Outsourcing of E-business services
Electronic business is a relatively new form of entrepreneurship that came into existence in the age of information technology and globalization. Despite the novelty of this field, companies that operate in virtual environment have to comply with the same laws of marketing and choose the same strategies for increasing their productivity. One of them is outsourcing or subcontracting a part of firms activities to partners (Chaffey, 2007, p 475). In this paper, we intend to discuss the advantages and disadvantages of this method especially in comparison with its opposite, in-sourcing. It is necessary to identify those criteria to which the management should pay attention in order to make the most balanced decision. In addition to that, we need to provide examples demonstrating the tactics that E-business corporations currently employ and how this affects their functioning.
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Yet, prior to conducting this analysis, we should give at least general overview of E-business services because they may differ immensely in terms of their complexity, sphere of application, duration, urgency and so forth. We can single out the most widespread types: 1) Web-related activities such as site personalization, designing, chat support; animation etc; 2) banking services like account opening, check processing or loan administration;. 3) even medical work may belong to this category if we are speaking about medical transcriptions (UN, 2003, p 141). This list is not complete but the range is rather vast. Firms may either major in these areas or they may be just supplementary ones. This brief survey leads us to the first parameter, namely, competence of the company. If the firm is quite capable of doing these tasks on its own without incurring additional expenses than it is more prudent to keep the service within the companys boundaries and not to attract external suppliers (Chaffey, 2007, p 477). In this case, the main advantage is the ability to maintain control over the process of production, and this is of great significance for those people, who emphasize the quality of their output.
Another reason, why in-sourcing may be the most optimal alternative is security of confidential information. The management of many E-businesses is now greatly concerned with the dangers of outside intrusion. Their misgivings are quite understandable because many of them develop new software solutions or improve already-existing technologies, their databases may contain financial accounts of important customers, and certainly, they are reluctant to share these secrets with any third-party that may hypothetically become a competitor (Franke, 2002). The third characteristic, which should be accounted for, is the nature of work. Provided that this process demands creativity, high level of education, the use of advance technologies, unfamiliar to others, English proficiency, etc, than it is inadvisable to choose in-sourcing.
Nevertheless, there are circumstances when outsourcing or off-shoring can be helpful. In particular, we should remember the necessity to decrease operation costs. No one can deny the fact that the same job can be done at a lesser price in developing countries. Furthermore, in some of them such as India China or Asian Tigers, employees have good academic background and possess sufficient skills in various fields like banking, programming, administration, recruitment and so forth (UN, 2003). This gives them good opportunities in the globalized world, especially given the fact that Internet erases national borders and connects people from various continents and countries. Thus, we can argue that outsourcing or off-shoring can be feasible due to such factors as financial situation in the corporation along with availability of highly-qualified subcontractors.
Apart from that, leading E-business firms may require for the aid of subcontractors even if this assistance is not essential for them and they can cope with the task independently. Such policy is usually pursued when the management intends to establish new partnership frameworks, gain access to new technologies and strengthen their positions in new markets (Siegel, 1999). Moreover, the governments of many developing countries are eager to invite foreign investors and they make concessions to multinational enterprises, for instance, by setting flexible terms of taxation. This evidence indicates that off-shoring may be very useful.
On the whole, this issue has become of a subject of heated debate among scholars, economists, lawyers and IT developers; many studies have been dedicated to answering this question. The results of the research prove that the tendency to outsource E-business services has intensified during last decade (UN, 2003). This phenomenon can be attributed to gradual improvement of infrastructure, technology and education in less advanced regions of the world (UN, 2003). Nonetheless, economists warn the representative of E-business against mere search for income because some enterprises achieved only short-term improvements. Although their operation expenses diminished, they could not guide the process of production and the quality of their services aggravated. Consequently, this gave rise to customers dissatisfaction, loss of some valuable clients and dependence on external suppliers. Such company as IBM once encountered similar problems in late nineties, but they managed to alternate in-sourcing and off-shoring and ensured that the core processes and services were under their close supervision (Stair & Reynolds, 2009).
Overall, the choice between in-sourcing or off-shoring should be based on thorough analysis of the firms capabilities, strengths, weaknesses, objectives and external environment: the availability of skilled personnel, political or economic situation in the country. Collaboration with subcontractors either domestic or foreign will enhance because new markets constantly emerge and more and more people are willing to participate in international trade, development, the process of design, and most importantly they are well prepared for these jobs.
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- Chaffey. D (2007). E-business and e-commerce management: strategy, implementation and practice. Pearson Education.
- Franke. U. J (2002). Managing virtual web organizations in the 21st century: issues and challenges. Idea Group Inc.
- Siegel. D. (1999). Futurize your enterprise: business strategy in the age of the e- customer. Wiley.
- Stair. R. Reynolds. G (2009). Principles of Information Systems. Cengage Learning
- United Nations (2003). E- Commerce and Development Report 2003.