Chapter - 1

INTRODUCTION

OUTSOURCING:Historical Background
Outsourcing dates back to the 1970s. Initially it only involved IT-related issues, but gradually
more and more enterprises realized that they could not be experts in more than one or two fields.
This Conclusion made them get rid of various areas of activity and entrust them to specialists.
According to a survey by Fortune magazine, over 90% of business organizations today take
advantage of external
Service providers, and in the European market alone the 2001 estimate of such services was
US$27 billion, which is growing from year to year. Originally, outsourcing was only used by
large Corporations, but nowadays it is becoming more and more popular among small-sized
enterprises.
The broader use of outsourcing in the industrial market results from the build-up of competitive
Pressures and progressing globalization as the environment becomes increasingly complex,
faster And faster advancement of technology, with the consequent changes in the conditions in
which any Given enterprise functions, necessitate the search for more and newer methods which
keep one ahead of ones competitors. In the past the key to success was bulk; today the
importance of high quality is growing. In the past the key to success was the bulk, today the
importance of high quality is growing.
As the managerial paradigm shifts from .bigger is better. to lean and mean. and from .highvolume. To .high-value, Companies are being forced to identify exactly where they have the
greatest competitive advantage, and to redefine their organizational structures to maximize that
advantage. An increasingly common way for organizations to try and increase their .flexibility.
And generate .high value
is through outsourcing . This situation requires precise identification of the line of

Business one wishes to follow (ensuring a competitive advantage) and a careful analysis of its
weak and strong points one important result of this process is a recognition and reassessment of
those activities which are not core. In particular, whether these non-core activities should be
carried out by the organization itself (make) or outsourced to a specialist third party (buy)
Each enterprise that wants to outsource some of its activities must determine:
1. What tasks should be accomplished in-house;
2. What tasks should be accomplished through strategic partnerships; and
3. What tasks should be contracted out (outsourced) to third-party specialists.
The decision to commission some processes to an external provider is strategic in nature, and it
can largely determine a firms future; it must therefore be well-thought-out and informed.
Outsourcing sometimes involves transferring employees and assets from one firm to another, but
not always. Outsourcing is also used to describe the practice of handing over control of public
services to for-profit corporations.
Outsourcing includes both foreign and domestic contracting, and sometimes includes off
shoring or relocating a business function to another country. Financial savings from lower
international labor rates is a big motivation for outsourcing /off shoring.
The opposite of outsourcing is called in- sourcing, which entails bringing processes handled by
third-party firms in-house, and is sometimes accomplished via vertical integration. However, a
business can provide a contract service to another business without necessarily in-sourcing that
business process.
Outsourcing occurs when a company purchases products or services from an outside supplier,
rather than performing the same work within its own facilities, in order to cut costs. The decision
to outsource is a major strategic one for most companies, since it involves weighing the potential
cost savings against the consequences of a loss in control over the product or service. Some
common examples of outsourcing include manufacturing of components, computer programming
services, tax compliance and other accounting functions, training administration, customer
service, transportation of products, benefits and compensation planning, payroll, and other
human resource functions. A relatively new trend in outsourcing is employee leasing, in which
2

specialized vendors recruit, hire, train, and pay their clients' employees, as well as arrange health
care coverage and other benefits.
The growth in outsourcing in recent years is partly the result of a general shift in business
philosophy. Prior to the mid-1980s, many companies sought to acquire other companies and
diversify their business interests in order to reduce risk. As more companies discovered that there
were limited advantages to running a large group of unrelated businesses, however, many began
to divest subsidiaries and refocus their efforts on one or a few closely related areas of business.
Companies tried to identify or develop a "core competence," a unique combination of experience
and expertise that would provide a source of competitive advantage in a given industry. All
aspects of the company's operations were aligned around the core competence, and any activities
or functions that were not considered necessary to preserve it were then outsourced. Today,
outsourcing is embraced by companies of all sizes and industry orientations. As analysts Tom
Osmond commented in Employee Benefit News, "Many companies have decided that
transactional and administrative functions are neither core competencies nor value-added
activities. In fact, some companies are putting themselves at risk as a result of using outdated
technology and not complying with government regulations. Vendors, by focusing on
administration as part of their business model, provide better service enforced by contracts and
service-level agreements."
Successful outsourcing requires a strong understanding of the organization's capabilities and
future direction. As William R. King explained in Information Systems Management, "decisions
regarding outsourcing significant functions are among the most strategic that can be made by an
organization, because they address the basic organizational choice of the functions for which
internal expertise is developed and nurtured and those for which such expertise is purchased.
These are basic decisions regarding organizational design." Outsourcing based only upon a
comparison of costs can lead companies to miss opportunities to gain knowledge that might lead
to the development of new products or technologies.
Outsourcing can be undertaken to varying degrees, ranging from total outsourcing to selective
outsourcing. Total outsourcing may involve dismantling entire departments or divisions and
transferring the employees, facilities, equipment, and complete responsibility for a product or
3

function to an outside vendor. In contrast, selective outsourcing may target a single, timeconsuming task within a department, such as preparing the payroll or manufacturing a minor
component that can be handled more efficiently by an outside specialist.
Vendors providing outsourcing services are generally grouped into two models: Business Process
Outsourcing (BPO) and Application Service Provider (ASP). In the BPO model, major resources
and assets are transferred from the company to the vendor. Under the ASP model, on the other
hand, vendors concentrate on providing selected services for multiple clients. But as Osmond
told Employee Benefit News, many variations exist within these two models. "Each vendor has a
particular focus and/or point of entry to the market, particularly in the ASP space," Osmond
stated. "There is also a wide range of pricing models and option. The good news is that there is a
seemingly endless combination of service, pricing, and delivery, providing a solution for most
situations. The bad news is that it can be difficult to compare vendors on an apples-to-apples
basis."

