Outsourcing (Australia)

Kraut & Korman (1999) cite the 1997 Survey of Human Resource Trends where 1700 organisations were surveyed. The results indicated 50% of respondents outsourced more HR functions than they did three years ago. Mike Johnson (1997) maintains outsourcing isn’t a new idea. He sees the concept of outsourcing as an ever-changing process, and notes how we as individuals ‘outsource the things we cannot do ourselves or are too busy to do…Just like companies…’ The work of Peters, Greer & Youngblood (1998) also shows that outsourcing has been around for a long time. However, they add that it is now far more widespread, and part of an increasing trend. This increase can be seen both in the number of organisations participating in outsourcing, and the number of functions that are being outsourced.

Outsourcing has fostered the concept of ‘core’ activities staying within an organisation (Domberger 1998). According to the Australian Government Publishing Service (1996), outsourcing is when an organisation opts to have an ‘activity or function’ performed for them by an external agency, which has overall responsibility for the activity. Directly related to core competency in outsourcing is the desire for increased efficiency. Similarly,

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Another benefit of outsourcing lies in expertise. Johnson (1997) states that outsourcing means a firm has access to ‘world-class capabilities’ and this includes new technology, tools, techniques and expertise that the organisation would otherwise not possess.

Traditionally, HR has not been outsourced. ’

Unanticipated costs might ‘creep’ in after the contract has commenced when firms are caught off guard with bills for extra charges (Keppler 1998). When an organisation becomes more flexible it is better able to adapt to changing opportunities and to handle fluctuations (Johnson 1997; Keppler 1998). Ivancevich (1998) defines outsourcing as ‘the practice of hiring another firm to complete work that is important and must be done efficiently’.

The most commonly outsourced functions are those not ‘core’ to a particular business – and due to the diverse nature of businesses, the functions outsourced will vary across industries. While saving costs is important, Johnson (1997) cites Corbett (1997) who believes ‘the process [of outsourcing] – properly and professionally applied – can only be beneficial to today’s business, and is a great deal more than a cost-cutting exercise’.

Outsourcing is becoming increasingly important in a constantly changing economy.

Corbett (2000b) maintains outsourcing organisations adhere to traditional boundaries.

Particular success can be seen in the growth of Mambo Graphics who are based in Sydney, Australia (Domberger 1998). BP pioneered outsourcing when it contracted out accounting and IT support groups in 1991, and Avis Rent-a-Car made a twenty year contract with Automatic Data Processing, who carry out payroll activities for over 17 million workers in more than 300 000 client companies (Johnson 1997). This generates economic benefits through increased productivity and reduced costs (Domberger 1998). This makes it necessary to conduct extensive research into prospective contractors to be familiar with their particular culture.

There are many advantages in outsourcing, but even these advantages can turn into drawbacks if they are not carefully implemented (Domberger 1998).

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