ACCT618 Managerial Accounting

Voice App is a midsize software company that specializes in voice recognition software. Due to rising costs of maintaining IT technical support, your director is considering outsourcing your technical support services. Currently, 30 full-time and 15 part-time employees staff your technical support service desk. Your director has asked you to prepare a recommendation report that includes the advantages and disadvantages of outsourcing and a cost/benefit analysis to determine if outsourcing will actually result in any significant savings for the company.

For this assignment, prepare your preliminary list of the advantages and disadvantages of outsourcing for your company, including both long- and short-term consequences. Rank the advantages and disadvantages in descending order of importance. 

According to the provided case study, it can be seen that Voice App is a midsize software company that is considering the strategy of outsourcing of technical supports due to the rise in the costs. However, at the time of outsourcing any kind of services, the business organizations need to consider some major aspects. Two of those major aspects are the advantages and disadvantages of the process of outsourcing. Another major aspect is the cost/benefit analysis that is helpful for the determination of the savings of the company from the process of outsourcing. The advantages and disadvantages of outsourcing are discussed below:

Advantages of Outsourcing

There are various major advantages of the process of outsourcing. Some of the major advantages are discussed below:

Focus on the Core Activities: The process of outsourcing helps the business organizations to focus on the core activities of the companies. With the help of outsourcing strategies, the business organizations can focus on the core business activities of the organizations. This process helps to intact the good quality of the products (Schniederjans, Schniederjans & Schniederjans, 2015).

Cost and Efficiency Savings: The strategy of outsourcing is one of the major way outs for the companies that have complicated nature of business operations. Sometimes, the employees of the organizations do not have that much quality to carry on those operations; thus, it is necessary to adopt the strategy of outsourcing. This process helps to reduce the costs of the organizations (Troac? & Bodislav, 2012).

Reduction of Overheads: The overhead costs of the complicated business operations are very high. For this reasons, the business operations use to outsource these business operations in order to reduce the overhead costs. The process of outsoaring leads to the free spaces in the business organizations.

Operational Control: It is advantageous for the companies to outsource the business operations that have huge running costs. It is needed to outsource these business operations as they are out of the control of the companies. The outsourcing companies use to bring control in those business operations by managing them tactfully (Michela, Carlotta & Andrea, 2012).

Flexibility in Staffing: One of the major advantages of outsourcing is that it helps to bring flexibility in the staffing process. With the help of outsourcing strategy, the business organizations can raise the required resources for the seasonal business operations (Hsu & Liou, 2013).

Continuity & Risk Management: The strategy of outsourcing helps to develop contingency and risk management strategies for the business organizations. The strategy of outsourcing will help to provide continuity to the business operations while reducing the risks of the businesses. These are the main advantages of outsourcing.

Disadvantages of Outsourcing

Apart from the advantages, there are some major disadvantages of outsourcing. Some of the major disadvantages of outsourcing are discussed below:

Loss of Managerial Control: In the process of outsourcing, one business organization allows another one to perform the business operations of entire departments. This process transfers the managerial control to the outsourcing company. The same mission and vision of the outsourced company will drive the outsourcing company (Gobble, 2013).

Hidden Costs: At the time of outsourcing, both the companies enter into the agreements of outsourcing. These types of agreements include all the charges of outsourcing. However, it can be seen that sometimes companies have to face hidden expenses for the outsourcing services. This is a major disadvantage of outsourcing (Milberg & Winkler, 2013).

Threat to Security and Confidentiality: Confidential information is considered as the bloodline of the business organization. At the time of the outsourcing process, the outsourcing company has the access to the important information of the outsourced company. Thus, there is always risk that the confidentiality of the important information may be compromised. Hence, it is the responsibility of the outsourcing companies to protect the confidentiality of the information of the outsourced companies (Dhar, 2012).

Quality Problems: The main objective of the outsourcing companies to earn profits. In this process, these outsourcing companies often miss to maintain the quality in the services of the outsourced companies. Sometimes, it is hard for the outsourcing companies to match with the ever-changing business environments and it affects the quality of services. Business organizations need to take into account all these major disadvantages of outsourcing at the time of considering adopting outsourcing strategy (Li et al., 2014).

Cost Benefit Analysis

Recommendations

From the above analysis, the cost and benefit analysis of Voice App for outsourcing can be seen. In the above analysis, the cost and revenues of the company from 2017 to 2021 can be seen. The above analysis shows that the total amount of operational costs of Voice App from 2017 to 2021 is $30,440. On the other hand, the total amount of revenues of the company from 2017 to 2021 is $57,750. It can be seen that there are profits in each year. Apart from this, the cost and benefit analysis shows that net saving is positive in every year apart from 2021. The total project cost is less than the amount of savings except the 2021 financial year. From the discussion of the advantages and disadvantages of outsourcing, it can be seen that there are some major disadvantages of the process of outsourcing. At the same time, there are some major advantages of the process of outsourcing. It can be seen that the portion of advantages are more than the portion of disadvantages. Thus, based on the above discussion and the cost benefit analysis, it is recommended that the strategy of outsourcing will help Voice App to save significantly and it will increase the efficiency of the business.

References

Dhar, S. (2012). From outsourcing to Cloud computing: evolution of IT services. Management Research Review, 35(8), 664-675.

Gobble, M. M. (2013). Outsourcing innovation. Research-Technology Management, 56(4), 64-67.

Hsu, C. C., & Liou, J. J. (2013). An outsourcing provider decision model for the airline industry. Journal of Air Transport Management, 28, 40-46.

Li, J., Huang, X., Li, J., Chen, X., & Xiang, Y. (2014). Securely outsourcing attribute-based encryption with checkability. IEEE Transactions on Parallel and Distributed Systems, 25(8), 2201-2210.

Michela, P., Carlotta, M. C., & Andrea, C. (2012). Organizational change: Business process reengineering or outsourcing?. Annals of Faculty of Economics, 1(2), 277-287.

Milberg, W., & Winkler, D. (2013). Outsourcing economics: global value chains in capitalist development. Cambridge University Press.

Schniederjans, M. J., Schniederjans, A. M., & Schniederjans, D. G. (2015). Outsourcing and insourcing in an international context. Routledge.

Troac?, V. A., & Bodislav, D. A. (2012). Outsourcing. The Concept. Theoretical and Applied Economics, 6(6), 51.