Abstract
Outsourcing is one of the new strategic concepts which are gaining popularity very rapidly among firms in the United Arab Emirates. In this study, the researcher is interested in investigating the relevance of outsourcing to Emirati firms in the current competitive business environment. It will investigate the prevalence of outsourcing in the country and the kind of firms that prefer this strategy. Finally, the researcher will determine the future of outsourcing in the country. To achieve these objectives, it will be necessary conduct a review of literatures to determine the trend in the respective industries. The literatures will help in developing a basis for the study. The researcher will then conduct a primary data collection by interviewing experts in this field within the country. The primary data will help in confirming or challenging the existing information found in the literatures. This study is expected to have a positive impact on the existing bodies of knowledge about outsourcing. It will not only help in addressing the contradictions in this field but also in eliminating the gaps in existing knowledge. The report will be very important for future scholars who will be interested in conducting studies in this field.
Introduction
The United Arab Emirates is one of the fastest developing economies in the Middle East. Multinational companies are now attracted to some of the major cities in this country, especially Dubai and Abu Dhabi. The movement of external players into the local market has increased competition in the market, forcing the local firms to increase their efficiency in order to remain competitive. Firms that are unable to improve on their competitiveness are easily forced out of the market by more efficient firms that know how to minimize their costs of operation and maximize their profits. The need for efficient operations has forced many firms in the United Arab Emirates to redefine their operational strategies with the view of identifying and eliminating ineffective operations.
It is because of this pressure on the local firms that has seen many of them embrace outsourcing as a strategy of improving their efficiency. Zeltserman (2010) defines outsourcing as a strategic arrangement where a company pays another firm to provide services that were previously provided for in-house. It is a strategy where a firm assigns a different firm some duties that it considers time consuming or too demanding to be done in-house as a way of improving service delivery. This strategy is increasingly becoming common in the United Arab Emirates in various industries. In this study, the researcher seeks to determine the relevance of outsourcing to Emirati firms in the current competitive business environment.
Literature Review
The strategy of outsourcing has become common in the global business environment as firms struggle to be lean and very efficient in every activity they undertake. Scholars have conducted investigation to understand why this strategy is increasingly becoming popular among firms and its actual impact on their performance. The researcher will review some of the literatures as a way of establishing a basis for this study. According to Schniederjans, Schniederjans, and Schniederjans (2007), outsourcing is a strategy where a firm identifies activities that it lacks special capacities to deliver excellent service and assigns them to companies that have better competencies. The aim of this strategy is to eliminate some activities that are making the firm less efficient in order to provide more time for the workforce to concentrate on specialized activities.
Sparrow (2013) says that outsourcing started out in the aviation sector. Many aviation companies realized that to build-up an airbus, there were numerous activities that had to be done which were highly time consuming. They noted that some of these activities were not specialized. For instance, manufacturing of the seats to be fitted in the planes was not a specialized as developing the engines. However, these activities were time consuming for these companies. Moreover, employees who worked in these less-specialized activities demanded for salaries as high as that of engineers who did the specialized tasks. This was making the process of developing the planes time consuming and unnecessarily expensive. They came up with a strategy where all unspecialized activities were assigned to other firms so that these firms could just concentrate of developing specialized activities. This reduced demand for more space within these firms, the number of employees they had to manage, and the cost of constructing a unit plane.
The strategy gained popularity very fast, not only in the aviation sector but also in other industries that realized that they could become more efficient by delegating some duties to other firms at a fee (Blake & Broschak, 2009). In the modern society, firms have embraced the idea of outsourcing to help them concentrate only in activities which they believe are sensitive to their firm. One of the areas where firms have been quick to outsource is the human resource. Since the Industrial Revolution, the relationship between employees and their employers has been an issue of concern majorly because of the conflicting interests.
As Sparrow (2013) observes, employees want better salaries, few working hours, fully-paid holidays, and other benefits from the employers. These needs have direct negative impact on profitability of a firm. On the other hand, employers want employees to work for longer hours, accept minimum salaries, reduce their yearly holidays, and be flexible in their duties. These needs are contradictory to the desires of employees. Finding a solution to these conflicts has been one of the major areas of research among scholars and human resource practitioners. Many firms are unable to address these conflicts, leading to undesirable industrial action that is common in many countries around the world.
