Outsourcing Practices Implemented by Businesses in Malaysia

Question: You are required to carry out a research on the topic of "Outsourcing." Review the text, supplemented by the general reading list, and not forgetting journal articles for topic areas. This should be a 'real-life' critical case analysis. That is, choose a business or company where you have access to individuals for specific interviews, and/or access to necessary information. Answer: Literature Review on Outsourcing Outsourcing is an important phenomenon that has been described in the existing literature as a process whereby businesses seeks to get their business processes done through an outside third party. This third party is mainly described as the professionalised service firm that specifically provides the outsourcing services. Outsourcing of business activities have been significantly higher within businesses in the 21st century because of large number of advantages provided by it. As indicated by Bragg (2006) outsourcing is an important strategy that has been pursued by businesses at increasing level in order to benefit from it. The major benefit of outsourcing function has especially been to large firms because there are processes being carried out within such firms at a larger level which often makes it difficult to them in performing their management in an efficient manner. As a result, they prefer to avail the services of outside service provider that have necessary level of expertis e in providing such services. As indicated by Bhatia (2005), there are different important processes from different functional areas that are being outsourced by businesses with a view to get additional advantage from the services of the outsourced firms. Bhatia (2005) has indicated that there has been higher level of this outsourcing strategy being evident especially in respect to HRM functions whereby businesses seeks to outsource their HR practices such as recruitment function, selection and training of employees and other major HR related functional areas. However, there are various reasons being cited in the existing literature for such outsourcing practices being utilised by businesses at increasing level. As suggested by Dogra (2007), the most important reason why businesses seek this outsourcing strategy within their business is mainly the possibility of achieving cost advantageous factor. There can be the attainment of cost efficiency being possible from outsourcing strategy as considered by business. This strategy is significant because of its benefit to firms in terms of cost efficiency in their operations. Large businesses have to carry out their processes at broader level and with the globalisation of their business practices; they are often encountered with large number of processes to be carried out in delivering their offerings to their customers on timely basis. As a result, this particular strategy is highly suited to them because they can outsource those practices which are not so significant and does not require any technical knowledge. Such processes are being outsourced to professionalised outsourcing firms and in turn, they can pay attention towards their core processes. This has been an important advantage that drives businesses in performing their business operations with higher level of excellence and effectiveness. By focusing on their core processes, they achieve excellence over it, and by way of outsourcing their non core business practices, they benefits in te rms of getting them done with high quality and at cheaper costs (McIvor, 2005). The above indicated advantages have become the prime reasons for which businesses often consider this strategy of outsourcing. Along with cost advantage and also the benefit in terms of requisite time to focus towards the core areas, businesses can excel in their operations and they can thereby achieve significant level of performance. Outsourcing is also highly preferred by businesses mainly because of the professionalised services as provided by the outsourcing firms. By availing their services, it could be possible to achieve higher level of excellence in performing them, which could not have been possible if they would carry out such activities. Thus the easy accessibility to professionalised services has been a major driving factor for businesses preferring the outsourcing strategy in performing their business processes (Schniederjans and Schniederjans, 2005). Overall, an assessment of the existing literature above has indicated about the outsourcing strategy and also highlighte d about the major reasons leading to such outsourcing strategy being pursued by businesses. The analysis leads to the identification of best practices which suggests that the processes that are significant can be outsourced to professionalised firm, or it can be the processes that are not so significant and does not require specific attention. Such processes can be outsourced so that businesses can focus towards improving their core business processes (Parker, 2005). Background of the Company/Business This section of analysis is now focused towards analysing the outsourcing practices as adopted by a real world company. The company as selected for the purpose of analysing its outsourcing practices is Petronas. An analysis of Petronas indicates that it is a fully integrated energy company based in Malaysia and it has the leading portfolio of businesses across the world. The demand for energy has been increasing across all the countries in the world and the main focus of Petronas is towards meeting out the energy needs of businesses in a positive manner. The company is considering the application of innovative technologies aimed at meeting out the rising demands for energy in a sustainable manner. The businesses in which Pertonas is currently involved are exploration and production of oil, gas and power exploration, logistics and maritime services and upstream and downstream activities. An analysis of the company indicates that it has also considered the application of outsourcing bu siness strategy in performing the management of its business processes in a highly efficient manner (Petronas, 2015). Factor that Influenced the Outsourcing Businesses seek to utilise this strategy of outsourcing based on the requirements within their firms. This strategy of outsourcing can be efficiently utilised based on the organisational