ADVANTAGES OF OUTSOURCING
Companies that decide to outsource do so for a number of reasons, all of which are based on
realizing gains in business profitability and efficiency. Principal merits of outsourcing include the
following:

Cost savings: - Many businesses embrace outsourcing as a way to realize cost

savings or better cost control over the outsourced function. Companies usually
outsource to a vendor that specializes in a given function and performs that
function more efficiently than the company could, simply by virtue of transaction
volume.

Staffing level:-. Another common reason for outsourcing is to achieve headcount

reductions or minimize the fluctuations in staffing that may occur due to changes
in demand for a product or service. Companies also outsource in order to reduce
the workload on their employees (freeing them to take on additional

moneymaking projects for the business), or to provide more development

opportunities for their employees by freeing them from tedious tasks.

Focus:-Some companies outsource in order to eliminate distractions and force

themselves to concentrate on their core competencies. This can be a particularly
attractive benefit for start-up firms. Outsourcing can free the entrepreneur from
tedious and time-consuming tasks, such as payroll, so that he or she can
concentrate on the marketing and sales activities that are most essential to the
firm's long-term growth and prosperity. "What an outsourcing partner really sells
is focus," wrote Adam Katz-Stone in Baltimore Business Journal. "In accounting
for instance, that is something that typically is seen as necessary but not essential,
not the core of the business. So you bring in an outsourcing partner and then you
don't have to think about that any more. You can focus your energies on sales,
marketing, and all the other things that matter more."

Morale: - This is an often-overlooked but still notable benefit that can sometimes
be gained by initiating an outsourcing relationship. "Often a business's lack of
internal expertise or dedication to non-core tasks results in poor attitudes and
ultimately poor performance," wrote Kevin Grauman in CPA Journal. "This can
lead to overlap and duplication of internal efforts. An effectively designed and
ongoing communication process emanating from one or more outsourcers can
greatly reduce or eliminate these duplications."

Flexibility:-Still others outsource to achieve greater financial flexibility, since the

sale of assets that formerly supported an outsourced function can improve a
company's cash flow. A possible pitfall in this reasoning is that many vendors
demand long-term contracts, which may reduce flexibility.

Knowledge:- Some experts tout outsourcing of computer programming and other

information technology functions as a way to gain access to new technology and
outside expertise. This may be of particular benefit to small businesses, which
may not be able to afford to hire computer experts or develop the in-house
5

expertise to maintain high-level technology. When such tasks are outsourced, the
small business gains access to new technology that can help it compete with larger
companies.

Accountability:- Outsourcing is predicated on the understandingshared by

business and vendor alikethat such arrangements require quality service in
exchange for payment. "Paying for a business service creates the expectation of
performance," stated Grauman. "Outsourcers are well aware that this
accountability is both practical and legal, with fiscal implications. The same
cannot be said for internally provided functions."

DISADVANTAGES OF OUTSOURCING
Some of the major potential disadvantages to outsourcing include poor quality control, decreased
company loyalty, a lengthy bid process, and a loss of strategic alignment. All of these concerns
can be addressed and minimized, however, by companies who go about the outsourcing process
in an informed and deliberate fashion. Info Worlds Maggie Biggs counsels businesses to define
"exactly what business processes and/or functions it makes sense to maintain via a service
relationship. Unless you have a lot of resources to expend, it may make sense to prioritize
outsourcing projects based on the number of benefits you expect to gain from the arrangement."
There may also be inherent advantages of maintaining certain functions internally. For example,
company employees may have a better understanding of the industry, and their vested interests
may mean they are more likely to make decisions in accordance with the company's goals.
Indeed, most analysts discourage companies from outsourcing core functions that directly affect
the products or services that the business offers.

OTHERS DISADVANTAGES
Dependence on the supplier
Hidden costs
Loss of know-how - losing touch with new technological breakthroughs that offer

opportunities for product and process innovations

Loss of long-run research and development (R&D) competitiveness
6

The risk of co-operating with a dishonest supplier which, having gained access to
knowledge Concerning a firm and its products, may use it against that firm in the future
Service providers lack of necessary capabilities
Communication and coordination difficulties.

Strategic outsourcing
Strategic outsourcing is the process of engaging the services of a provider to manage essential
tasks that would otherwise be managed by in-house personnel. This is often done to allow a
business to arrange the use of its assets to best advantage, and allow the company to move closer
to the achievement of its goals. An outsourcing strategy of this type may be employed by
businesses and other organizations of any size, and normally helps to reduce the cost of
operations as well as allow available resources to be allocated to the other necessary functions
that are still managed within the organization proper.
Many people tend to associate outsourcing with small companies that operate with limited
budgets. This is often true, since a smaller business enterprise is likely to have limited resources.
When this is the case, a strategic outsourcing effort may involve contracting with a provider to
manage the process of generating invoices to customers, receiving those payments, and paying
any outstanding debts using the proceeds from those payments. Thus, the outsourcing allows the
small company to divert resources that would normally go to supporting an accounting
department into other important areas, such as product development, marketing, or sales.
Larger businesses can also make use of strategic outsourcing as a means of utilizing their
resources to better advantage. For example, a business may choose not to maintain an in-house
sales force, but contract out the sales effort to others who generate sales on behalf of the
company. With this model, the business does not have to be concerned with the expense of
salaries and benefit packages for salespeople. Instead, the business only has to provide the
7