To eliminate these problems, many large multinationals have embraced outsourcing as the only solution. These large firms only hire top and mid managers to be responsible for policy issues. However, junior employees are outsourced from other firms that specialize in managing human resource. This has worked magic for many firms around the world. These local human resource firms have specialized in identifying the skills needed by each company and selecting those who are willing to accept minimum wages as desired by the contracting firms. The outsourced firm will be responsible for hiring and addressing all the issues relating to these junior employees. The outsourcing firm in turn, pays it to undertake these activities. This means that the top managers will only focus on how to develop strategies that can manage market competition.
Auditing is another area that many firms are now outsourcing as a way of improving their efficiency. According to Sparrow (2013), many firms audit their accounts once every year, especially at the end of accounting period. Hiring auditors on a permanent basis is economically undesirable because their services may be needed only for less than a month every year. Instead of wasting resources by hiring these employees, firms are now outsourcing these activities to specialized firms like KPMG, Ernst and Young, Price Water House Coopers, among others. These are firms that have specialized only on issues about accounting. They are independent, professional, and thorough in their work. This makes it desirable for firms to outsource their services.
Benefits of outsourcing
At this point, some of the benefits of outsourcing have been outlined in explaining why this strategy is increasingly becoming common not only in the United Arab Emirates, but also in other parts of the world. One of the main benefits of outsourcing, according to Barrar and Gervais (2006), is that it improves efficiency. By assigning some complex or demanding tasks to professionals, a firm can be sure that these professionals will deliver high quality service because that is their area of expertise. The firm is left with ample time and resources to also focus on its area of expertise. The outcome of such arrangement is that the ultimate product will be of very high quality, and the process of producing a unit product will need lesser time.
Related to this is the benefit of reduced cost of production. Given that activities at each stage are done by professionals who have experience, production problems such as damages or defects are eliminated. These defects and damages always increase overhead cost per unit product. If they are effectively eliminated, then the unit cost per product will be reduced. The cost of managing the employees will be reduced too. In such settings, therefore, a firm will be able to offer high quality products in the market at reduced costs, making it possible to slash the market price. Such a firm will have a competitive edge over competitors whose services are hampered by inefficiency and lack of concentration by a management that has to focus on so many issues, including addressing problems related to human resource management.
According to Jakob and Skaksen (2009), every business owner would want to experience full control of his business. This is always hampered by unruly employees who are constantly demanding for increased benefits through their unions. Unionization is one of the issues that many employers fear the most because of its impact on the operations of the firm. When an employer is faced with an industrial action, the power over his firm is taken away from him. He has to give in to the demands of the employees or risk his firm’s operations being grounded. Such fears are eliminated when the entire human resource, except top managers and strategic mid-managers, is outsourced. The worry is taken care of by another firm that has to be responsible for handling the demands of the employees’ unions.
Outsourcing promotes risk-sharing among firms. Sparrow (2013) says that it is always challenging to determine the volatility of the market both in terms of raw material sources and the market for the finished products. When a firm outsources some of the activities, then it will share the risk of sporadic price increases of raw materials with the outsourced firm. For example, airplane manufacturer may be seriously affected by a sporadic increase in the market price of leather material that it uses to make seats if the task of making these seats is not outsourced. However, this risk can be shared if it outsourced the activity.
Disadvantages of outsourcing
Sparrow (2013) says that outsourcing is not a golden bullet that a firm can use to address challenges it may be facing in its operations. It also has a number of weaknesses that must be taken into consideration before a firm makes the decision to contract a firm to undertake activities that would otherwise be done in-house. One of the major risks of outsourcing is the exposure of confidential information to third parties that may use it against the firm. According to Zeltserman (2010), firms are under pressure to conduct regular research and come up with new unique ways of addressing market challenges. These new strategies can only offer a firm competitive edge over its market rivals if they remain confidential. However, maintaining confidentiality is not easy in a setting where the entire human resource department is outsourced. The employees will owe allegiance to the outsourced firm which is their employer instead of the company. This makes it easy for them employees to leak out confidential information that may not only reduce competitiveness of the firm but also expose it individuals whose interest may be to cause harm to the firm.
