functions that

are still managed within the organization proper.

Many people tend to associate outsourcing with small companies

that operate with limited budgets. This is often true, since a

smaller business enterprise is likely to have limited resources.

When this is the case, a strategic outsourcing effort may involve

contracting with a provider to manage the process of generating

invoices to customers, receiving those payments, and paying any

outstanding debts using the proceeds from those payments. Thus,

the outsourcing allows the small company to divert resources that

would normally go to supporting an accounting department into

other important areas, such as product development, marketing, or

sales.

Larger businesses can also make use of strategic outsourcing as a

means of utilizing their resources to better advantage. For

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example, a business may choose not to maintain an in-house sales

force, but contract out the sales effort to others who generate

sales on behalf of the company. With this model, the business

does not have to be concerned with the expense of salaries and

benefit packages for salespeople. Instead, the business only has

to provide the agreed-upon commissions for sales generated by the

business partner, and any monthly fee charged as part of the

contractual agreement between the two entities.

The core idea behind strategic outsourcing is to benefit in some

manner from allowing outside entities to take over the operation

and management of a given function. Those benefits can take many

different forms. Often, the idea is to increase the bottom line

of a company by reducing various operating expenses. At other

times, the benefit has to do with having immediate access to

professionals who specialize in handling the outsourced function,

without the need to train personnel to take over those functions.

The benefit may be a matter of convenience, allowing the business

owner to not have to deal with necessary functions that he or she

does not wish to deal with, or feels unable to manage with any

degree of efficiency. As long as the benefits that are generated

by the arrangement is considered sufficient by the client, then

the process of strategic outsourcing can be considered a success.

How to Develop an Outsourcing Strategy

12

Method 1 of 4: Examine the Needs of Your Organization

1 Define organizational objectives: - Your goal may be tohelp a start-up get off the ground. Alternatively, your

organization may be well-established and focused on innovating

and developing new products.

2 Pinpoint your reasons for outsourcing: - Accessing toolsand skills that are not available in-house, reducing operational

costs and accelerating organizational change are a few examples.

3 Outline a plan for achieving organizational goals: -Your Company may be in the process of offering a new service to

existing clients or expanding the range of services to attract

new clients. Your detailed plan might include hiring outside

consultants, buying parts from a third-party vendor or training

in-house personnel to deliver services.

Method 2of 4: Research outside resources

Contact outside vendors and service providers to

inquire about their expert is:- One of the most importantreasons to outsource a particular service is to benefit from the

knowledge and experience of outside individuals and/or firms.

Ask for cost estimates. Gathering cost estimates early on in the

process will aid you in conducting a cost-benefit analysis and13

competitive pricing studies. Check references to ensure quality

of services. Ask to speak to other organizations that have been

served by the vendor or service provider.

Method 3 of 4: Assess the Costs and Risks of Outsourcing

1 Calculate the financial costs and savings:-Training in-house staff and funding office space and equipment for new staff

may result in higher costs than outsourcing tasks to a third-

party.

Consider contract maintenance costs. In-house personnel must

oversee outsourcing contracts, which might involve an investment

of time, equipment and travel expenses. Determine if necessary

skills exist in-house. Salaried employees might possess required

skills, making it unnecessary to hire outside vendors or

consultants.

2 Evaluate quality needs: - Outsourcing can be risky if an outside vendor, contractor or consultancy firm does not meet

quality expectations. In these cases, organizations typically

incur greater costs because they must have the work revised by

another vendor or hire in-person staff to correct issues.

Establish quality standards by talking to clients and holding

internal meetings to develop a list of must-have qualities.

Distribute quality requirements. Make sure that your outside vendors and consultants receive a clear explanation of quality standards, both verbally and in writing.

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3Analyze cultural and communication dynamics: - The nature of the work might dictate that you outsource to domestic

firms that understand the culture of your clients. Alternatively,

your needs may be technical in nature, making it more affordable

to outsource offshore.

4 Evaluate legal considerations: - Examine tax laws, contract language, data protection responsibilities and other

factors relevant to your industry and workplace before signing an

outsourcing agreement.