agreed-upon commissions for sales generated by the business partner, and any monthly fee
charged as part of the contractual agreement between the two entities.
The core idea behind strategic outsourcing is to benefit in some manner from allowing outside
entities to take over the operation and management of a given function. Those benefits can take
many different forms. Often, the idea is to increase the bottom line of a company by reducing
various operating expenses. At other times, the benefit has to do with having immediate access to
professionals who specialize in handling the outsourced function, without the need to train
personnel to take over those functions. The benefit may be a matter of convenience, allowing the
business owner to not have to deal with necessary functions that he or she does not wish to deal
with, or feels unable to manage with any degree of efficiency. As long as the benefits that are
generated by the arrangement is considered sufficient by the client, then the process of strategic
outsourcing can be considered a success.

How to Develop an Outsourcing Strategy

Method 1 of 4: Examine the Needs of Your Organization

1 Define organizational objectives: - Your goal may be to help a start-up get off the
ground. Alternatively, your organization may be well-established and focused on innovating and
developing new products.

2 Pinpoint your reasons for outsourcing: - Accessing tools and skills that are not
available in-house, reducing operational costs and accelerating organizational change are a few
examples.

3 Outline a plan for achieving organizational goals: - Your Company may be in the
process of offering a new service to existing clients or expanding the range of services to attract
new clients. Your detailed plan might include hiring outside consultants, buying parts from a
third-party vendor or training in-house personnel to deliver services.

Method 2of 4: Research outside resources

Contact outside vendors and service providers to inquire about their expert
is:- One of the most important reasons to outsource a particular service is to benefit from the
knowledge and experience of outside individuals and/or firms.
Ask for cost estimates. Gathering cost estimates early on in the process will aid you in
conducting a cost-benefit analysis and competitive pricing studies. Check references to ensure
quality of services. Ask to speak to other organizations that have been served by the vendor or
service provider.

Method 3 of 4: Assess the Costs and Risks of Outsourcing

1

Calculate the financial costs and savings:-Training in-house staff and funding office

space and equipment for new staff may result in higher costs than outsourcing tasks to a thirdparty.
Consider contract maintenance costs. In-house personnel must oversee outsourcing contracts,
which might involve an investment of time, equipment and travel expenses. Determine if
necessary skills exist in-house. Salaried employees might possess required skills, making it
unnecessary to hire outside vendors or consultants.

2 Evaluate quality needs: - Outsourcing can be risky if an outside vendor, contractor or

consultancy firm does not meet quality expectations. In these cases, organizations typically incur
greater costs because they must have the work revised by another vendor or hire in-person staff
to correct issues. Establish quality standards by talking to clients and holding internal meetings
to develop a list of must-have qualities.
Distribute quality requirements. Make sure that your outside vendors and consultants receive a
clear explanation of quality standards, both verbally and in writing.

3Analyze cultural and communication dynamics: - The nature of

the work might dictate that you outsource to domestic firms that understand the culture of your
9

clients. Alternatively, your needs may be technical in nature, making it more affordable to
outsource offshore.

4 Evaluate legal considerations: - Examine tax laws, contract language, data protection
responsibilities and other factors relevant to your industry and workplace before signing an
outsourcing agreement.

5 Examine relationship risks: - Consider internal relationships. Outsourcing a significant

portion of the responsibilities of in-house staff should be accompanied by an explanation.
Always communicate openly with personnel to avoid misunderstandings and low employee
morale.
Examine relationships with clients. Determine how your clients will be affected by your
outsourcing plans. For example, a client who is accustomed to receiving blog posts written by
your in-house staff might not want the content to come from another vendor or a different part of
the world.
Discuss outsourcing plans with existing clients. Keep clients informed about upcoming
outsourcing plans before implementation.

Method 4 of 4
1 Hire in-house personnel who have necessary expertise:-While you might
outsource large quantities of work, having someone in-house who understands how to oversee
the outsourced tasks is essential for ensuring that your organization's needs are met and services
are delivered as promised.

2 Avoid becoming locked into a contract with a single vendor:- Include language
in your contract that allows you to exit the business relationship after a trial period. This allows
you to properly evaluate service quality, reliability and communication practices.

10

NEXUS MARKETING
NEXUS

MARKETING is

Jalandhar

(India)

based

high

caliber Strategic

Marketing, Strategic Management & Business Consultancy organization run by highly

qualified & experienced professionals. NEXUS MARKETING is a well-established marketing
consultant and is a management consultant offering services that embrace:

Strategic Marketing Program me, Formulation of Marketing Strategies, Market Entry

Strategies and Business Strategies

Conducting Market Assessment and Diagnostic Studies & Marketing Research

Distribution related studies, channel evaluation and channel development strategies

Identification and evaluation of strategic business alliances (Marketing, distribution, JV

and purchasing/sourcing/contract manufacturing)

Business Restructuring and Operations Optimization studies

Strategic Business Planning

Organizational Restructuring and Human Resource Management Strategy

Work Force Orientation & Training

We provide solutions that change the way people work and organizations do business. In
virtually every industry, from manufacturing to financial services, Information Technology to
education, health care to trading, NEXUS has been helping companies leverage their resources
by reducing their operating costs and increasing their productivity.