The research by Hira and Hira (2008), says that outsourcing reduces customer focus and customer commitment among employees. Employees are human beings with feelings that must be directed in a given way to ensure that they remain motivated. When employees are aware that they are working for a firm that has outsourced the entire human resource, they will feel withdrawn. There will be a feeling that the firm that they are working for lacks commitment to care for them and that is why they outsourced the department. This will reduce their morale. It is also important to note that employees are always motivated when they realize that they are part of the firm that employs them. They will make an effort to ensure that it is successful because they know that they will share in that success. However, this is not the case when they realized that they are working for a different firm. Their focus to deliver excellent services to the customers will be reduced. This creates a scenario where there is a constant poor client experience whenever they seek services from this firm.
Loss of regular monitoring is another undesirable factor that a firm has to deal with when it outsources some of its activities. The desire of every chief executive officer of any company is to have control over the employees to be able to guide them towards a given direction that bring desired result. However, this is not possible because the employees will be pledging their allegiance to a different authorities. This means that there will be two centers of authority, with the external authority being stronger than the internal authority in terms of managing the employees. They are actually the employer who must be respected by the employees. The problem may be complicated if the outsourced firm is also offering services to another rival firm. This means that the attention of the outsourced firm will be divided between the two clients, reducing its capacity to deliver high value.
Method
Area of Study
When planning to conduct a research, it is always important to define the area of study in order to identify the participants in a patterned approach. This research will be based on data that will be collected from two major cities in the United Arab Emirates. The selected cities will be Dubai and Abu Dhabi. These are the cities where there are numerous companies operating in different companies. The researcher will identify experts who are currently working within these cities.
Data Collection Methods
In this study, the researcher will use both primary data and secondary sources of information. Secondary data will be collected by reviewing relevant literature that exists about outsourcing. The researcher will gather recent reports about this topic from local and international authors. This will include books, journal articles, and reliable online sources. The literature sources will not just be limited to the United Arab Emirates, but will cover how the practice is done in other parts of the world. This will enable the researcher to compare the strides the country has made in embracing this practice compared to other countries in the international society. This way, it will be possible to identify areas that needs improvements locally as the country tries to benchmark itself with the best in the world, especially the West. Primary data collection will be collected from a sample of participants within the cities of Dubai and Abu Dhabi. The respondents will include experts in this field and senior managers who are forced to embrace this practice in their respective firms.
Scope of Data Collection
According to Bernard (2011), when conducting research, it is important to define the scope of data collection in order to inform the users of the documents the scope within which the document can be applied. As mentioned above, secondary sources of information will be collected from materials published from various parts of the world but available in the school or online library. However, primary data will strictly be collected from respondents who are currently staying within the United Arab Emirates, especially the cities of Dubai and Abu Dhabi. The decision to limit the scope of primary data collection was informed by two factors. The first factor was that the aim of the research was to determine the prevalence and relevance of outsourcing to firms within the United Arab Emirates. Data collected within this scope would be sufficient to achieve this aim. The second factor was the limited time available for the study that would not allow the researcher to tour the world collecting data from various countries.
Sampling design
The researcher has identified two main groups that will be relied on when collecting primary data. The two different groups are the experts in this field such as lecturers and consultants, and senior managers who are forced to embrace the practice. The researcher will use stratified sampling methods to collect data from the two strata. Each stratum will have equal weight when conducting analysis.
Instrument of data collection
Primary data will be collected using questionnaires. The researcher will develop questionnaires that capture all the important facts about this research project. The questionnaires will be printed because primary data will be collected from face to face interviews. It means that the researcher will be personally involved in administering the questionnaires. Face to face interview was considered the best form of survey because it will enable the researcher to collect more information than what is captured in the questionnaire. The questionnaire will use both structured and unstructured questions. Structured questions will facilitate statistical analysis which is very important in the study, while unstructured questions will allow the respondents to expound on their answers.
Data analysis
The researcher intends to use both quantitative and qualitative data analysis methods in order to facilitate a comprehensive understanding of this topic. Quantitative data analysis will be done using Statistical Package for Social Scientists (SPSS) software. Quantitative data that will be collected using structured questions will be entered into the SPSS software and coded as appropriate. Once the information is coded, the researcher will be able to derive various values such as mean, standard deviation, quartiles, and percentiles. Answers obtained through this analysis will be presented in graphs, tables, and charts for the purpose of enhancing clarity in this study.