5 Examine relationship risks: - Consider internal relationships. Outsourcing a significant portion of the

responsibilities of in-house staff should be accompanied by an

explanation. Always communicate openly with personnel to avoid

misunderstandings and low employee morale.

Examine relationships with clients. Determine how your clients

will be affected by your outsourcing plans. For example, a client

who is accustomed to receiving blog posts written by your in-

house staff might not want the content to come from another

vendor or a different part of the world.

Discuss outsourcing plans with existing clients. Keep clients

informed about upcoming outsourcing plans before implementation.

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Method 4 of 4

1 Hire in-house personnel who have necessary expertise:-While you might outsource large quantities of work, having

someone in-house who understands how to oversee the outsourced

tasks is essential for ensuring that your organization's needs

are met and services are delivered as promised.

2 Avoid becoming locked into a contract with a single

vendor:- Include language in your contract that allows you to exit the business relationship after a trial period. This allows

you to properly evaluate service quality, reliability and

communication practices.

NEXUS MARKETING

NEXUS MARKETING is a Jalandhar (India) based high

caliber Strategic Marketing, Strategic Management & Business

Consultancy organization run by highly qualified & experienced

professionals. NEXUS MARKETING is a well-established marketing

consultant and is a management consultant offering services that

embrace:

Strategic Marketing Program me, Formulation of Marketing

Strategies, Market Entry Strategies and Business Strategies

16

Conducting Market Assessment and Diagnostic Studies & Marketing

Research

Distribution related studies, channel evaluation and channel

development strategies

Identification and evaluation of strategic business alliances

(Marketing, distribution, JV and purchasing/sourcing/contract

manufacturing)

Business Restructuring and Operations Optimization studies

Strategic Business Planning

Organizational Restructuring and Human Resource Management

Strategy

Work Force Orientation & Training

We provide solutions that change the way people work and

organizations do business. In virtually every industry, from

manufacturing to financial services, Information Technology to

education, health care to trading, NEXUS has been helping

companies leverage their resources by reducing their operating

costs and increasing their productivity. .

We possess the domain expertise to understand the critical issues

facing your business and we offer proven modules & comprehensive

services that streamline process and reduce complexity of

operations. More importantly they are tailored to reduce costs &

take your business to a new level of competitive advantage.

Journey started with a small step in the direction of excellence

has resulted in development of a transactional consultancy

organization providing ONE STOP MARKETING SOLUTIONS. The17

foundation upon which our team is created is based upon the

premise that motivated people and long-standing relationships are

the ultimate tools of success; and creativity, energy,

perseverance and loyalty are just as important as a platinum

resume. Measurable Results

We believe our consulting responsibility goes beyond assessment

and recommendation. Our consultants will assure that your

objectives are translated into measurable performance improvement

and bottom-line results

When you need a CHAMPION to bring in EXCELLENCE, we have a TEAM

to do it. NEXUS MARKETING specializes in conducting market

studies and market research pertaining to consumer/durable

products, industrial products, social issues, hospitality and

non-conventional business services. The company has successfully

carried out several assignments of this nature for Indian and

foreign clients. List shown below shows the diversity of the

projects undertaken by us.

Figure 1 Industrial safety expenditures before and

after introducing outsourcing

Strategy.

18

Industrial safety Expenditures before

Implementing outsourcing

Industrial safety Expenditures after

Implementing outsourcing

OBJECTIVES

19

Along with this we are trying to assess company’s performance

compared with that of the competition…

To know the area in which the dealer satisfy their customer

and the areas that they do not satisfy.