We possess the domain expertise to understand the critical issues facing your business and we
offer proven modules & comprehensive services that streamline process and reduce complexity
of operations. More importantly they are tailored to reduce costs & take your business to a new
level of competitive advantage.
Journey started with a small step in the direction of excellence has resulted in development of a
transactional consultancy organization providing ONE STOP MARKETING SOLUTIONS. The
foundation upon which our team is created is based upon the premise that motivated people and
long-standing relationships are the ultimate tools of success; and creativity, energy, perseverance
and loyalty are just as important as a platinum resume. Measurable Results
11

We believe our consulting responsibility goes beyond assessment and recommendation. Our
consultants will assure that your objectives are translated into measurable performance
improvement and bottom-line results
When you need a CHAMPION to bring in EXCELLENCE, we have a TEAM to do it. NEXUS
MARKETING specializes in conducting market studies and market research pertaining to
consumer/durable products, industrial products, social issues, hospitality and non-conventional
business services. The company has successfully carried out several assignments of this nature
for Indian and foreign clients. List shown below shows the diversity of the projects undertaken
by us.

Figure 1 Industrial safety expenditures before and after introducing outsourcing

Strategy.

Industrial safety Expenditures before

12

Implementing outsourcing

Industrial safety Expenditures after

Implementing outsourcing

OBJECTIVES
Along with this we are trying to assess companys performance compared with that of the
competition

To know the area in which the dealer satisfy their customer and the areas that they do not

satisfy.
To come out with the conclusion and recommendation based on the analysis and
interpretation.

achieving a gain in competitive advantage,

spending more time on those activities that are truly central to the success of the
organization,

repositioning the organization in the marketplace, or

achieving a dramatic increase in share price

13

Chapter - 2

LITERATURE REVIEW
Dwindling resources and market competitiveness have forced organizations to scrutinize their
methods of producing goods and services and make changes in their processes in order to
maximize economic returns. To be able to survive and be profitable in current globalization era,
organizations have pursued continuous improvement, leaned up production, reengineered
business processes, and Integrated supply chains ( Brannemo 2006). Over the past decades there
is a growing realization of the important contribution of sourcing strategy on organizational
performance (Cousins et al., 2006). Outsourcing is a management strategy by which an
organization delegates major, non-core functions to specialized and efficient service providers.
According to Corbett (1999) outsourcing is nothing less than the holistic restructuring of
corporations around core competencies and outside relationships. Yankelovih (2003) indicated
that two-third of companies world-wide outsource at least one business process to an external
third party. This practice appears to be most common in the U.S., Canada, and Australia, where
72 percent of outsourcing is being sought. Javaligi (1998) noted that successful implementation
14

of an outsourcing strategy has been credited with helping to cut cost increase capacity, improve
capacity and improve quality.
Kotabe (1998) argued that there could be negative long-term consequences of outsourcing
resulting from a companys dependence on independent suppliers. Such reliance on outsourcing
may make it inherently difficult for the company to sustain its long-term competitive advantage
without engaging in the developmental activities of the constantly evolving design and
engineering technologies. This
View point was corroborated by Corley (2000) when he examined the outcomes of technology
sourcing partnerships from the sourcing firms point of view and found out that, equity-based
alliances were more effective than contract-based outsourcing. Steensma, Kevin and Corley
(2000) suggest that the outcomes from technology partnerships for sourcing firms depend on the
interaction between technology attributes and the interdependence between source and sourcing
firms. Klaasetal (2001), suggest that the influence of organizational characteristics is highly
contingent, suggesting that organizational characteristics have different effects on various types
of outsourcing activities outsourced. As such, it appears that many factors such as pay level,
promotional opportunities and demand uncertainty should be considered when deciding to
outsource functions or Activities. Kotabe (1998) identifies three types of performance measures
as necessary components in any outsourcing performance measurement system: strategic
measures; financial measures; and quality measures. Malhorta (1997) used additional dimensions
of market performance such as costs savings, cycle time, customer satisfaction, and productivity
to measure the effectiveness of outsourcing strategy. Foster (1999) argue from a different
perspective, obstacles such as poor choices of sourcing partners, inadequate planning and
training/skills needed to manage outsourcing activities and poor organizational communication
have also been identified as key determinant of the success of outsourcing projects . Lau and
Hurley (1997) examined the relationship between outsourcing and profitability margin and they
found that Chryslers profit margin is four times as high as that of GM due to effective
outsourcing strategy. Frayer, Scannell, and Thomas (2000) suggest that companies are
increasingly viewing outsourcing strategies as a means of reducing costs, increasing quality, and
enhancing a firms overall competitive position.
According to Ellram et al. (2007), outsourcing has implications for day-to-day management and
performance, as well as strategic implications. Therefore, companies must outsource
15

intelligently. Outsourcing decisions may affect companys cost structures, long-term competitive
situation and can also alter the nature of risks that the company must manage (Brannemo, 2006).
Hence, it is crucial for management to understand and have a clear conceptual framework of
their outsourcing decision. Furthermore, it will also important that company must know the
benefits and risks of outsourcing. The increasing use of outsourcing arrangements, as well as the
unfamiliar complexity associated with it especially in developing countries suggests the need to
probe further about how to effectively utilize this strategy.

