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Outsourcing in the UK: Influence and Impact

Introduction

In this era of globalisation, outsourcing is a common business practice resorted to by different countries. The quantum of outsourcing has greatly increased in the recent years. UK and USA are the two countries which outsource vast amount of business. Information technology is the most commonly outsourced industry. It is seen that more and more companies are outsourcing their activities due to its advantages. The word ‘outsourcing’ means sourcing from outside a set of activities or functions. As a firm can focus on its core competency areas through outsourcing, it has now become an active business strategy. Current trend shows a growing outsourcing market in the years to come.

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Statement of Problem

The study by Centre for Economic and Business Research (CEBR) during 2004, reported that the UK economy would boost in the next five years by £16 bn a year. It was said that over 610000 UK jobs would be created by 2008 through outsourcing. (Thornton 2004). But recent news reported by BBC is as follows “Claims that the UK is losing large numbers of white-collar jobs through outsourcing to India and other nations.” (Outsourcing impact ‘exaggerated’ 2007). There exists a contradiction between the statements contained in the above sentences. So the problem discussed through this research is the current UK economy and the implications of outsourcing in UK economy.

Objective of the study

The primary objective of this research is to identify the influence and impact of outsourcing in UK.

Research Question

Following research questions are framed to achieve the above objective.

  1. What is the present condition of the UK economy?
  2. Which are the areas outsourced in the UK?
  3. Why do UK organisations go for outsourcing?
  4. What are the advantages of outsourcing in UK economy?
  5. What is the impact of outsourcing?

Research Methodology

An elaborate working plan has to be formulated and the overall environmental factors have to be analyzed so as to identify the influence and impact of outsourcing in UK. In order to identify the advantages and disadvantages of outsourcing in the economy and society detailed analysis of the economic factors has to be made. For identifying the potential impact of outsourcing in the UK economy and society, data relating to the external as well as internal business conditions is to be collected and analyzed. For this both primary and secondary data should be collected.

Primary Data

A primary research will be effective and necessary for finding the current trend among the organizations in the country regarding outsourcing strategy. Information relating to the operations and strategies of the enterprise together with the degree of customer acceptance is included in the primary research. For collecting primary data relating to the outsourcing operations of the company in the industry and its effectiveness in improving business profitability and growth, a managerial questionnaire is prepared scientifically. (See Appendix 1). This questionnaire focuses on operational and managerial data relating to the outsourcing of the company.

Secondary Data

Secondary data collected for this research mainly relates to the existing outsourcing business practices in UK. For collecting secondary data, internet is the prime source. The other major sources of data would include the UK economy website. In order to identify the present condition of the UK economy, data has to be collected from secondary sources such as various academic journals, newspapers, business journals as well as other sources and books available in the internet. The research reports of various research scholars are also to be considered for this research.

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Interview Method

A questionnaire based interview is conducted as part of the research for collecting data from different organizations which adopt outsourcing for its business.

Literature Review

The outsourcing has a significant influence in the economy of United Kingdom. Here the impact and influence of the outsourcing in UK is analyzed with the help of available literature on this topic. There are so many reasons for outsourcing. Among them the main reasons are reduction in cost and the possibility of getting the work done by most skilled and qualified persons. “A few years ago, UK workers worried about their employers off- shoring their jobs to low-cost locations like India. The people affected by this were mainly call centre staff or administrative staff.” (Offshore outsourcing and its impact on UK IT sector n.d.).

When companies go for outsourcing their business processes, it may cause the employees of the company to feel that their jobs are not secured. As almost all the companies are interested in reducing the total cost, they will make all efforts to achieve this objective. Though outsourcing can offer many benefits to the company, this may really affect the morale of the employees which will have a serious impact in the society. The society will always fight against the activities which affect the people of the society. The companies in UK are not much bothered about the negative impact of the outsourcing. However, such an attitude is not acceptable and the companies must have concern for the society. If they do not bother about the feelings of the society it is against ethics.

The outsourcing can offer benefits to the employees in the country to which the business processes are outsourced. Call centres are another area where outsourcing takes place. From UK mainly business processes are outsourced to countries like India, China, Singapore, Philippines etc. The employees of theses countries get much higher pay if they are working in outsourcing industry. The chief reason is the difference in exchange rate. The outsourcing companies also get benefit by way of reduction in labour cost. If the companies are outsourcing their business to countries like India, they have to pay only one fourth or one fifth of the money that they have to pay in UK. (Call centre outsourcing to India 2009).