To come out with the conclusion and recommendation based on

the analysis and interpretation.

achieving a gain in competitive advantage,

spending more time on those activities that are truly

central to the success of the organization,

repositioning the organization in the marketplace, or

achieving a dramatic increase in share price

20

Chapter - 2

LITERATURE REVIEWDwindling resources and market competitiveness have forced

organizations to scrutinize their methods of producing goods and

services and make changes in their processes in order to maximize

economic returns. To be able to survive and be profitable in

current globalization era, organizations have pursued continuous

improvement, leaned up production, reengineered business

processes, and Integrated supply chains ( Brannemo 2006). Over

the past decades there is a growing realization of the important

contribution of sourcing strategy on organizational performance

(Cousins et al., 2006). Outsourcing is a management strategy by

which an organization delegates major, non-core functions to

specialized and efficient service providers. According to Corbett

(1999) outsourcing is nothing less than the holistic

restructuring of corporations around core competencies and

outside relationships. Yankelovih (2003) indicated that two-third

of companies world-wide outsource at least one business process

to an external third party. This practice appears to be most

common in the U.S., Canada, and Australia, where 72 percent of

21

outsourcing is being sought. Javaligi (1998) noted that

successful implementation of an outsourcing strategy has been

credited with helping to cut cost increase capacity, improve

capacity and improve quality.

Kotabe (1998) argued that there could be negative long-term

consequences of outsourcing resulting from a company’s dependence

on independent suppliers. Such reliance on outsourcing may make

it inherently difficult for the company to sustain its long-term

competitive advantage without engaging in the developmental

activities of the constantly evolving design and engineering

technologies. This

View point was corroborated by Corley (2000) when he examined the

outcomes of technology sourcing partnerships from the sourcing

firms’ point of view and found out that, equity-based alliances

were more effective than contract-based outsourcing. Steensma,

Kevin and Corley (2000) suggest that the outcomes from technology

partnerships for sourcing firms depend on the interaction between

technology attributes and the interdependence between source and

sourcing firms. Klaasetal (2001), suggest that the influence of

organizational characteristics is highly contingent, suggesting

that organizational characteristics have different effects on

various types of outsourcing activities outsourced. As such, it

appears that many factors such as pay level, promotional

opportunities and demand uncertainty should be considered when

deciding to outsource functions or Activities. Kotabe (1998)

identifies three types of performance measures as necessary

22

components in any outsourcing performance measurement system:

strategic measures; financial measures; and quality measures.

Malhorta (1997) used additional dimensions of market performance

such as costs savings, cycle time, customer satisfaction, and

productivity to measure the effectiveness of outsourcing

strategy. Foster (1999) argue from a different perspective,

obstacles such as poor choices of sourcing partners, inadequate

planning and training/skills needed to manage outsourcing

activities and poor organizational communication have also been

identified as key determinant of the success of outsourcing

projects . Lau and Hurley (1997) examined the relationship

between outsourcing and profitability margin and they found that

Chrysler’s profit margin is four times as high as that of GM due

to effective outsourcing strategy. Frayer, Scannell, and Thomas

(2000) suggest that companies are increasingly viewing

outsourcing strategies as a means of reducing costs, increasing

quality, and enhancing a firm’s overall competitive position.

According to Ellram et al. (2007), outsourcing has implications

for day-to-day management and performance, as well as strategic

implications. Therefore, companies must outsource intelligently.

Outsourcing decisions may affect company’s cost structures, long-

term competitive situation and can also alter the nature of risks

that the company must manage (Brannemo, 2006). Hence, it is

crucial for management to understand and have a clear conceptual

framework of their outsourcing decision. Furthermore, it will

also important that company must know the benefits and risks of

23

outsourcing. The increasing use of outsourcing arrangements, as

well as the unfamiliar complexity associated with it especially

in developing countries suggests the need to probe further about

how to effectively utilize this strategy.

Chapter - 3

REASEARCH METHODOGYThe process used to collect information and data for the purpose

of making business decisions. The methodology may include

publication research, interviews, surveys and other

research techniques, and could include both present and

historical information.

Methodology is the systematic, theoretical analysis of the

methods applied to a field of study.

It comprises the theoretical analysis of the body of methods and

principles associated with a branch of knowledge. Typically, it

encompasses concepts such as paradigm, theoretical model, phases

and quantitative or qualitative techniques.

