CC BY
0IRSTI 13.15.53 UDC 658.8
DOI:10.56032/2523-4684.2023.2.6.99
A.M. Samenova1 1Kazakh National Academy of Choreography (Astana, Kazakhstan)
OUTSOURCING AS A MODERN TOOL FOR IMPROVING BUSINESS EFFICIENCY
Annotation
The article explores the role of outsourcing in the modern business environment and its importance for improving the efficiency of business processes. The main aspects of outsourcing are considered, including its definition, the main advantages and risks, such issues of the main advantages of outsourcing as cost reduction, increased flexibility and access to expertise and resources that can significantly improve the operational efficiency and competitiveness of the company are touched upon. In conclusion, the author comes to the conclusion that outsourcing is an important and effective tool for improving business efficiency but requires careful planning and management to avoid potential problems.
Key words: outsourcing, back office, efficiency, business, market
risk.
Ключевые слова: аутсорсинг, бэк-офис, эффективность, бизнес, рыночный риск.
А.М. Саменова1 1^азак улттык хореография академиясы (Астана, Казакстан)
АУТСОРСИНГ БИЗНЕСТЩ ТИ1МД1Л1Г1Н АРТТЫРУДЫН ЗАМАНАУИ К¥РАЛЫ РЕТ1НДЕ
Аннотация
Осы макалада аутсорсинтн каз'1рг'1 iскерлiк ортадаFы рэлiн жэне онын бизнес-процестердiн тиiмдiлiгiн арттырудаFы маныздыль^ын зерттейдi. Аутсорсинтн непзп аспектiлерi, онын аныктамасы, непзп артыкшылыктары мен тэуекелдерi карастырылады, шы^ындарды азайту, икемдiлiктi арттыру жэне компаниянын операциялык ти'1мд'т'1п мен бэсекеге кабiлеттiлiгiн едэуiр жаксарта алатын сараптамалык бiлiм мен ресурстарFа кол жеткiзу сиякты аутсорсинтн непзп артыкшылыктары карастырылады. Корытындылай келе, автор аутсорсинг бизнест'1н ти'1мд'ш'1пн арттырудын манызды жэне ти'1мд'1 куралы болып табылады, бiрак ыктимал проблемаларды болдырмау Yшiн мукият жоспарлау мен баскаруды кажет етедi деген корытынды^а келедi.
ТYЙiндi сездер: аутсорсинг, бэк-офис, ти1мд1л1к, бизнес, нарыктык тэуекел.
А.М. Саменова1 гКазахская национальная академия хореографии (Астана, Казахстан)
АУТСОРСИНГ КАК СОВРЕМЕННЫЙ ИНСТРУМЕНТ ПОВЫШЕНИЯ ЭФФЕКТИВНОСТИ БИЗНЕСА
Аннотация
В статье исследуется роль аутсорсинга в современной деловой среде и его значимость для повышения эффективности бизнес-процессов. Рассматриваются основные аспекты аутсорсинга, включая его определение, основные преимущества и риски, затрагиваются такие вопросы основного преимущества аутсорсинга, как снижение затрат, повышение гибкости и доступ к экспертным знаниям и ресурсам, которые могут значительно улучшить операционную эффективность и конкурентоспособность компании. В заключении автор приходит к выводу о том, что аутсорсинг является важным и эффективным инструментом для повышения эффективности бизнеса, но требует тщательного планирования и управления, чтобы избежать потенциальных проблем.
Introduction. Outsourcing affects capacity development, operating and production costs, and exposure to market risks, all of which can affect an organization's performance.
Research on the effectiveness of outsourcing usually focuses on the transaction or capability level. However, it is also essential to theorize and study the implications of outsourcing at the firm level since administrative decisions regarding the organization depend on organization-specific factors. Also, the effects of some outsourcing strategies may replace transactional-level attributes.
Outsourcing occurs when an organization signs a contract with a third party to perform activities that would otherwise be performed in-house. Organizations often choose to outsource some activities while doing others themselves.
An organization's outsourcing strategy can be conceptualized in terms of outsourcing solutions' portfolio
across all of the organization's activities. Some organizations outsource various related activities, while others outsource a more diverse set. Moreover, some organizations may adopt dynamic outsourcing strategies and constantly switch back and forth between in-house and outsourcing services rather than maintaining stable, long-term relationships with their outsourcing partners.
