OUTSOURCING Advantages and Disadvantages to Businesses

Definition Outsourcing or subcontracting – refers to using another domestic business to undertake part of the production process Offshoring - – refers to using another business overseas to undertake part of the production process

Business Process Outsourcing (BPO) A form of outsourcing which uses a third party to take responsibility for certain business functions such as human resources and finances

REASONS FOR OUTSOURCING

YOU TUBE : WHY OUTSOURCE 9w

Drawbacks of Outsourcing Disadvantages Customer Resistance Poor quality assurance Loss of jobs Ethical concerns External economic factors eg inflation

YOU TUBE: WATCH?V=V7FSEIP2R_8 WATCH?V=V7FSEIP2R_8 You Tube : Why is Outsourcing bad for business?

MAKE OR BUY DECISION This refers to the firm decision to either buy or make the product themselves The choice of whether to outsource or not is really part of a debate that a business has about what the scope of its business should be. In other words: - What should a business do itself? - What should a business buy in from others?

YOU TUBE: WHY OUTSOURCE IN THE PHILLIPINES Soo

Decision Making Tools Break even Analysis Cost and Benefit analysis Use any of these tools

Using Benefit & Cost Analysis The decision depends on 4 factors: Expected sales volume or quality FC associated with making product AVC P per unit charged by supplier Extra Factors: Relative product quality Reliability of suppliers If suppliers have extra capacity to meet extra orders Terms and conditions of contracts

CTM vs CTB Cost to Make (CTM) CTM = FC + (AVC XQ) Cost to Buy (CTB) CTB = P X Q

Apparently one US worker hired people in China do his work. Having outsourced his job, 'Bob' would spend the day at work browsing sites on the internet. (If you believe it), the US- based software developer has been caught outsourcing his work to China for less than a fifth of his six figure salary - while he spent his time messing around on Facebook, LinkedIn, eBay and Reddit. According to the Huffington Post, the employee - known as "Bob", was rumbled after the firm brought in its experts amid concerns its networks were being breached by Chinese hackers. The traffic logs for Bob - the firm's top programmer - saw regular logins to the firm's China server.Huffington Post The company in question came up with this good bit of computerbabble: "The company's IT personnel were sure that the issue had to do with some kind of zero day malware that was able to initiate VPN connections from Bob's desktop workstation via external proxy and then route that VPN traffic to China, only to be routed back to their concentrator. Yes, it is a bit of a convoluted theory, and like most convoluted theories, an incorrect one." Further examination of Bob's online activity revealed he had authorised a software consultancy firm in China to access his work IT account, paying Chinese staff to do his work for him (for a fraction of what he was being paid). There are some funny bits in the article that you might want to check out. Not that you are time wasting or anything! A surprising amount of electronic monitoring of staff takes place, and not just for those who are working from home. time wastingelectronic monitoringworking from home