24

http://www.businessdictionary.com/definition/technique.html

http://www.businessdictionary.com/definition/survey.html

http://www.businessdictionary.com/definition/interview.html

http://www.businessdictionary.com/definition/research.html

http://www.businessdictionary.com/definition/publication.html

http://www.businessdictionary.com/definition/methodology.html

http://www.businessdictionary.com/definition/business.html

http://www.businessdictionary.com/definition/maker.html

http://www.businessdictionary.com/definition/data.html

http://www.businessdictionary.com/definition/information.html

http://www.businessdictionary.com/definition/process.html

A methodology does not set out to provide solutions - it is,

therefore, not the same thing as a method. Instead, it offers the

theoretical underpinning for understanding which method, set of

methods or so called “best practices” can be applied to specific

case, for example, to calculate a specific result.

It has been defined also as follows:

1."the analysis of the principles of methods, rules, and

postulates employed by a discipline"

2."the systematic study of methods that are, can be, or have

been applied within a discipline"

3."the study or description of methods"

STEPS FOR RESEARCH MEHODOLOGY

i. Identify the problems.

ii. Review of literature.

iii. Clarify the problems- (Specially identify the purpose of the

study).25

http://en.wikipedia.org/wiki/Analysis

iv. Clearly define terms and concepts.

v. Define the populations.

vi. Develop the instrmentaions plan.

vii. Collect the data.

viii. Analyses the data.

Research hypotheses

The primary intent of the study is to examine the conjectural

statement that outsourcing strategy as an independent variable

has an influence on performance variables depicted by sales

turnover, profitability and customer satisfaction.

Specifically the hypotheses are:

H0: Outsourcing Strategy has no significant effect on sales

turnover.

H0: Outsourcing Strategy has no significant influence on

profitability.

H0: Outsourcing Strategy has no significant effect on Customer

Satisfaction.

Operatiolization and measurement of variables

a. Outsourcing Strategy: this was measured by the extent of the

production activities that were subcontracted to other firms in

the same industry group.

b. Customer Satisfaction: this was measured in terms of the

number of complaints/and its Customer repurchase patronage.

26

c. Performance: sales growth gotten from the records of the

organization and profitability index were used to measure

performance.

d. Core Competence: this was operational zed as the quality of

organization‘s human and material resources devoted to the

portion of her production process that is retained in-house and

is considered very critical to her performance

Population of the study, sample sizeThe sample for this study was drawn from the population of the

organization. The organization employed approximately 50

employer.The purpose of this study is to examine the effects of

outsourcing strategy on organizational performance using data. A

survey research design was used. The Justification for the use of

survey research for this study is that convenience with which the

survey can be conducted and inferences for larger population can

be made from the result. A five likert scale was used to seek

information from top, middle and lower level managers of the

firms on the wide range of key measurement variables of the

study.

In the words of Asika (2004) a sample is a subset of a universe

or a part of a study population that is systematically selected

to represent the population. The decision to use stratified

sampling technique to pick the respondents is based on the fact

that the decision to outsource often times is taken by the top

management. Middle and lower level managers were included because

they have direct contact with the production floor men and

27

customers who are the final end of the production and

distribution channel. More so, this technique of sample selection

is particularly necessary when one want to apply research finding

directly to a population

Sample Size:-100 customer

MEARUREMENT

Question will be design and data will be collected

DATA COLLECTION

The first step in working with the organizations was to obtain

approval for distribution of the survey. I met with the manager

of the organization to discuss the purpose of the research and

obtain his consent to conduct the study. I was informed that the

survey would be approved as long as the employees agreed. From

there, I worked with employees of organization.

Data sources:-Primary and secondary data

PRIMARY DATA

The source of primary data related was collected from personal

interview and questionnaire .For the purpose of survey primary

data is collected in the form of questionnaire. Questionnaire is

given to the selected employee. Employees were requested to fill

the correct answers for the proper survey.

28

SECONDARY DATA

The source of secondary data was internet, research papers books

and company record.

DATE ANALYSIS AND INTERPRETATIONAs the data being primary and secondary, it was collected by

questionnaires and company records. Questionnaire was designed in

such a way that it covers all the aspects of the problem under

the study and to know the general information about the

respondents.

Statistical tools used for analysis of collected data are:

Microsoft Excel. The data is shown in the form of tables and

charts.

A frequency table comprising of five kinds of responses was

prepared for each and mean score for each variable was calculated

by using the formula.