Chapter - 3

REASEARCH METHODOGY
The process used to collect information and data for the purpose of making business decisions.
The

methodology may include

publication research,

interviews,

surveys and other

research techniques, and could include both present and historical information.
Methodology is the systematic, theoretical analysis of the methods applied to a field of study.
It comprises the theoretical analysis of the body of methods and principles associated with a
branch of knowledge. Typically, it encompasses concepts such as paradigm, theoretical model,
phases and quantitative or qualitative techniques.
A methodology does not set out to provide solutions - it is, therefore, not the same thing as a
method. Instead, it offers the theoretical underpinning for understanding which method, set of
methods or so called best practices can be applied to specific case, for example, to calculate a
specific result.

16

It has been defined also as follows:

1. "the analysis of the principles of methods, rules, and postulates employed by a discipline"
2. "the systematic study of methods that are, can be, or have been applied within a
discipline"
3. "the study or description of methods"

STEPS FOR RESEARCH MEHODOLOGY

i.

Identify the problems.

ii.

Review of literature.

iii.

Clarify the problems- (Specially identify the purpose of the study).

iv.

Clearly define terms and concepts.

v.

Define the populations.

vi.

Develop the instrmentaions plan.

17

vii.

Collect the data.

viii.

Analyses the data.

Research hypotheses
The primary intent of the study is to examine the conjectural statement that outsourcing strategy
as an independent variable has an influence on performance variables depicted by sales turnover,
profitability and customer satisfaction.
Specifically the hypotheses are:
H0: Outsourcing Strategy has no significant effect on sales turnover.
H0: Outsourcing Strategy has no significant influence on profitability.
H0: Outsourcing Strategy has no significant effect on Customer Satisfaction.
Operatiolization and measurement of variables
a. Outsourcing Strategy: this was measured by the extent of the production activities that were
subcontracted to other firms in the same industry group.
b. Customer Satisfaction: this was measured in terms of the number of complaints/and its
Customer repurchase patronage.
c. Performance: sales growth gotten from the records of the organization and profitability index
were used to measure performance.
d. Core Competence: this was operational zed as the quality of organizations human and
material resources devoted to the portion of her production process that is retained in-house and
is considered very critical to her performance

Population of the study, sample size

The sample for this study was drawn from the population of the organization. The organization
employed approximately 50 employer.The purpose of this study is to examine the effects of
outsourcing strategy on organizational performance using data. A survey research design was
used. The Justification for the use of survey research for this study is that convenience with
which the survey can be conducted and inferences for larger population can be made from the

18

result. A five likert scale was used to seek information from top, middle and lower level
managers of the firms on the wide range of key measurement variables of the study.
In the words of Asika (2004) a sample is a subset of a universe or a part of a study population
that is systematically selected to represent the population. The decision to use stratified sampling
technique to pick the respondents is based on the fact that the decision to outsource often times is
taken by the top management. Middle and lower level managers were included because they
have direct contact with the production floor men and customers who are the final end of the
production and distribution channel. More so, this technique of sample selection is particularly
necessary when one want to apply research finding directly to a population
Sample Size:-100 customer

MEARUREMENT
Question will be design and data will be collected

DATA COLLECTION
The first step in working with the organizations was to obtain approval for distribution of the
survey. I met with the manager of the organization to discuss the purpose of the research and
obtain his consent to conduct the study. I was informed that the survey would be approved as
long as the employees agreed. From there, I worked with employees of organization.

Data sources:-Primary and secondary data

PRIMARY DATA
The source of primary data related was collected from personal interview and questionnaire .For
the purpose of survey primary data is collected in the form of questionnaire. Questionnaire is
given to the selected employee. Employees were requested to fill the correct answers for the
proper survey.

SECONDARY DATA
The source of secondary data was internet, research papers books and company record.
19

DATE ANALYSIS AND INTERPRETATION

As the data being primary and secondary, it was collected by questionnaires and company
records. Questionnaire was designed in such a way that it covers all the aspects of the problem
under the study and to know the general information about the respondents.
Statistical tools used for analysis of collected data are: Microsoft Excel. The data is shown in the
form of tables and charts.
A frequency table comprising of five kinds of responses was prepared for each and mean score
for each variable was calculated by using the formula.
Mean score = (FSA x 5) + (FAX 4) + (FN x 3) + (Fo x 2) + (Fso x 1)
N
FSA = No. of respondents whose response was 'strongly agree'
FA = No. of respondents whose response was 'agree'
FN = No. of respondents whose response was 'neutral'
FD = No. of respondents whose response was 'disagree'
FsD = No. of respondents whose response was 'strongly disagree'
N = Total Number of respondents
The results so obtained were tabulated and have been reported in Chapter-IV. Further logical
conclusions have been drawn, on the basis of which an attempt has been made to make
recommendations.

LIMITATIONS OF STUDY
Though the research was conducted properly, the probability of error and biases kept is
minimum. Still some errors occurred because of certain limitations
These are follows:-

20

A very short span of time for research.

This is time consuming research method and the respondent did not have sufficient time for
giving information foe such type of research.
People did not give the proper response for questionnaire and interview, because of short time

Chapter - 4

INTERPRETATION AND CONCLUSONS

Table.1 showing the response of the question.
S.no.
1

Response

Number of respondents

Percentage of

12

respondents
24%

Strongly agree
21

Agree

23

46%

Neutral

18%

Disagree

8%

Strongly disagree

4%

Total

50

100%

Chart.1. Showing the table 1(Response of employees)

25
20
15
10
5
0

Interpretation: From the above table it is clear that majority of people i.e. 46% are agree.
Most of the employees are in favor regarding the strategy of outsourcing.
Table2:- Has your company ever outsourced any department or positions?
S.no.

