ESSAY: BBA 3551, Information Systems Management

As a manager of an organization, you will often need to find ways to cut costs. One way to cut costs is to outsource by hiring another organization to perform the service. Consider the scenario below.

As a manager for the public outreach department, you realize that the current system for managing outreach issues is outdated. You would like to have a new outreach system developed using the Cloudera platform to help manage big data. However, no one in the organization has the expertise. You will have to outsource the project to save on costs and avoid management problems. Two companies have sent in a bid—one from Vancouver, Canada, and one from Mumbai, India. The bid from India was slightly lower than the bid from Canada. Compose a response that includes the elements listed below.

Define what is meant by outsourcing.
Explain how Peter Drucker’s statement (covered in the textbook in uCertify) about how one company’s back room is another company’s front room pertains to outsourcing. Use an example.
Summarize the management advantages, cost reduction, and risk reduction of outsourcing.
Summarize the outsourcing risks concerning control, long-term costs, and exit strategy.
Discuss which company you would outsource to and why. Does distance matter?
Your case study must be at least two pages in length (not counting the title and reference pages), and you must use at least two references as a source for your essay. See the Suggested Reading section for some sample articles on outsourcing. Be sure to cite all sources used in APA format, and format your essay in APA style.

BBA 3551, Information Systems Management

Outsourcing has become a great practice by many reputable organizations. Most organizations opt to outsource to get access to better skills or as a way of getting services that the organization is not able to undertake on its own. This essay seeks to look at the different aspects of outsourcing as a practice in business operations.

What Is Meant by Outsourcing?

Outsourcing is a business practice that entails a company hiring either an individual or another company to undertake tasks, operations, or offer services that cannot be handled by a company’s employees. In most cases, this happens due to a lack of expertise or necessary tools forcing a company to seek for them in another company.

An explanation of Peter Drucker’s Statement

Peter Drucker is a respected person, especially in human resource practices. He is also respected for restructuring General Electric by revamping its outsourcing policy. Drucker’s statement, “make sure that your backroom becomes their front room,” meant that companies don’t need to guard services at their plant when they cannot handle them. Business leaders should not engage in meetings trying to solve problems, yet they don’t have specialists that can help solve the challenge that is facing them (Bogoviz et al., 2019). By saying this statement, Drucker was emphasizing the importance of an organization to outsource services. A good example of outsourcing is to have a healthcare facility that doesn’t have expertise in handling an electric health record system that can hire a specialist to train staff or provide services on contractual terms.

Management Advantages, Cost Reduction and Risk Reduction of Outsourcing

Outsourcing can come with many benefits to management.  One advantage is that its outsourcing leads to increased in-house efficiency in the organization. In most cases, once tasks have been allocated to the outsourcing partner, the outsourced company will share responsibilities with employees, which helps management develop a more competent workforce. Management will also benefit from increased productivity and an increase in the value of the business. 

Outsourcing is also a cost reduction measure for organizations. While building individual capacity or infrastructure can be costly for a business, outsourcing is an alternative that cuts down on such costs. A stated before; outsourcing expertise helps train internal capacity, which implies that costs that could have been used to prepare such employees have been saved. Lastly, outsourcing also helps improve the brand image and the quality of the products, which eventually leads to low costs used in maintaining systems for a manufacturing company. Organizations also outsource to reduce the risks associated with opting not to outsource. According to Drucker’s statement, a business t…