Mean score = (FSA x 5) + (FAX 4) + (FN x 3) + (Fo x 2) + (Fso x

1)

N

FSA = No. of respondents whose response was 'strongly agree'

FA = No. of respondents whose response was 'agree'

FN = No. of respondents whose response was 'neutral'

29

FD = No. of respondents whose response was 'disagree'

FsD = No. of respondents whose response was 'strongly

disagree'

N = Total Number of respondents

The results so obtained were tabulated and have been

reported in Chapter-IV. Further logical conclusions have been

drawn, on the basis of which an attempt has been made to make

recommendations.

LIMITATIONS OF STUDY

Though the research was conducted properly, the probability of

error and biases kept is minimum. Still some errors occurred

because of certain limitations

These are follows:-

A very short span of time for research.

This is time consuming research method and the respondent did not

have sufficient time for giving information foe such type of

research.

People did not give the proper response for questionnaire and

interview, because of short time

30

Chapter - 4

INTERPRETATION AND CONCLUSONSTable.1 showing the response of the question.

S.no. Response Number of

respondents

Percentage of

respondents1 Strongly agree 12 24%2 Agree 23 46%3 Neutral 9 18%4 Disagree 4

8%

31

5 Strongly disagree 2 4%Total 50 100%

Chart.1. Showing the table 1(Response of employees)

Strongly disagree

disagree neutral disagree strongly disagree

0

5

10

15

20

25

Interpretation: From the above table it is clear that majority of people i.e. 46% are agree. Most of the employees are

in favor regarding the strategy of outsourcing.

Table2:- Has your company ever outsourced any department or positions?


respondents

Percentage of

respondents1 Yes 30 60%2 No 20 40%

Total 50 100%

32

Chart.2. Showing the table 2 (Response of employees)

Interpretation:From the above table it is clear that majority of people i.e. 60%

are agree. Most of the employees are in favor regarding the

company outsourced any department/position.

Table3. How many employees does your company have?


respondents

Percentage of

respondents1 0-50 0 0%2 50-100 24 48%3 100-150 26 52%

33

Yes No0

5

10

15

20

25

30

35

4 150-200 0 0%Total 50 100%

Chart.3. Showing the table (Response of employees)

0-50 50-100 100-150 150-2000

5

10

15

20

25

30

Interpretation:From the above table it is clear that there is a very few

difference between the 26% and 24%.but majority of people i.e.

26% are lie between the 100-150 towards the employees within the

organization.

Table.4. the outsourcing done by my company was done by other

companies as well in the same.


respondents

Percentage of

respondents34

1 Strongly agree 0 0%2 Agree 10 20%3 Neutral 25 50%4 Disagree 10 20%



Strongly agree

agree neutral disagree strongly agree

0

5

10

15

20

25

30

Interpretation: From the above table it is clear that majorityof people i.e. 25% feels that they will, The outsourcing done by

his/her company was done by other companies as well in the same.

Table5. The department(s) was outsourced to increase the work

quality for the company35


respondents

Percentage of

respondents1 Strongly agree 15 30%2 Agree 20 40%3 Neutral 9 18%4 Disagree 4 8%


Chart.5. Showing the table 5 (Response of employees)

Strongly agree

agree neutral disagree strongly disagree

0

5

10

15

20

25

Interpretation: From the above table it is clear that majorityof people i.e. 20% are strongly agree that The department(s) was

outsourced to increase the work quality for the company. but

majority of peoples that is 20% are agree and 9%are neutral so we

can’t ignore the values of agree not neutral.

36

Table6:-The outsourcing in my company was implemented because of

the pressure from its customers.


respondents

Percentage of



Chart6. Showing the table 6(Response of employees)

Strongly agree

agree neutral disagree Strongly disagree

0

5

10

15

20

25

30

Interpretation: From the above table it is clear that majorityof people i.e. 50% are disagree that The outsourcing in my

37

company was implemented because of the pressure from its

customers. But majority of peoples that is 25% are agree.