Response

Number of respondents

Percentage of

Yes

30

respondents
60%

No

20

40%

Total

50

100%

22

Chart.2. Showing the table 2 (Response of employees)

35
30
25
20
15
10
5
0
Yes

No

Interpretation:
From the above table it is clear that majority of people i.e. 60% are agree. Most of the employees
are in favor regarding the company outsourced any department/position.

Table3. How many employees does your company have?

S.no.

Response

Number of respondents

Percentage of

0-50

respondents
0%

50-100

24

48%

100-150

26

52%

150-200

0%

23

Total

50

100%

Chart.3. Showing the table (Response of employees)

30
25
20
15
10
5
0
0-50

50-100

100-150

150-200

Interpretation:
From the above table it is clear that there is a very few difference between the 26% and 24%.but
majority of people i.e. 26% are lie between the 100-150 towards the employees within the
organization.

Table.4. the outsourcing done by my company was done by other companies as well in the
same.
S.no.

Response

Number of respondents

Percentage of

Strongly agree

respondents
0%

Agree

10

20%

Neutral

25

50%

Disagree

10

20%

24

Strongly disagree

10%

Total

50

100%

Chart.4. Showing the table 4(Response of employees)

30
25
20
15
10
5
0
Strongly agree

agree

neutral

disagree

strongly agree

Interpretation: From the above table it is clear that majority of people i.e. 25% feels that they
will, The outsourcing done by his/her company was done by other companies as well in the
same.

Table5. The department(s) was outsourced to increase the work quality for the company
S.no.

Response

Number of respondents

Percentage of

Strongly agree

15

respondents
30%

Agree

20

40%

Neutral

18%

Disagree

8%

25

Strongly disagree

4%

Total

50

100%

Chart.5. Showing the table 5 (Response of employees)

25
20
15
10
5
0

Interpretation: From the above table it is clear that majority of people i.e. 20% are strongly
agree that The department(s) was outsourced to increase the work quality for the company. but
majority of peoples that is 20% are agree and 9%are neutral so we cant ignore the values of
agree not neutral.

Table6:-The outsourcing in my company was implemented because of the pressure from its
customers.
S.no.

Response

Number of respondents

Percentage of

Strongly agree

respondents
6%

Agree

19

38%

Neutral

2%

Disagree

25

50%

26

Strongly disagree

4%

Total

50

100%

Chart6. Showing the table 6(Response of employees)

30
25
20
15
10
5
0

Interpretation: From the above table it is clear that majority of people i.e. 50% are disagree
that The outsourcing in my company was implemented because of the pressure from its
customers. But majority of peoples that is 25% are agree.
Table7: The outsourcing in my company was implemented because of the pressure from its
suppliers
S.no.

Response

Number of respondents

Percentage of

Strongly agree

respondents
6%

Agree

4%

Neutral

2%

Disagree

25

50%

27

Strongly disagree

19

38%

Total

50

100%

Chart.7. Showing the table 7(Response of employees)

30
25
20
15
10
5
0
Strongly agree

agree

neutral

disgree Strongly disagree

Interpretation: From the above table it is clear that majority of people i.e. 50% are disagree
that The outsourcing in my company was implemented because of the pressure from its
suppliers. But majority of peoples that is 35% are strongly disagree.

Table8. The morale of the remaining departments has increased after the outsourcing
process.
S.no.

Response

Number of respondents

Percentage of

Strongly agree

14

respondents
28%

Agree

20

40%

Neutral

12%

Disagree

8%

Strongly disagree

12%

28

Total

50

100%

Chart.8. Showing the table 8

25
20
15
10
5
0

Interpretation: From the above table it is clear that majority of people i.e. 40% are agree that
The morale of the remaining departments has increased after the outsourcing process. But
majority of peoples that is 12% are neutral and 12% are strongly disagree.

Table9: The outsourcing done by company was to restructure the company to improve its
efficiency.
S.no.

Response

Number of respondents

Percentage of

Strongly agree

14

respondents
28%

Agree

11

22%

Neutral

15

30%

Disagree

14%

29

Strongly disagree

6%

Total

50

100%

Chart.9. Showing the table 9

16
14
12
10
8
6
4
2
0

Interpretation: From the above table it is clear that majority of people i.e. 30% are neutral
that . The outsourcing done by company was to restructure the company to improve its
efficiency. But majority of peoples that is 28% strongly

Table10. My company has become more profitable after the outsourcing.

S.no.

Response

Number of respondents

Percentage of

Strongly agree

22

respondents
6%

Agree

24

4%

Neutral

2%

Disagree

50%

Strongly disagree

38%

30

Total

50

100%

Chart.10. Showing the table 10

30
25
20
15
10
5
0

Interpretation: From the above table it is clear that majority of people i.e. 30% are neutral
that . company has become more profitable after the outsourcing . But majority of peoples that is
38% strongly disagree but we cant ignore the %age of strongly agree and disagree that is 6%
and 4%

Table11: Outsourcing has enhanced my companys relationship with its partners.

S.no.