requirements. This signifies that the consideration of outsourcing strategy is highly dependent on appropriate factors as applicable to businesses. In respect to Petronas, the interview has been carried out with the HR assistant of the company whereby the focus has been towards identifying different important aspects related to the outsourcing strategy that has been adopted by it. On the basis of performance of the interview, significant level of findings has been achieved. As for instance, the major factor leading to the consideration of such outsourcing strategy by Petronas has been identified from the interviews as carried out with its HR assistant. The major factor as per the opinion of the interviewed HR assistant at Petronas that drives the company in considering such outsourcing strategy is mainly the proactive factor. This proactive factor signifies that the outsourcing decisions have been taken proactively within organisation whereby the strategy has been considered in advance prior to any thing has happened within it. Contrary to this, the reactive factor signifies that this strategy involves the consideration of reactive measures whereby strategies are considered based on certain major activities that have taken place. In reaction to such activities, appropriate strategies are considered so that similar kinds of issues never happen again (Petronas Case Study, 2014). The performance of interview with the HR assistant at Petronas indicated that the company is operating at a large level and it is further expanding its operations for both the upstream and downstream. According to the interviewed HR assistant, there are around 93 wholly owned subsidiaries, 19 partly owned outfits and 55 associated companies that are operational within the database of Petronas and the management of such huge companys operations has not that been easier. As a result, the company has considered the proactive outsourcing strategy whereby it has considered for additional man power in ensuring that its business processes are managed efficiently. This has been achieved by the company through the outsourcing strategy because the shortage of manpower issue can be resolved through involving additional manpower which has been ensured at Petronas by way of considering outsourcing strategy by the business (Beaumont and Sohal, 2004). The interview has also resulted into the identification that there are various other important areas that are included within the outsourcing strategy that has been considered by Petronas. As for instance, the company has also considered the application of outsourcing strategy in respect to its IT systems and solutions as responded by the interviewed HR assistant. According to him, Petronas has obtained Collaborative Manufacturer Enabler Solution from an Indian company and this has mainly been to manage its refinery in Malaysia. It also outsourced an IT solution from AdNovums IT architecture and web access framework. This indicates that it is not only the outsourcing of HR function of recruiting additional manpower that has been considered by Petronas, but this outsourcing strategy has been applied in respect to managing its IT solutions and functional areas. The outsources of business practices is considered at Petronas in a large number of areas, and this particular strategy as con sidered by organisation gives an indication that the proactive strategy has been followed by Petronas in performing the management of its business activities while selecting the outsourcing strategy. Objective behind Outsourcing and Its Accomplishment This strategy of outsourcing is considered by businesses with a view to achieve operational efficiency and also in achieving cost advantage. There are various reasons that become the primary driving factor to businesses in selecting an appropriate outsourcing strategy. In the given case of Petronas, the reason behind the selection of outsourcing strategy is assessed from the interview as carried out within the assistant HR manager. The performance of interview has resulted into the identification that the main objective behind the consideration of such outsourcing strategy by the firm is mainly to focus on its core business areas of upstream, and downstream operations. This signifies that the business is aimed at focusing specifically on its core business areas of operations from considering such outsourcing strategy. It is not only the focus factor that drives particularly to Petronas in considering such strategy of outsourcing in performing its business operations, but there are certain other objectives that are evident especially in respect to such strategy as suggested by the interviewed HR assistant across the company. On the basis of performance of analysis, it has been evaluated that the other major objectives of the company behind considering such business strategy of outsourcing includes the attainment of cost savings, efficiently performing business operations by resourcing sufficient number of human resources in managing its operations. The assistant as interviewed has also indicated about certain other reasons behind the consideration of such outsourcing strategy by Petronas. As for instance, these objectives as identified are mainly in terms of achieving ease of execution, flexibility in performing operational processes, and also towards enhancing the lack of in-house capability that has been suffered by organisation (Javalgi, Dixit and Scherer, 2009). Achievements: Although these major objectives have been identified in respect to Petronas for considering such outsourcing strategy by the firm, yet the performance of interview has also indicated findings with respect to the attainment of achievements in this respect. As per the viewpoints as shared by the interviewed HR assistant, it has been analysed that there has been significant level of benefits and achievements that have been possible from the consideration of such outsourcing strategy by it. As for instance, the viewpoint of the interviewed personnel indicated that the organisation has been efficiently able to focus on its core operations of streamlining the processes. The upstream and downstream processes are being focused in an efficient way which in turn has allowed it in achieving operational efficiency in its performance. Apart from this, the analysis also leads to identification that there has been the benefit in