Quantitative analysis will help in answering the question of prevalence of this practice within the Emirati community. Qualitative data will take the explanatory approach. It will answer the question as to why this practice is becoming common in this society. Through the descriptive data, the researcher will answer the main research question about the relevance of outsourcing to Emirati firms in the current competitive business environment. Using both qualitative and quantitative methods was considered appropriate because it will make it possible to respond effectively to all the questions by not only providing statistical figures but also supporting them with detailed explanations based on the views of the respondents.
Reliability and validity of the method
The issue of reliability and validity of the study will be given serious consideration in this study. In this research, internal validity will be facilitated by checking the representativeness of the sample selected, while external validity will ensured through triangulation. To guarantee reliability in this study, researcher shall adopt principles of openness, coherence, and discourse to ensure that data collected and analysed is based on the information gathered from the field.
Ethics
When conducting a research, the issue of ethics becomes fundamental in guiding every action of the researcher. According to Wang and Groat (2013), a researcher must appreciate that his report may be relevant to many stakeholders such as academicians, policy makers, and policy implementers. These stakeholders deserve the right to truthful and objective information. A researcher must, therefore, observe ethics at all times. In this study, the researcher will avoid any forms of biasness when collecting, analyzing, and presenting data. The participants will be identified without giving preference to any party. According to Wang and Groat (2013), a researcher has ethical responsibility to inform his subjects about the intended study well in advance before the day of collecting data. This will make them prepared for the study. The researcher will observe this ethical requirement by calling the identified participants and explaining to them the intentions of the study.
Limitations
This research has some limitations that are worth noting as a way of clarifying the relevance of the content to consumers who may be outside the United Arab Emirates. Collection of primary data will be limited to the country, specifically the cities of Dubai and Abu Dhabi. When using this document, this fact should be observed. Another important limitation is that this is an academic work done by the researcher solely for academic purposes. It is not a heavily founded project with many players. It is an academic task that will involve interviewing only a number of respondents that can help support the findings from the literature. This limitation should be observed by those who may want to use the report in policy making.
Timeline of the Project
In this project, it is important to define the timeline for the research project in order to plan on how various activities shall be addressed. The project shall be completed within the next six weeks, unless a serious challenge is met along the way. The Gantt chart below has important activities in the project, and their set timeline.
Timeline of the Activities in Project
As shown in the above Gantt chart, the entire project should to take about six weeks to be completed as per the plan. Each of the set activities has a timeline, but it is important to note that some of them may be finished within a shorter period than what has been given in the plan. All weekends and public holidays have not been considered working days. It means that a week has five working days, running from Monday to Friday. Within the first week, the major activity will be development and subsequent approval of the research proposal. In the following second week, the researcher will review relevant literatures to form the basis of the study. The third week will involve data collection from primary sources. Analysis of data will be conducted on the fourth week. Finally, writing of the entire report shall be done on fifth and sixth weeks.
Conclusion
This research will be very important in explaining the relevance of outsourcing to the Emirati firms as they try to manage market competition. From the limited literature review conducted at this pre-research stage, it is evident that this practice is becoming increasingly popular in this country. This is a confirmation that firms are finding the practice to be beneficial in improving their efficiency. This will either be conformed or refuted when the study is completed.
References
Barrar, W., & Gervais, R. (2006). Global outsourcing strategies: An international reference on effective outsourcing relationships. Aldershot: Gower.
Bernard, H. R. (2011). Research methods in anthropology: Qualitative and quantitative approaches. Lanham: AltaMira Press.
Blake, A., & Broschak, J. (2009). Outsourcing and the Changing Nature of Work. Annual Review of Sociology 35(2), 321-340.
Hira, R., & Hira, A. (2008). Outsourcing America: The true cost of shipping jobs overseas and what can be done about it. New York: AMACOM.
Jakob, M., & Skaksen, R. (2009). Specialization, Outsourcing and Wages. Review of World Economics 145(1), 57-73.
Schniederjans, M. J., Schniederjans, A. M., & Schniederjans, G. (2007). Outsourcing management information systems. Hershey: Idea Group Pub.
Sparrow, E. (2013). Successful IT outsourcing: From choosing a provider to managing the project. London: Springer.
Wang, D., & Groat, L. N. (2013). Contemporary research methods. Hoboken: Wiley.
Zeltserman, D. (2010). Outsourced. London: Serpent’s Tail.