The decision to outsource organizational activities is a strategic one that affects current and future performances. On the one hand, outsourcing allows an organization to adapt to changing market conditions easily, focus on core competencies and take advantage of third-party providers' knowledge, experience, and efficiency. On the other hand, outsourcing comes at the expense of being tied to a potential supplier and losing organizational experience and know-how. The lack of capacity to manage the portfolio of outsourced activities at the organizational level may well play a role in unexpected and undesirable outsourcing outcomes. Thus, outsourcing can have a positive or negative impact on productivity.
Methods. The method used in this study is observational research. The management personnel consists of 4 heads of different departments of the creative organization "Davai Shodim [Let's Go]," which covers cultural and leisure events in Kazakhstan.
The primary tools of data collection were interviews.
Multistage sampling, including stratified, quota, and random sampling methods, was implemented to ensure that the draw of respondents was from all departments of the organization and that the number of surveyed respondents in different departments was representative of their percentage of the total population.
The following options were offered in the survey:
1. Strongly agree.
2. I agree.
3. Undecided.
4. Disagree.
5. Strongly disagree.
Closed-ended questions were used to ensure reliability.
Literature Review. There is a sufficient number of scientific literature on the topic of research, thus, the works of
Katharine Abraham, Susan Taylor, as well as Peter and Hartmut Eggers were used in this article.
According to Nottingham University economists Girma and Gerg [1, p. 817], outsourcing can lead to an increase in firm productivity if it reduces production costs to a greater extent than transaction costs increase. Hence, outsourcing may become more appealing when the difference in production costs increases or transaction technology advances. Thus, innovations that reduce transaction costs could make outsourcing more attractive and increase productivity.
There are many reasons why outsourcing can reduce production costs. Abraham and Taylor [2, p.394] mention three following main reasons:
The first reason is that a third party can potentially produce an intermediate product at a lower cost than the firm due to, for example, lower wages. This is especially true for international outsourcing, as wages can vary significantly from country to country. They also mention that even in-house outsourcing can cut payroll costs, for instance, when the outsourcing firm is in a labor union while the contractor is not.
The second reason is related to the cyclical nature of production. When a firm experiences cyclical growth in production over time, it may lack the capacity for peak periods, as this implies having too much capacity during periods of lower demand. Instead, the firm could outsource part of the manufacturing process during peak periods.
The third reason is economies of scale. If economies of scale are applied to some part of the manufacturing process, costs will be lower if all firms outsource that particular part to another party. For example, many small firms outsource payroll management to specialized accounting firms.
The authors H. Egger and P. Egger [3, p.98] identified three reasons where outsourcing can reduce production costs.
The first reason is the performance effect. The productivity effect means that the cost of completing a set of tasks is reduced due to lower production costs in the country providing the resources. While strong theoretical arguments support the idea that outsourcing can improve the performance of a firm, empirical research on the subject has
been relatively limited, justified by the difficulty in measuring outsourcing.
The second reason is the relative price effect. Here, a decrease in the price of some good, while the prices of other goods remain constant, is a decrease in the relative price of this good (the given good becomes cheaper relative to all other goods). Simultaneously, though other goods' nominal (monetary) prices remain unchanged, they become more expensive relative to this good.
The third reason is the labor supply effect. The labor market, together with other relations (for example, social or legal), ensures the normal reproduction and efficient use of labor resources. In the labor market, the magnitude of the demand for labor resources is revealed, and the labor supply is adjusted.
Organizational efficiency is an organization's ability to carry out its activities at a lower cost. In the service industry, efficiency is measured in terms of customer service costs. Efficiency can be achieved through direct cost reduction, for example, by eliminating excess capacity; through innovation, such as new technologies, allowing achievement of the same result with fewer resources; or through operational processes, such as those built based on process codification, standardization, and formalization. An organization can allocate and use its resources efficiently by streamlining activities and establishing procedures.
There are many mechanisms by which outsourcing affects the performance of an organization.
First of all, outsourcing can provide faster efficiency gains by lowering initial investment costs.
Outsourcing reduces the necessary investment in people, expertise, and assets needed to perform a given activity. According to Anikin and Rudaya [4, p.14], this reduces the risks associated with technological obsolescence, excess capacity, and exit barriers. By outsourcing products or services, an outsourcer can take advantage of new technologies without significant capital investments.
