Outsourcing

Topic Outline: Outsourcing

Thesis: How outsourcing jobs has affected IBM's Human Resource Management Department

I. What is outsourcing

A. Factory work to outside contractors

B. Management responsibilities

C. Human Resource Management duties

II. Why use outsourcing

A. Reduction in labor force

B. Saving's factor

C. Technological advantages

D. Increase customer satisfaction

III. Winners

A. Stockholders

B. CEO's

C. Clients

D. Outside contractors

IV. Losers

A. Local employees

I. Families

B. The community

Conclusion - - Outsourcing is not the solution for all of corporate America, but for IBM it is the only profitable way to operate.

Outsourcing, this is a term that is heard more and more in corporate America. Outsourcing refers to the practice of having another company (a vendor, third-party provider, or consultant) provide services (Noe et al. 49). Often times, companies can utilize a tremendous amount of additional resources by outsourcing key components of their work force. Practically all areas of business are subject to outsourcing. Today, it is possible to start up an entire company with only a computer. As Americans, we expect the best possible value for our dollar. Often times the pennies we save cost us a lot more in the long run. Because some companies have taken advantage of outsourcing their competitors have to do the same to compete.

The most common form of outsourcing is that of the factory worker. America has lost a countless number of jobs to lower wage workers at home and abroad. The American textile industry has practically been wiped out by outsourcing. The vast majority of textiles are now being produced outside of our borders. Auto workers are now faced with the same problem due to the cheap influx of Asian imports.

Management is not immune from outsourcing as it once was. Several leading companies have turned to private firms for help in managerial situations. Later on in this paper I will give an example of this new wave of outsourcing. Today they are called private consultants. More and more firms are relying on these private consultants for help in making key business decisions. As the business world looks to squeeze more pennies out of the dollar this practice will increase. Management staff is freed up to handle other duties.

Human Resource Management (HRM) has also falling into the hands of private contractors. IBM has outsourced their HRM department to a private contractor. Since its inception more than 20 years ago, IBM has been a leader in its field. Despite this success, over the course of the last several years, IBM has found that in order to keep itself competitive, corporate restructuring has been necessary. As such, practices such as downsizing and outsourcing have become quite popular for the company. In 2002 IBM signed a deal with Fidelity's Employer Services Company to outsource its HRM department. Of the IBM's 1,200 human resource employees, Fidelity retained 450.

"The growth of HR outsourcing will continue to gain momentum as organizations reap the benefits, including significant cost savings, new capabilities and services for employees, and enabling HR to focus on more strategic work that is integral to the business," Bryan Doyle, president of Hewitt's HR outsourcing group, said in a press release (Gurchiek).

Why are companies looking to outsourcing more of their jobs? One of the most appealing aspects is the reduction in labor. This reduction fits in with the new idea of streamlining. More can be done with less therefore more can be earned. The market place today is extremely competitive, and every advantage counts.

Millions of dollars are saved by turning to outside contractors. Not only do companies save on wages, they save from not having to provide benefit packages. Revenue saved can be put to better product development, and new research. A major reason outsourcing can save money is that the outside company specializes in the services and can benefit from economies of scale... (Noe et al. 146). To illustrate the impact of this benefit, a recent article published in CA Magazine (2004) notes: "Furthermore, 35% of respondents said outsourcing allows their companies to implement strategies and change at a faster rate. And more than half (57%) the executives surveyed said they experience control gains within the first eight months of an outsourcing agreement" (p. 12).

Advances in computer technologies have accelerated the process of outsourcing. Upon calling support centers for computer companies, you are likely to be speaking to someone overseas. The fact that American tax returns are being prepared in India is an example of the affect technology has on outsourcing. Cyberspace has placed the entire world within the reach of your fingers. Conferences can be held by people thousands of miles apart via cellular communications. Customers can use the internet to access all sorts of information from outside contractors regardless of their location.

A huge benefit that can be derived from the process of outsourcing the HRM is the improved services for employees. Because companies outsource peripheral services to companies that deal specifically with these issues, the outsourcing company is in a position to better address the specific issues facing employees. Many companies seek to outsource human resource and payroll services. While this may seem like a bane for some employees because outsourcing companies work specially with issues of human resources or payroll, employees