terms of cost efficiency in its operations (Petronas Cas e Study, 2014). By outsourcing the practices in relation to managing human resources, the achievement that has been possible is mainly in terms of sufficient availability of manpower through which the expansion decision of the company has been carried out in an efficient manner. There are achievements that have been possible to the company in terms of enhanced level of flexibility in its operations. Such higher level of flexibility has been possible because of high quality and technically advanced IT services firms that have assisted the company in performing its processes in an efficient manner. Thus the outsourcing has benefits especially in terms of attainment of higher level of effectiveness in performing its business operation. The core purpose for which the business has adapted this outsource strategy has been efficiently fulfilled. This shows that there has requisite level of achievement that has been possible from the consideration of this outsourcing strategy (Zajda, 2005). Potential Issues/Problems in the Outsourcing Strategy The outsourcing strategy as considered by businesses is mainly aimed at enhancing their overall performance levels. However, the consideration of this strategy is likely to result into certain major challenges/threats to the firms. As for instance, an analysis of the given case of Petronas indicates that the company has also adopted such outsourcing strategy and this strategy has been considered across different major areas of organisational operations. On the basis of performance of analysis, it has also been assessed that there are various major objectives or goals that are sought to achieve by the company from considering such outsourcing strategy. The responses of the interviewed HR assistant above indicated that there has been attainment of certain major objectives being possible at Petronas in a positive manner, but there are certain major areas that seem problematic (Petronas Case Study, 2014). As for instance, the problems in such outsourcing strategy have not been shared by the interviewed assistant HR manager. However, on the basis of evaluation as carried out, it has been assessed that there are potential problems especially in terms of gaining the right skilled manpower by Petronas. The analysis indicated that there has been significant level of expansion being carried out and the organisation is already operating at such a larger level. All these factors have required manpower and since Petronas are concerned with upstream and downstream activities, it requires manpower with specific knowledge and skilled abilities. However, in respect to the outsourcing of human resources practices as performed, it is significantly difficult to get manpower that is efficient enough in addressing the organisations operations in a highly efficient manner. As a result, this is identified as a major problem in the process of outsourcing practices whereby the focus is mainly towards recru iting personnel to cope up with the organisational requirements for the same (Blokdijk, 2008). There are certain other potential problems that are also expected in respect to the performance of Petronas from the outsourcing initiative that it has considered. As for instance, the analysis in case of Petronas indicated that the company has also considered such outsourcing strategy aimed at meeting out the IT and software requirements of the business whereby IT solutions and services have been considered from other providers. This has been a technical area of operation and the potential problem that is likely to be encountered is mainly in terms of outsourced firms efficiently understanding the processes of the business. This is likely to create technical barriers to the company in its efficient performance of core processes and the resulting impact could be adverse to the organisations performance. Apart from this, there is also the potential risk of losing confidential information from outsourcing such key business and IT processes (Petronas Case Study, 2014). Overall, the assessment of the case of Pertonas in respect to the outsourcing function that has been carried out by the company has indicated certain major advantages and there are certain major issues that have also been identified in such outsourcing strategy of the company. Conclusion In this report, a critical assessment has been carried out especially in respect to the outsourcing strategy that has been considered by Petronas. Initially, a brief analysis of the existing literature is performed in relation to the outsourcing strategy and the performance of analysis indicated that this strategy has been highly significant from the point of view of achieving the main purpose of doing the analysis. It has been assessed that outsourcing is an important strategy which is utilised in getting the tasks done from others, and there are various reasons that motivates businesses in considering this strategy. Some of these include cost advantage, achieving professionalism, getting the work done in a perfect way or it can be to focus on the core business activities. The case analysis of Petronas has also indicated that the company has also considered the application of this outsourcing strategy whereby the main objectives has been to achieve adequate level of manpower in hand ling its business processes, achieving cost savings, flexibility in its operations and many more. The consideration of this outsourcing strategy has resulted into the attainment of significant level of improvements in its performance in terms of achieving cost savings, and its better ability in focusing towards its core operations of up stream and down stream business processes. There are certain major challenges that have also been identified especially in terms of getting highly efficient and skilled workforce that can integrate better to its performance. References Bragg, S.M. (2006), Outsourcing: A Guide to ... Selecting the Correct Business Unit ... Negotiating the Contract ... Maintaining Control of the Process, 2nd ed., John Wiley Sons. Bhatia, S.K. (2005), International Human Resource Management, Deep and Deep Publications. Beaumont, N. and Sohal, A. (2004), "Outsourcing in Australia", International Journal of Operations Production Management, Vol. 24 Iss 7 pp. 688-700. Blokdijk, G. 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