What is Outsourcing? For IB Diploma Business Management course.

What is Outsourcing? For diploma IB Business Management course.
#WhatisOutsourcing? #IBBusinessManagement #EduIgnites
Hello, this is David, reporting from the board room of Voice Tel, an Asian Global Telecommunications Services provider.
Voice Tel is an Asian Global Telecommunications services provider, with global market share around 14 %. Voice Tel offers its own premium handsets. The company offers an excellent value pack for its customers.
Voice Tel’s customers are mostly business travellers who frequently visit different countries within Asian continent.
However, due to globalisation and internet-based voice and messaging services, revenue of Voice Tel has been declining over the past one year. Even market share also decreased.
The top officials of Voice Tel recently met to discuss the current problems and future challenges. The head of operations, Mr Mark pointed out that, we should reduce operating costs by outsourcing some of non-core functions relating to customer service, billing, human resource, accounting, and marketing.
So, students, I have two questions.
Question 1. What is outsourcing?
Question 2. What are its advantages and disadvantages?
Outsourcing also called sub-contracting, is the business practice of hiring a party outside a company to perform services and create goods that traditionally were performed in-house by the company's own employees and staff. Outsourcing is a practice usually undertaken by companies as a cost-cutting measure. As such, it can affect a wide range of jobs, ranging from customer support to manufacturing to the back office.
Companies use outsourcing to cut labor costs, including salaries for its personnel, overhead, equipment, and technology. Outsourcing also helps companies to focus on core aspects of business.
Outsourcing offers many benefits for businesses. Key benefits are:
1. By outsourcing particular tasks, companies are often able to substantially improve performance by drawing on the niche skills of experts in that field.
2. Outsourcing can help get things done a whole lot quicker by passing time-consuming tasks on to freelancers or external agencies.
3. By outsourcing, companies will be able to concentrate core skills on strengthening and improving the core processes that help make business stronger.
4. Outsourcing always going to be cheaper than hiring permanent full time employees. This will greatly reduce cost of recruitment of staff.
5. Outsourcing enables executives to plan and execute more effectively. This gives the business the chance to take new risks and experiment with different methods of exposure.
However, there are few disadvantages of outsourcing.
When a company outsources HR, Payroll and Recruitment services, it involves a risk if exposing confidential company information to a third-party.
Though, non-core operations are outsourced, at times, hidden costs might increase overall cost of production.
Other disadvantages include:
a. Meeting deadline.
b. Quality issues. And ,
c. Ethical concerns.


To conclude, due to emerging globalisation and influence of external factors, global trend towards outsourcing has been increasing to cut down costs and become more competitive. However, a detailed costs and benefits analysis must be carried out, before any function is outsourced.
Please check the descriptions below for questions to discuss.
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Thank you, and happy learning.
Questions to discuss:
With reference to Voice Tel define the term ‘ outsourcing ’. [ 2 marks]
Identify and explain two benefits for Voice Tel of outsourcing their HR and accounting operations. [ 4 marks]
Identify and explain two disadvantages for Voice Tel of outsourcing their HR and accounting operations. [ 4 marks]
‘Outsourcing is the best strategy to reduce cost’. Discuss this with reference to Voice Tel.[ 10 marks]
Acknowledgements:
https://www.investopedia.com/terms/o/...
https://www.flatworldsolutions.com/ar...