Table7: The outsourcing in my company was implemented because of

the pressure from its suppliers


respondents

Percentage of




Strongly agree

agree neutral disgree Strongly disagree

0

5

10

15

20

25

30

Interpretation: From the above table it is clear that majorityof people i.e. 50% are disagree that The outsourcing in my

company was implemented because of the pressure from its 38

suppliers. But majority of peoples that is 35% are strongly

disagree.

Table8. The morale of the remaining departments has increased

after the outsourcing process.


respondents

Percentage of



Chart.8. Showing the table 8

Strongly agree


0

5

10

15

20

25

39

Interpretation: From the above table it is clear that majorityof people i.e. 40% are agree that The morale of the remaining

departments has increased after the outsourcing process. But

majority of peoples that is 12% are neutral and 12% are strongly

disagree.

Table9: The outsourcing done by company was to restructure the company to improve its efficiency.


respondents

Percentage of




40

Strongly agree


0

2

4

6

8

10

12

14

16

Interpretation: From the above table it is clear that majorityof people i.e. 30% are neutral that . The outsourcing done by

company was to restructure the company to improve its efficiency.

But majority of peoples that is 28% strongly

Table10. My company has become more profitable after the outsourcing.


respondents

Percentage of

respondents1 Strongly agree 22 6%2 Agree 24 4%3 Neutral

0

2%

4 Disagree 3 50%

5 Strongly disagree 1 38%

41

Total 50 100%


Strongly agree


0

5

10

15

20

25

30

Interpretation: From the above table it is clear that majorityof people i.e. 30% are neutral that . company has become more

profitable after the outsourcing . But majority of peoples that

is 38% strongly disagree but we can’t ignore the %age of

strongly agree and disagree that is 6% and 4%

Table11: Outsourcing has enhanced my company’s relationship with its partners.


respondents

Percentage of

respondents1 Strongly agree 16 32%

42

2 Agree 21 42%3 Neutral 4 8%4 Disagree 5 10%



Strongly agree


0

5

10

15

20

25

Interpretation: From the above table it is clear that majority of people i.e. 30% are neutral that the Outsourcing has

enhanced my company’s relationship with its partners But majority

of peoples that is 42 % agree but we can’t ignore the %age of

strongly disagree and neutral that is 10% and 8%.

FINDINGS43

Making the right decision can add significantly to your

organization's bottom line in terms of cost savings and increased

efficiency. Outsourcing can bring fresh minds to your business,

and it can also free time up for innovation and other vital

tasks. However, making the wrong decision can put your business

at a competitive disadvantage. Perhaps you'll lose control of

proprietary information, or receive components that don't meet

your organization's quality standards.

So, how can you ensure that your organization makes the right

decision?

The Outsourcing Decision Matrix helps you see clearly which

tasks, processes, or functions you should keep in-house – and

which can be safely outsourced. In this article, we'll examine

the Outsourcing Decision Matrix and see how your organization can

use it to make better outsourcing decisions.

You consider two important factors in outsourcing a task:

1. How strategically important is the task to your business?

Strategically important tasks are sources of competitive

advantage.

2. What is the task's impact on your organization's operational

performance? Tasks which have a high impact on operational

performance are those which, if done well, contribute

44

greatly to the smooth running of the organization or, if

done badly, greatly disrupt it.

CONCLUSIONOutsourcing strategy is at the center of the process of

organizational changes and business structure. In this respect,

these processes may be preceded by radical changes which lay the

ground work for process re-engineering. The trend towards virtual

corporations based on the relationship of cooperation among

several firms starts with the identification and exploitation of

the concept of core competences, in such a way that new

advantages are obtained from specialization and that the customer

receives added value superior to the levels previously offered.

The contemporary relationship of firms to their business

surroundings are conditioned by the changes in technology and the

economic environment. Firms face these alterations to their

surroundings by making qualitative change in the way that they

Perform their activities and structure their organization.