Secondly, outsourcing can be used as a means of reducing production costs. Suppliers may have specialized experience, capabilities, or scale advantages in providing services, allowing them to provide services at a lower cost.
Outsourcing spreads risk and can increase organizational agility since organizations can switch suppliers to those providing higher-quality goods and services at lower costs. Outsourcing can reduce the cost of innovation and adaptation, especially in rapidly changing environments, allowing an organization to respond quickly to local conditions without being tied to existing technologies or strategies.
From an administrative point of view, outsourcing can reduce bureaucratic costs - the costs of managing activities. Doing a large set of tasks on your own increases bureaucratic costs. Due to market competition, external providers are under pressure, demanding to reduce the bureaucratic costs associated with coordinating and administering activities. Finally, outsourcing can be used as a mechanism for benchmarking analysis of internal costs and learning how to perform activities more efficiently from third parties.
Based on the knowledge and information gained from outsourcing partners, the organization can implement new efficiency-improving processes and procedures.
We draw on the literature on outsourcing, capabilities, and organizational learning in order to predict the impact of outsourcing strategy aspects on organizational performance. We argue that these aspects shape the organizational experience of outsourcing, which in turn influences learning and capacity development over time. Therefore, differences in the choices organizations make regarding outsourcing will lead to differences in the organization's performance.
Outsourcing can undermine a firm's long-term competitive advantage by reducing its control over operations, replacing innovation, and transferring knowledge to suppliers. Thus, outsourcing strategies at the organizational level can influence the firm's performance. However, the benefits and costs of outsourcing strategies are not static. Over time, choices made affect experience and learning, which in turn affect performance.
Results.
Different scholars classify outsourcing strategies in different ways. This research will consider the classification of Gholami and Rashidi [5, p. 40], who divided strategies into four groups related to usually outsourced activities.
These four strategies are:
1. Outsourcing back-office operations
2. Outsourcing core activities
3. Outsourcing accounting services
4. Outsourcing non-core activities.
These strategies fit into sub-activities based on the following characteristics.
Figure 1. Outsourcing strategies classification
In order to identify the effectiveness of outsourcing, a survey was conducted in "Davai Shodim [Let's Go]" the media company which has been successfully operating in the Kazakhstani market for more than a decade and has several branches throughout the region.
The table below demonstrates the data collected from this survey.
Reasons for using outsourcing services Responses, %
Allows to focus on your core activities 25%
Lack of internal skills or experience 10%
Cost reduction 34%
Quality improvement (of products or services) 30%
Increases the service level 25%
Enables business transformation 46%
Flexibility 78%
Table 1. Outsourcing effectiveness identification in an enterprise
As seen from Table 1, the main reason the "Davai Shodim [Let's Go]" company uses outsourcing services is because it is a flexible system that enables business transformation and reduces the cost of the enterprise.
Thus, the effectiveness of outsourcing services is multifaceted. The survey results showed that most respondents consider outsourcing justified to reduce costs and improve the quality of goods and services and that outsourcing allows the company to focus on its core activity.
Conclusion. The results of this study conclude the effectiveness of outsourcing strategies in increasing the organization's efficiency. Hence, enterprises need to be more strategic when using outsourcing, but on the condition that it benefits the organization without being detrimental to employees.
The results of this study allow us to conclude that outsourcing is one of the effective strategies for improving and developing an organization.
References:
1. Girma S. and H. Gorg. Outsourcing, Foreign Ownership, and Productivity: Evidence from UK Establishment-Level Data, Review of International Economics. - №12. - 2004, p.817. (In Engl.).
2. Abraham K.G. and Taylor S.K. Firms' use of outside contractors: Theory and evidence. Journal of Labor Economics. - №14(3). - 1996. - p.394. (In Engl.).
3. Egger H. and P. Egger. International Outsourcing and the Productivity of Low-skilled Labour in the EU, Economic Inquiry. - №44. -2006. - p.98. (In Engl.).
4. Anikin B.A., Rudaya I.L. Outsourcing and Outstaffing: High Technology Management: Study Guide. 2nd edition, revised and updated - M.: INFRA-M, 2009. - p. 320. (In Engl.).
5. Nazeri, A. Gholami, R. & Rashidi, S. Outsourcing and its impact on operational performance. Proceedings of the 2012 International Conference on Industrial Engineering and Operations Management Istanbul, Turkey. - July 3-6. - 2012. - P.40. (In Engl.).