The outsourcing has significant influence in the companies of United Kingdom. The positive influence or advantages of outsourcing are reduction in cost, growth in business, increase in profit, availability of skilled employees, possibility of concentrating on the main business of the company, higher customer satisfaction, and benefit of time difference etc. (The benefits of outsourcing 2009).

The outsourcing has helped the UK economy which trend is likely to continue in future also. “Increased IT outsourcing during the next five years could boost the British economy, increasing GDP by £16bn and narrowing the ‘productivity gap’, according to new research.” (McCue, 2008). Outsourcing of facilities management in the area of health and education is growing year by year in United Kingdom. The UK government is giving full support to this kind of outsourcing.

Discretion

Outsourcing may be a dominant, aggressive business weapon for organizations in UK. Various earliest tries to approximate the belongings of division on plant productivity using micro data consists Gorzig and Stephan and Girma and Gorg. Three different kinds of outsourcing are employed and these are connected to internal labour cost. These are material inputs, external contract work and other cost related to production.

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Material inputs which reveal make or buy decisions by the organization are similar to material outsourcing to external suppliers. External contract work consists of return subcontracting. Other cost related to production consists of outsourcing of services. In fact, Gorizig and Stephan identified the cause of these three procedures of outsourcing based on the performance of firm and calculated as return per employee. “This effect is strongest for material outsourcing, but negative for services in the short run. Moreover, they find that increased subcontracting and outsourcing of services reduces firm profitability, whereas firms engaged in material outsourcing tend to do better than those that do not outsource.” (Olsen 2006, p.18). There are no understandable consequences about impact of outsourcing on increase of labour productivity.

Outsourcing is considered as the proportion of imported inputs over total inputs. Offshore outsourcing and materials and servicing outsourcing are different from each other. Services such as direct and indirect cost do not include materials, wages etc.

Recommendation and Conclusion

From the analysis of literature review, it is clear that outsourcing is increasing day by day as a result of globalisation thus leading to reduction in total cost. There is a chance of job losses in United Kingdom due to outsourcing. So there is a scope for a research about the outsourcing in UK and its implications in the UK economy.

References

Call centre outsourcing to India 2009, The Weekly Grip. Web.

McCue, A 2008, IT director: outsourcing could boost UK economy by £16bn, Silicon.com: Driving Business Through Technology. Web.

Outsourcing impact ‘exaggerated’ 2007, BBC News. Web.

Offshore outsourcing and its impact on UK IT sector: the UK work place goes global n.d., Offshoring Times. Web.

Olsen, KB 2006, STI working paper 2006/1: productivity impacts of offshoring and outsourcing: a review: productivity effects at the level of the firm, OECD Directorate for Science, technology and Industry (STI). Web.

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Thornton, P 2004, Outsourcing ‘could create 610, 000 UK jobs by 2008’, The Independent. Web.

The benefits of outsourcing 2009, Outsource 2 India. Web.

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StudyCorgi. (2021, October 30). Outsourcing in the UK: Influence and Impact. Retrieved from https://studycorgi.com/outsourcing-in-the-uk-influence-and-impact/

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StudyCorgi. (2021, October 30). Outsourcing in the UK: Influence and Impact. https://studycorgi.com/outsourcing-in-the-uk-influence-and-impact/

Work Cited

"Outsourcing in the UK: Influence and Impact." StudyCorgi, 30 Oct. 2021, studycorgi.com/outsourcing-in-the-uk-influence-and-impact/.

1. StudyCorgi. "Outsourcing in the UK: Influence and Impact." October 30, 2021. https://studycorgi.com/outsourcing-in-the-uk-influence-and-impact/.


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StudyCorgi. "Outsourcing in the UK: Influence and Impact." October 30, 2021. https://studycorgi.com/outsourcing-in-the-uk-influence-and-impact/.

References

StudyCorgi. 2021. "Outsourcing in the UK: Influence and Impact." October 30, 2021. https://studycorgi.com/outsourcing-in-the-uk-influence-and-impact/.

References

StudyCorgi. (2021) 'Outsourcing in the UK: Influence and Impact'. 30 October.

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