45

Outsourcing has a series of advantages and disadvantages which

can be divided for analytical purposes into strategic and

operational nature. The main strategic advantages are the

creation of Competitive advantages, the reduction of risks, an

improved long-term cost structure and an increase in

organizational sale turnover and profitability. From a strategic

standpoint, outsourcing allows the firm to concentrate its

efforts on consolidating and expanding its core competences. On

the other hand, among the operational advantages, we find an

increase in efficiency as a result of activities being carried

out by specialized firms and reductions in permanent staff, which

then become variable costs related to the level of activity. As

for the disadvantages of a strategic nature, the most important

are the loss of control of activity done through outsourcing, the

transfer of sensitive information, the possibility of exorbitant

price increase by the suppliers at a future date, along with

fluctuations in quality. The operational problems we have

observed are difficulties related to the making of the contract

arising from the effects on human resources. With respect to

problems of an internal nature, it is certain that firms have

turned to outsourcing as a short-term solution to avoiding the

rigidities caused by labor laws. These firms may limit themselves

by viewing outsourcing merely as a simple way of freeing

themselves of permanent staff. From this perspective, outsourcing

could represent a phenomenon of opportunity, while labor

46

legislation is being in accordance with the needs of firms for

more flexible organizations and more professional and motivated

Chapter5

RECOMMENDATIONS

First of all, outsourcing usually reduces a company’s control

over how certain services are

delivered, which in turn may raise the company’s liability

exposure. Companies that outsource should continue to monitor the

contractor’s activities and establish constant communication.

Secondly, outsourcing strategy should come from the workers

themselves. That is, workers

should be made to embrace the strategy before implementation so

as to alley the fear of loss of Jobs. Also, successful

implementation of an outsourcing strategy has been credited with;

cost

increase profitability and productivity. Therefore, organizations

are system; enjoined to reduce the outsourcing strategy and

improve their service delivery.

Company managers agree that successful outsourcing requires a

shift in their mindset, which means that they must manage their

contractors and workers in order to improve on efficient service

delivery. Integrating and managing a diverse, split work force

47

embodying different corporate cultures and perhaps divided

loyalties can be a daunting assignment compared to the more

traditional approach to work force management.

Chapter:-6

REFERENCES[1] Gilley K. M., Rasheed A. Making more by doing less: an

analysis of outsourcing and its effects on Firm performance.

Journal of Management, Vol. 26, No. 4, 2009, pp.763-790.

48

[2] Shy O., Stenbacka R., Strategic outsourcing. Journal of

Economic Behavior & Organization, Vol. 50, 2003,pp.203-224.

[3] Benjaafar S., Elahi E., Donohue, K. L.. Outsourcing via

service competition. Management Science.Vol. 53, No. 2, 2007,

pp.241-259.

[4] Ren J. Z., Zhou Y. P. Call Center Outsourcing: Coordinating

Staffing Level and Service Quality. Management Science, Vol. 54,

No. 2, February 2008, pp. 369-383

[5] Jae-Nam L., Miranda S. M., Yong-Mi K.. IT Outsourcing

Strategies: Universalistic, Contingency, and Configurational

Explanations of Success. Information Systems Research, Vol. 15,

No. 2, June 2004, pp. 110-131.

[6] Dekkers R. Decision models for outsourcing and core

competencies in manufacturing. International Journal of

Production Research, Vol. 38, No. 17, 2000, pp.4085- 4096.

[7] Alp O., Erkip N. K., Güllü R. Outsourcing Logistics:

Designing Transportation Contracts Between a Manufacturer and a

Transporter. Transportation Science, Vol. 37, No. 1, 2003,pp.23-

39.

[8] Ellram L., Billington C. Purchasing leverage considerations

in the outsourcing decision. European Journal of Purchasing and

Supply Management, Vol. 7, 2001, pp.15-27.

[9] Bush A. A., Tiwana A., Tsuji H. An empirical investigation of

the drivers of software outsourcing decisions in Japanese

organizations. Information and Software Technology, Volume 50, Issue 6, May

2008, pp.499-510.

49

[10] Bailey W., Masson R., Raeside R.. Outsourcing in Edinburgh

and Lothians. European Journal of Purchasing and Supply

Management .Vol. 8, 2002, pp.83-95.

[11] Pagnocelli D.. Outsourcing scientific and technological

activities. Proceedings of the Third

International Conference on Systems Integration, Vol. 1, 1994,

pp. 276–285.

