Strategic outsourcing is a business tool, which helps to improve business performance and marketing activity. Originally, the companies will be able to leverage their skills for achieving increased profitability by assessing the relative costs and possible risks which are associated with purchasing, hiring new employees, and creating principally new aims and goals, as well as departments for achieving these goals.
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This paper aims to analyze all the possible drawbacks of strategic outsourcing in Bharti Airtel Limited. The structure of the paper presupposes the definition of a problem and its solution. Thus, the analysis will represent the review of the possible problems described in the case study, the recommendations for the company, and the analysis of the strategic approaches, which are used, and should be resorted to for overcoming the possible problems.
Strategic Outsourcing. Problems
Benefits of Outsourcing
First of all, it should be emphasized that the benefits of outsourcing are evident and essential, while the possible drawbacks depend on the managerial strategies and the allover managerial performance of the organization. Originally, the possible benefits are the following and Bharti Airtel Limited is regarded as the organization which aims to get the most of the potential benefits:
- The access to the latest workflow technology and human resources without high investments
- Professional skills and services available are wider than with the traditional HR approach.
- The costs of the services and production are lower
- Strong possibility to save time, efforts, infrastructure, and resources
- Outsourced workers often work overtime, thus, the deadlines of the projects may be shortened
- A flexible system of outsourcing HRM provides increased efficiency and productivity.
- Faster time of accessing the market
- Improved processes bring about improved customer satisfaction
- Gain a competitive edge with sophisticated technology and people
- Benefit from operational efficiencies without capital investment
- Benefit from better performance and management
- Benefit from process maturity and scalability
In the light of this fact, there is a strong necessity to mention that all the problems of the company are associated with the matters of managing the outsourced resources. As it is stated in the case study, the company applies the family principle of running a business, like lots of other Indian industries. On the one hand, it provides an opportunity for the proper running of the business by the collective efforts of a single-family – people with a single aim and powerful determination. By Lowson (2006), companies with such approaches will inevitably experience problems with the outsourced workers, as such an approach contradicts the original claims of a family-run business.
The essence of the problem is covered in the notion that the company’s managerial system is not oriented toward the outsourcing application. The solution to the problem will be based on the restructuring of the managerial strategy. The following steps will be required: the company should be focused on the core competencies and the resources, which define the extension of these competencies. Originally, preeminence, which is defined by strategic outsourcing provides unique features for the consumers of the organization, thus, the company should emphasize the importance of the resources, and make everything that will be able to improve the resources.
The next step will be to outsource all the possible resources, also entailing the traditionally considered integral to any company, taking into consideration management of the sources and activities, which are of no need or special capacities for the company.
The constant analysis of the process is the main task of the management teams, which is required for the adequate assessment of the progress and timely definition of the possible problems. Domberger (2004, p. 52) emphasizes the following statement:
For the meaningful analysis of outsourcing various theoretical insights are helpful. Transaction Cost Theory (TCT) originates from an economic perspective and Resource-Based View (RBV) is heavily applied in strategic management. Transaction costs are often disregarded because of the difficulty in quantifying the costs. Firms need to consider both the production and transaction costs of outsourcing. Other unexpected hidden costs are related to activities such as contractual amendment, unexpected transition and management, lock-in and disputes and litigations
Vendors and Investment
Another problem, which is faced, is associated with the matters of the relations with vendors. On the one hand, these relations should not touch upon the issues of outsourcing, nevertheless, when the company changes its supplier, the approaches of the HRM in particular, and resources management in general appear to be changed. If the services of one supplier appear to be unsatisfactory, the income of the company lowers, while the load for the outsourced specialists lowers essentially. To solve this problem, there is a strong necessity to combine all the approaches of outsourcing for increasing the benefits. Originally, the leveraging process of the company may be arranged in four ways. As Quinn and Hillmer (2007) emphasize, they maximize returns on internal resources by concentrating investments and energies on what the enterprise does best. Then as it is generally stated, the well-developed central competencies offer formidable barriers, which are suitable for opposing the present and future competitors, who are aiming to expand their spheres of interest, thus, the company will be capable to facilitate the strategic advantages of market share. The third recommended leverage tool contradicts the reality of business performance, nevertheless, there is a strong necessity to of the complete and maximally effective utilization of all the incoming investment. The specialized capabilities, which are required for this effective utilization would be duplicated internally, thus, improving the performance of the organization, and further increase of the capital investment flow. As Maromonte (2008, p. 195) claimed in his research on the issues of strategic outsourcing, “this joint strategy decreases risks, shortens cycle times, lowers investments, and creates more favorable investment atmosphere, thus, increasing the business performance effectiveness”. Nevertheless, it is applicable only in rapidly changing markets and spheres, as stable markets are not subjected to the extension of the investment flows without any reasonable marketing premise, as it is possible in the developing markets.