Response

Number of respondents

Percentage of

Strongly agree

16

respondents
32%

Agree

21

42%

Neutral

8%

Disagree

10%

Strongly disagree

8%

31

Total

50

100%

Chart.11. Showing the table 11

25
20
15
10
5
0

Interpretation: From the above table it is clear that majority of people i.e. 30% are neutral
that the Outsourcing has enhanced my companys relationship with its partners But majority of
peoples that is 42 % agree but we cant ignore the %age of strongly disagree and neutral that is
10% and 8%.

FINDINGS
Making the right decision can add significantly to your organization's bottom line in terms of
cost savings and increased efficiency. Outsourcing can bring fresh minds to your business, and it
can also free time up for innovation and other vital tasks. However, making the wrong decision
can put your business at a competitive disadvantage. Perhaps you'll lose control of proprietary
information, or receive components that don't meet your organization's quality standards.
So, how can you ensure that your organization makes the right decision?
32

The Outsourcing Decision Matrix helps you see clearly which tasks, processes, or functions you
should keep in-house and which can be safely outsourced. In this article, we'll examine the
Outsourcing Decision Matrix and see how your organization can use it to make better
outsourcing decisions.

You consider two important factors in outsourcing a task:

1.

How strategically important is the task to your business? Strategically important tasks
are sources of competitive advantage.

2.

What is the task's impact on your organization's operational performance? Tasks

which have a high impact on operational performance are those which, if done well,
contribute greatly to the smooth running of the organization or, if done badly, greatly
disrupt it.

CONCLUSION
Outsourcing strategy is at the center of the process of organizational changes and business
structure. In this respect, these processes may be preceded by radical changes which lay the
ground work for process re-engineering. The trend towards virtual corporations based on the
relationship of cooperation among several firms starts with the identification and exploitation of
the concept of core competences, in such a way that new advantages are obtained from
specialization and that the customer receives added value superior to the levels previously
offered. The contemporary relationship of firms to their business surroundings are conditioned
33

by the changes in technology and the economic environment. Firms face these alterations to their
surroundings by making qualitative change in the way that they Perform their activities and
structure their organization. Outsourcing has a series of advantages and disadvantages which can
be divided for analytical purposes into strategic and operational nature. The main strategic
advantages are the creation of Competitive advantages, the reduction of risks, an improved longterm cost structure and an increase in organizational sale turnover and profitability. From a
strategic standpoint, outsourcing allows the firm to concentrate its efforts on consolidating and
expanding its core competences. On the other hand, among the operational advantages, we find
an increase in efficiency as a result of activities being carried out by specialized firms and
reductions in permanent staff, which then become variable costs related to the level of activity.
As for the disadvantages of a strategic nature, the most important are the loss of control of
activity done through outsourcing, the transfer of sensitive information, the possibility of
exorbitant price increase by the suppliers at a future date, along with fluctuations in quality. The
operational problems we have observed are difficulties related to the making of the contract
arising from the effects on human resources. With respect to problems of an internal nature, it is
certain that firms have turned to outsourcing as a short-term solution to avoiding the rigidities
caused by labor laws. These firms may limit themselves by viewing outsourcing merely as a
simple way of freeing themselves of permanent staff. From this perspective, outsourcing could
represent a phenomenon of opportunity, while labor legislation is being in accordance with the
needs of firms for more flexible organizations and more professional and motivated

Chapter5

RECOMMENDATIONS
First of all, outsourcing usually reduces a companys control over how certain services are
delivered, which in turn may raise the companys liability exposure. Companies that outsource
should continue to monitor the contractors activities and establish constant communication.
Secondly, outsourcing strategy should come from the workers themselves. That is, workers

34

should be made to embrace the strategy before implementation so as to alley the fear of loss of
Jobs. Also, successful implementation of an outsourcing strategy has been credited with; cost
increase profitability and productivity. Therefore, organizations are system; enjoined to reduce
the outsourcing strategy and improve their service delivery.
Company managers agree that successful outsourcing requires a shift in their mindset, which
means that they must manage their contractors and workers in order to improve on efficient
service delivery. Integrating and managing a diverse, split work force embodying different
corporate cultures and perhaps divided loyalties can be a daunting assignment compared to the
more traditional approach to work force management.

Chapter:-6
REFERENCES

[1] Gilley K. M., Rasheed A. Making more by doing less: an analysis of outsourcing and its
effects on Firm performance. Journal of Management, Vol. 26, No. 4, 2009, pp.763-790.
[2] Shy O., Stenbacka R., Strategic outsourcing. Journal of Economic Behavior & Organization,
Vol. 50, 2003,pp.203-224.