[12] Quinn J.B.. Strategic outsourcing: leveraging knowledge

capabilities.Sloan Management Review Vol.40, No. 4, 1999, pp. 9-

22.

[13] Marshalla D., McIvorb R., Lamming R.. Influences and

outcomes of outsourcing: Insights from the telecommunications

industry. Vol. 13, 2007, pp.245-260.

[14] Lacity M. C., Willcocks L. P., & Feeny D. F.. The value of

selective IT sourcing. Sloan Management Review, Vol.37, No.3,

1996, pp.13-25.15

[15] Earl M. J., The Risk of Outsourcing IT. Sloan Management

Review, Spring,1996, pp.26-33.

[16] Fan T. J., Li H. Y., Chang X. Y., Liu L. P.. Model of

business outsourcing Strategies based business process and

contract term. Management Review(In Chinese), Vol. 19, No. 11,

2007,pp.55-62.

[17] Lacity M. C., and Willcocks L. P.. An empirical

investigation of information technology sourcing practices:

Lessons from experience, MIS Quarterly, Vol. 22, No. 3, 1998,

pp.363-408.

50

[18] Choi T.Y., Hartley J.L.. An exploration of supplier

selection practices across the supply chain. Journal of

Operations Management, Vol.14, No. 4, 1996, pp.333-343.

[19] Kennedy C., O’Connor. Winning Major Bids, the Critical

Success Factors. Policy Publications, 1997, Bedford.

[20] Wadhwa V., Ravindran A. R.. Vendor selection in outsourcing.

Computers & Operations Research, Vol. 34, 2007, 3725-3737.

[21] Bhattacharya S., Behara R. S. and Gundersen D. E.. Business

risk perspectives on information systems outsourcing.

International Journal of Accounting Information Systems Volume 4,

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[22] Malhorta, Y. (1997). An empirical analysis of the determinants ofinformation systems productivityand the role of outsourcing policy. www.brint.com/papers/outsource. Virtual Institute of Information38-46

Outsourcing: making the rational decision

Respected Sir/Madam,51

I am a student of MBA. I am working on a Strategy

outsourcing company: nexus marketing jalandhar company. This

Questionnaire is framed to get your view regarding the strategic

outsourcing company nexus marketing jalandhar. This information

will be kept confidential & would be used only for academic

purpose. I hope that you will cooperate & will give genuine

opinion.

1. Name :

2. Age : 17-35 [ ] 35- 45 [ ]

above 45 [ ]

3. Sex : _________ [Male] ________

[Female]

4. Marital Status : __________ [Married]

________ [Single]

6. Income : Below 10,000 [ ] 10,000- 20,000 [ ] above

20,000[ ]

7. Has your company ever outsourced any department or positions?

Yes ( )

No ( )

8. How many employees does your company have?52

1-50 ( )

50-100 ( )

100-150 ( )

150-200 ( )

9. The outsourcing done by my company was done by other companies

as well in the same industry.

Strongly agree ( )

Agree ( )

No opinion/Neutral ( )

Disagree ( )

Slightly Disagree ( )

10. The department(s) were outsourced to increase the work

quality for the company.

Strongly agree ( )

Agree ( )


Disagree ( )


11. The outsourcing in my company was implemented because of the

pressure from its customers.

Strongly agree ( )

Agree ( )

No opinion/Neutral ( )53

Disagree ( )


12. The outsourcing in my company was implemented because of the

pressure from its suppliers.

Strongly agree ( )

Agree ( )


Disagree ( )


13. The morale of the remaining departments has increased after

the outsourcing process.

Strongly agree ( )

Agree ( )


Disagree ( )


14. The outsourcing done by company was to restructure the

company to improve its efficiency.

Strongly agree ( )

Agree ( )54


Disagree ( )


15. My company has become more profitable after the outsourcing.

Strongly agree ( )

Agree ( )


Disagree ( )


16. Outsourcing has enhanced my company’s relationship with its

partners.

Strongly agree ( )

Agree ( )


Disagree ( )


55

strategy outsourcing company

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