Companies Outsource Peripheral Services To Companies example essay topic

Topic Outline: Outsourcing Thesis: How outsourcing jobs has affected IBM's Human Resource Management Department I. What is outsourcing. Factory work to outside contractors. Management responsibilities. Human Resource Management duties II. Why use outsourcing A. Reduction in labor forced. Saving's factory.

Technological advantages. Increase customer satisfaction. Winners. Stockholders B. CEO " sC. Clients.

Outside contractors IV. Losers. Local employees I. Families. The community Conclusion - - Outsourcing is not the solution for all of corporate America, but for IBM it is the only profitable way to operate.

Outsourcing, this is a term that is heard more and more in corporate America. Outsourcing refers to the practice of having another company (a vendor, third-party provider, or consultant) provide services (Noe et al. 49). Often times, companies can utilize a tremendous amount of additional resources by outsourcing key components of their work force.

Practically all areas of business are subject to outsourcing. Today, it is possible to start up an entire company with only a computer. As Americans, we expect the best possible value for our dollar. Often times the pennies we save cost us a lot more in the long run. Because some companies have taken advantage of outsourcing their competitors have to do the same to compete. The most common form of outsourcing is that of the factory worker.

America has lost a countless number of jobs to lower wage workers at home and abroad. The American textile industry has practically been wiped out by outsourcing. The vast majority of textiles are now being produced outside of our borders. Auto workers are now faced with the same problem due to the cheap influx of Asian imports.

Management is not immune from outsourcing as it once was. Several leading companies have turned to private firms for help in managerial situations. Later on in this paper I will give an example of this new wave of outsourcing. Today they are called private consultants. More and more firms are relying on these private consultants for help in making key business decisions. As the business world looks to squeeze more pennies out of the dollar this practice will increase.

Management staff is freed up to handle other duties. Human Resource Management (HRM) has also falling into the hands of private contractors. IBM has outsourced their HRM department to a private contractor. Since its inception more than 20 years ago, IBM has been a leader in its field. Despite this success, over the course of the last several years, IBM has found that in order to keep itself competitive, corporate restructuring has been necessary.

As such, practices such as downsizing and outsourcing have become quite popular for the company. In 2002 IBM signed a deal with Fidelity's Employer Services Company to outsource its HRM department. Of the IBM's 1,200 human resource employees, Fidelity retained 450". The growth of HR outsourcing will continue to gain momentum as organizations reap the benefits, including significant cost savings, new capabilities and services for employees, and enabling HR to focus on more strategic work that is integral to the business", Bryan Doyle, president of Hewitt's HR outsourcing group, said in a press release (Gurchiek). Why are companies looking to outsourcing more of their jobs? One of the most appealing aspects is the reduction in labor.

This reduction fits in with the new idea of streamlining. More can be done with less therefore more can be earned. The market place today is extremely competitive, and every advantage counts. Millions of dollars are saved by turning to outside contractors. Not only do companies save on wages, they save from not having to provide benefit packages. Revenue saved can be put to better product development, and new research.

A major reason outsourcing can save money is that the outside company specializes in the services and can benefit from economies of scale... (Noe et al. 146). To illustrate the impact of this benefit, a recent article published in CA Magazine (2004) notes: 'Furthermore, 35% of respondents said outsourcing allows their companies to implement strategies and change at a faster rate. And more than half (57%) the executives surveyed said they experience control gains within the first eight months of an outsourcing agreement' (p. 12). Advances in computer technologies have accelerated the process of outsourcing.

Upon calling support centers for computer companies, you are likely to be speaking to someone overseas. The fact that American tax returns are being prepared in India is an example of the affect technology has on outsourcing. Cyberspace has placed the entire world within the reach of your fingers. Conferences can be held by people thousands of miles apart via cellular communications. Customers can use the internet to access all sorts of information from outside contractors regardless of their location. A huge benefit that can be derived from the process of outsourcing the HRM is the improved services for employees.

Because companies outsource peripheral services to companies that deal specifically with these issues, the outsourcing company is in a position to better address the specific issues facing employees. Many companies seek to outsource human resource and payroll services. While this may seem like a bane for some employees because outsourcing companies work specially with issues of human resources or payroll, employees can reap a number of benefits. In some cases, employees can obtain a better benefits package by working with a third-party HR firm. When examining at all of the benefits that can be garnered from outsourcing, it is surprising that the process is still seen in such a negative light. When outsourcing is successful stockholders are the big winners, returns on investments go up.

As the stock in a company goes up so does the confidence level of all the people involved. CEO's are free to spend more time on other business matters. Additional projects can now be explored because of additional funds generated when outsourcing is successful. We must keep in mind that not all attempts at outsourcing are successful. Outsourcing makes communication more difficult and more important than when done in-house. It is harder to ask questions when no one is down the hall (Locker 14).

When these attempts fail the CEO is left in a delicate situation. Customer satisfaction is the result of IBM outsourcing their HRM department to Fidelity. Fidelity centralized the department in one location, Raleigh, North Carolina. Employees are now able to access certain information online; this is a huge improvement over the old system. Before the outsourcing IBM had HRM offices all over the world. Amazingly, despite the radical downsizing of this unit, employee satisfaction with service actually increased to over ninety percent of employees saying they were satisfied (Noe et al.

128). Contractors that can specialize in services such as HRM stand to make large profits from this new trend. Today more and more companies are becoming specialist in certain fields. Multi purpose operations are becoming a thing of the past. Fidelity specializes in HRM functions which have created a big demand for their services. Everything from workers to consultants can be obtained from outside contractors.

Unfortunately, creating winners has a serious side effect, it also creates losers. Local employees that have had their job outsourced are the biggest losers. Families that have lost their benefits along with their pay check find themselves unable to afford basic health care. Without education and skilled training it is hard to find a job.

Some displaced workers are forced into lower paying jobs and have to work part time on a second job to make up the salary gap. When parents work more than one job, it takes away from the children. Losing jobs hurts the local community where these people work and live. Tax revenues go down, thus reducing the amount of community services available to the public. Some local businesses may be forced to go out of business, further compounding the problem. The community of Smithfield, North Carolina is losing 300 jobs to Mexico as of December 31, 3006.

The plant was once Smithfield's largest employer, with over 1600 jobs (Parker). Fortunately, these lost jobs will not have a long lasting effect on the community. Several new facilities are opening, creating approximately 900 jobs. "We are fortunately creating more jobs than we are losing", de Sherbet said (Parker). Outsourcing is not the answer for all the problems associated with business today, but for some it is the only way out.

IBM got excellent results from outsourcing their HRM department. I have a first hand account of outsourcing failing. My wife Paula worked at Burlington Industries for 10 years, only to be laid off. Burlington moved their drapery plant to Mexico.

In just a few short years, Burlington was out of the drapery business. It is a gamble worthy of Las Vegas odds.

Bibliography

Locker, Kitty O., Business and Administrative Communication. New York: Mcgraw- Hill / Irwin, 2003.
Noe, Raymond A., et al. fundamentals of human Resource Management. New York: McGraw-Hill / Irwin, 2004.
Parker, Vicki L. 'Dish maker to cut jobs. ' The News & Observer 6 May 2005: D 1+.
Gurchiek, Kathy. Record growth seen in outsourcing of HR functions. 2005.
20 Apr. 2005.