Originally, the main problem, which is associated with outsourcing, is Human Resources Management difficulties. The fact is that the successful development of the company requires the attraction of the best experts and the brightest technologists. On the one hand, these best will prefer the multinational companies, thus, Bharti Airtel Limited is among the outsiders. Training will solve the problem partially, as trained specialists will aim to leave the company before it achieves the essential results in this business sphere. Thus, outsourcing is the only solution for the successful development and attraction of the best personnel.
The solution for the problem will entail the implementation of outsourcing practices and increasing access to the global workforce, and the best skills of this workforce. As Hormozi and Hostetler (2003, p.291) stated in their research, there are several models of outsourcing, and all of them may be combined. The models are the following:
Staff augmentation – provides specialized resources, cost flexibility and satisfies short-term time-to-market demands. Out-tasking – is suitable for short-term business needs, to fill skill gaps. However, the integration of different out-tasked outcomes may not be a seamless one. Project-based outsourcing – Vendors and clients share risks and rewards through this collaborative model. This model has high client benefits as it holds the vendor accountable for an entire project, and allows the application of industry best practices in the outsourcing process.
In the light of this perspective, there is a strong necessity to emphasize that the original values of the business models of outsourcing are covered in the fact of global accessibility. On the one hand, it is suitable, and causes lesser expenses for the HR strategy; nevertheless, on the other hand, it requires a thoroughly developed managerial structure, consisting of reliable and highly experienced team members. Outsourcing also requires the implementation of the unified governance framework, which may be provided only by the multi-year managed services model as Lowson (2006) claims.
The managed service model is generally regarded as the most complicated, nevertheless the most thorough model of outsourcing in distinction with the previously described models. Originally, it is aimed at fostering the development of long-term relations with the employees. Originally, this model presupposes that the service provider takes full responsibility for the agreed-upon strategic business outcomes.
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The complex decisions, which any outsourcing model presupposes, require essential experience in sourcing and HRM in general. This experience means the awareness on the issues of who should outsource, why, where, and when, as well as the factors, which influence these issues.
Solution of the managerial problems associated with the implementation of outsourcing techniques often presupposes the solution of the problems of the technical character. The fact is that focusing on the core business processes and marketing aims in a company with outsourced workers, requires the constant monitoring of the project processes. The clients of such organizations have an opportunity to resort to cost-effective and flexible IT projects, which provide them with an opportunity for rapid response. In the light of this consideration, it should be stated that the implementation of a valuable IT structure is one of the key tasks for the outsourced segment of business activity. Originally, this aspect of IT management should be insourced, as only insourcing provides sufficient response rapidity.
Originally, outsourcing techniques and strategies, which are associated with these matters are highly beneficial and presuppose particular advantages and commodities for running a business. All the matters and possible problems, associated with outsourcing, and solutions for these problems have been regarded, nevertheless, the risks should be also taken into consideration. The strategic outsourcing matrix is utilized for these aims.
|Profit Impact||Outsourcing Risks|
|High||Leverage items: |
Develop market penetration and achieve higher expansion of market with high-level outsourcing.
|Strategic items: |
Insourcing for competitiveness
Strategic partnership for long-term business position.
|Low||Non-critical items : |
Improve cost strategy for economies of scale
|Bottleneck Items : |
Close partnership for assuring supply
Sourcing alternate partner
The matrix represents all the possible risks that are attributable to the outsourcing strategies and the matters of strategic planning. By the research by Domberger (2004), the risk factors are numerous, nevertheless, each company has its own. The problems and the key risks of Bharti Airtel Limited have been already regarded. Further research of the outsourcing for this specific case will require the risk assessment in the terms of technical complexity, uniqueness of the business process, and entry-level. Then, the situation will require assessment from the perspective of the profit impacts. Maromonte (2008) makes a particular emphasis on the following fact: “In a situation where the profit impacts are high and the outsourcing risks are low, firms would be advised to develop expansion strategy to penetrate and expand their market shares.”
Finally, it should be stated that the analysis of the problems from the perspective of Outsourcing Strategies, and the solutions of these problems are closely associated with the matters of the managerial mistakes and strategies, implemented for performing business tasks. Outsourcing itself is regarded as the universal approach for solving numerous problems, nevertheless, there are particular risks, associated with it, consequently, to resort to outsourcing, the internal managerial system should be properly adjusted and adapted for regulating the outsourced departments. Moreover, the managerial and economic risks should be evaluated and taken into consideration.
Domberger, S. (2004). The Contracting Organization: A Strategic Guide to Outsourcing. Oxford: Oxford University Press.
Hormozi, A., Hostetler, E., & Middleton, C. (2003). Outsourcing Information Technology: Assessing Your Options. SAM Advanced Management Journal, 68(4), 18.
Lowson, R. H. (2006). Strategic Operations Management: The New Competitive Advantage. New York: Routledge.
Maromonte, K. R. (2008). Corporate Strategic Business Sourcing. Westport, CT: Quorum Books.
Quinn, J. B., & Hillmer, F. G. (2007). Strategic Outsourcing. The McKinsey Quarterly, (1), 48.