35

[3] Benjaafar S., Elahi E., Donohue, K. L.. Outsourcing via service competition. Management
Science.Vol. 53, No. 2, 2007, pp.241-259.
[4] Ren J. Z., Zhou Y. P. Call Center Outsourcing: Coordinating Staffing Level and Service
Quality. Management Science, Vol. 54, No. 2, February 2008, pp. 369-383
[5] Jae-Nam L., Miranda S. M., Yong-Mi K.. IT Outsourcing Strategies: Universalistic,
Contingency, and Configurational Explanations of Success. Information Systems Research, Vol.
15, No. 2, June 2004, pp. 110-131.
[6] Dekkers R. Decision models for outsourcing and core competencies in manufacturing.
International Journal of Production Research, Vol. 38, No. 17, 2000, pp.4085- 4096.
[7] Alp O., Erkip N. K., Gll R. Outsourcing Logistics: Designing Transportation Contracts
Between a Manufacturer and a Transporter. Transportation Science, Vol. 37, No. 1, 2003,pp.2339.
[8] Ellram L., Billington C. Purchasing leverage considerations in the outsourcing decision.
European Journal of Purchasing and Supply Management, Vol. 7, 2001, pp.15-27.
[9] Bush A. A., Tiwana A., Tsuji H. An empirical investigation of the drivers of software
outsourcing decisions in Japanese organizations. Information and Software Technology, Volume
50, Issue 6, May 2008, pp.499-510.
[10] Bailey W., Masson R., Raeside R.. Outsourcing in Edinburgh and Lothians. European
Journal of Purchasing and Supply Management .Vol. 8, 2002, pp.83-95.
[11] Pagnocelli D.. Outsourcing scientific and technological activities. Proceedings of the Third
International Conference on Systems Integration, Vol. 1, 1994, pp. 276285.
[12] Quinn J.B.. Strategic outsourcing: leveraging knowledge capabilities.Sloan Management
Review Vol.40, No. 4, 1999, pp. 9-22.
[13] Marshalla D., McIvorb R., Lamming R.. Influences and outcomes of outsourcing: Insights
from the telecommunications industry. Vol. 13, 2007, pp.245-260.
[14] Lacity M. C., Willcocks L. P., & Feeny D. F.. The value of selective IT sourcing. Sloan
Management Review, Vol.37, No.3, 1996, pp.13-25.15
[15] Earl M. J., The Risk of Outsourcing IT. Sloan Management Review, Spring,1996, pp.26-33.
[16] Fan T. J., Li H. Y., Chang X. Y., Liu L. P.. Model of business outsourcing Strategies based
business process and contract term. Management Review(In Chinese), Vol. 19, No. 11,
2007,pp.55-62.
36

[17] Lacity M. C., and Willcocks L. P.. An empirical investigation of information technology
sourcing practices: Lessons from experience, MIS Quarterly, Vol. 22, No. 3, 1998, pp.363-408.
[18] Choi T.Y., Hartley J.L.. An exploration of supplier selection practices across the supply
chain. Journal of Operations Management, Vol.14, No. 4, 1996, pp.333-343.
[19] Kennedy C., OConnor. Winning Major Bids, the Critical Success Factors. Policy
Publications, 1997, Bedford.
[20] Wadhwa V., Ravindran A. R.. Vendor selection in outsourcing. Computers & Operations
Research, Vol. 34, 2007, 3725-3737.
[21] Bhattacharya S., Behara R. S. and Gundersen D. E.. Business risk perspectives on
information systems outsourcing. International Journal of Accounting Information Systems
Volume 4, Issue 1,March 2003, pp. 75-93.
[22] Malhorta, Y. (1997). An empirical analysis of the determinants of information systems productivity
and the role of outsourcing policy. www.brint.com/papers/outsource. Virtual Institute of Information
38-46

Outsourcing: making the rational decision

Respected Sir/Madam,

I am a student of MBA. I am working on a Strategy outsourcing company: nexus

marketing jalandhar company. This Questionnaire is framed to get your view regarding
the strategic outsourcing company nexus marketing jalandhar. This information will be
37

kept confidential & would be used only for academic purpose. I hope that you
will cooperate & will give genuine opinion.

1. Name

2. Age

17-35 [

3. Sex

_________ [Male]

4. Marital Status

6. Income

35- 45 [

__________ [Married]
Below 10,000 [

above 45 [

________ [Female]
________ [Single]

] 10,000- 20,000 [

] above 20,000[

7. Has your company ever outsourced any department or positions?

Yes
No

( )
( )

8. How many employees does your company have?

1-50
50-100
100-150
150-200

(
(
(
(

)
)
)
)

9. The outsourcing done by my company was done by other companies as well in the same
industry.

Strongly agree
Agree
No opinion/Neutral
Disagree
Slightly Disagree

(
(
(
(
(

)
)
)
)
)

10. The department(s) were outsourced to increase the work quality for the company.
Strongly agree
Agree

( )
( )
38

 No opinion/Neutral
Disagree
Slightly Disagree

( )
( )
( )

11. The outsourcing in my company was implemented because of the pressure from its
customers.

Strongly agree
Agree
No opinion/Neutral
Disagree
Slightly Disagree

(
(
(
(
(

)
)
)
)
)

12. The outsourcing in my company was implemented because of the pressure from its suppliers.

Strongly agree
Agree
No opinion/Neutral
Disagree
Slightly Disagree

(
(
(
(
(

)
)
)
)
)

13. The morale of the remaining departments has increased after the outsourcing process.

Strongly agree
Agree
No opinion/Neutral
Disagree
Slightly Disagree

(
(
(
(
(

)
)
)
)
)

14. The outsourcing done by company was to restructure the company to improve its efficiency.

Strongly agree
Agree
No opinion/Neutral
Disagree
Slightly Disagree

(
(
(
(
(

)
)
)
)
)
39

15. My company has become more profitable after the outsourcing.

Strongly agree
Agree
No opinion/Neutral
Disagree
Slightly Disagree

(
(
(
(
(

)
)
)
)
)

16. Outsourcing has enhanced my companys relationship with its partners.

Strongly agree
Agree
No opinion/Neutral
Disagree
Slightly Disagree

(
(
(
(
(

)
)
)
)
)

40

41

42