5.

Emerging Modes of Business

Q1. (A) Select the correct option and rewrite the sentence.

1. For online transactions ......... is required.

a. registration b. trading c. business

2. The term 'e-business' is derived from the term ..... and e-commerce.
a. Cash b. e-pay c. e-mail

3. The transactions under ....... are between consumers and consumers.

a. B2B b. C2C c. B2C

4. The process of contracting a business function to someone else is called as ....... .

a. outsourcing b. trading c. e-business

5. In online shopping customers put the product in the ....... .

a. shopping mall b. shopping cart c. shopping bag

(B) Match the pairs:

Group ‘A’ Group ‘B’

A) E- business 1) Consumer to consumer
B) B2C 2) Exist everywhere
C) Outsourcing 3) First step
D) Digital cash 4) Business to Consumer
E) Registration 5) Electronic business
6) BPO
7) RTO
8) Efficient business
9) exist only in cyberspace
10) Last step

Ans: A-5 B-4 C-6 D- 9, E- 3

(C) Give one word / term / phrase for the following sentence.

1) The stage where the goods bought are delivered to the customer.
Ans: Delivery stage
2) The term derived from the terms e-mail and e-commerce.
Ans: e-business

3) The transaction which is done with the help of the internet.

Ans: online transactions

4) The first step in online transaction.

Ans: Registration

5) The process of contracting a business function to specialized agencies.

Ans: outsourcing

6) Subset of outsourcing.
Ans: BPO

7) Sub segment of BPO

Ans: KPO

8) One of the value added BPO service which involves legal work.
Ans: LPO

(D) State whether following statements are true or false.

1) It is easy to set up e-business as compared to traditional business.

Ans: True

2) The term e-business is derived from the term e-mail and e-commerce.
Ans: True

3) e-business allows you to work across the globe in any field.

Ans: True

4) LPO stands for legal product outsourcing.

Ans: False

5) KPO requires advanced analytical and technical skills.

Ans: True

6) With the help of outsourcing, company cannot focus on the core areas.
Ans: False
(E) Find the odd one.

1) BPO,RTO,LPO,KPO
Ans: RTO

2)B2B,B2C,A2Z,C2C
Ans: A2Z

3) Debit card, Credit card, Aadhar card, ATM card.

Ans: Aadhaar card

(F) Complete the sentences.

1) E-business is an abbreviation for Electronic business

2) The term e-business came into existence in the year 1997 .

3) E-business means using the Internet to connect people and process.

4) E-business is Superset of e-commerce.

5) E-commerce is Subset of e-business.

6) The process of contracting a business function to specialized agencies is known

as Outsourcing ..

(G) Select the correct option and complete the table.

(Business to Business, First step, e-commerce, payment mechanism, e-business)

Group ‘A’ Group ‘B’

A) Registration First step
B) Superset of e-commerce E-business
C) Payment mechanism Last step
D) Subset of E-business E-commerce
E) Business to Business B2B

(H) Answer in one sentence.

1) What is E-business?

Ans: E-business means using the internet to connect people and process. E-business
establishes more closer and responsive relationship with partners, employees and
suppliers.
2) What is outsourcing ?

Ans: Outsourcing is the process of contracting a business function or any specific

business activity to specialized agencies mostly the non-core areas such as
sanitation, security, household pantry etc. are outsourced by the company. The
company makes a formal agreement with the agency.

3) What is Online Transaction?

Ans: Online transaction is done with the help of the internet. It can't take place
without a proper internet connection. Online transactions occur when a process of
buying and selling takes place through the internet.

4) What is shopping cart?

Ans: The shopping cart gives a record of all the items selected by the buyer to be
purchased ,the number of units or quantity desired to be bought per item selected
and the price for each item.

5) What is digital cash?

Ans: Digital Cash is a form of electronic currency that exists only in cyberspace and
has no real physical properties, but offers the ability to use real currency in an
electronic format.

6) What is BPO?

Ans: Business process outsourcing or BPO, is a business practice in which one

organization hires another company to perform a task (process) that the hiring
organization requires to operate its own business successfully.

7) What is KPO ?

Ans: KPO is the sub segment of BPO,in which the outsource service provider is hired
not only for its capacity to perform particular business process or function but also
to provide expertise around it.

8) What is LPO ?

Ans: LPO is a type of KPO that is specific to legal services, ranging from drafting legal
documents, performing legal research to offering advice.
(I) Correct the underlined word and rewrite the following sentence.

1) E-business is hard to start.

Ans: E-business is easy to start.

2) There are five stages of online transactions.

Ans: There are three stages of online transactions.

3) Registration is the Last step in online transaction.

Ans: Registration is the first step in online transaction.

4) Digital cash is form of plastic currency.

Ans: Digital cash is form of Electronic currency.

5) KPO includes less knowledge based and specialized work.

Ans: KPO includes more knowledge based and specialized work.

(J) Arrange in proper order.

1) Purchase or sale / Delivery stage / Pre purchase or sale.

Ans: Pre purchase / sale , Purchase / sale, Delivery stage

2) Placing an orders, Cash on delivery, Registration

Ans: Registration, Placing an order, Cash on delivery

Q.2. Explain the following terms / concepts.

1) E-business

Ans: The term 'E-business' i.e electronic business is derived form the terms e-mail
and e-commerce.
E- business or electronic business, is the administration of conducting business via
the internet.
This would include the buying and selling of goods or services, along with providing
technical or customer support through the internet.

2) B2B

Ans: In Business to Business (B2B) form the buyer and seller are both business
entities and do not involve individual consumers. Here, both the parties involved in
e-commerce transactions are business firms and hence the name B2B i.e. business to
business.
3) B2C

Ans: B2 C transactions have business firms at one end and its customers on the
other end.
The transactions under B2C are between business firms and consumer. Firms use
their sites for a range of marketing activities.

4) C2C

Ans: Consumer to consumer (C2 C) involves the electronically facilitated

transactions between consumers through some third party. A common consumer
posts an item for sale and other consumers bid to purchase it. The sites are only
intermediaries, just to match the consumers.

5) Outsourcing

Ans: Outsourcing is the process of contracting some business functions to

specialized agencies. The company benefits in two ways.

1. It reduces its own cost

2. It uses the expertise of the firm which specialises in a particular kind of service.

6) BPO

Ans: BPO is a subset of outsourcing that involves the contracting of the operations
and responsibilities of specific business process to a third party service provider.
BPO refers to the outsourcing of peripheral activities of the orgnisation to an
external organization to minimize cost and increase efficiency.

7) LPO

Ans: LPO is a type of KPO that is specific to legal services, ranging from drafting legal
documents, performing legal research to offering advice. LPO refers to the practice
of law firm or corporation obtaining legal support services from an outside law firm
or legal support services company. LPO is high-end industry that has been growing
rapidly in the recent years.

8) KPO

Ans: KPO is the sub segment of BPO,in which the outsource service provider is hired
not only for its capacity to perform particular business process or function but also
to provide expertise around it.
KPO is a form of outsourcing, in which knowledge related and information related
work is carried out by workers in a different company or by a subsidiary of the same
organization. Which may be in the same country or in an off share location to save
cost.

Q.3. Study the following case / situation and express your opinion.

1. Abhay purchases some gift articles online from www.flipkart.com. At the same
time Sheetal purchased gift from e-bay.com.

i. Which website is related to C2C?

Ans: eBay.com website is related to Consumer to Consumer (C2C).

ii. Which website is related to B2C?

Ans: www.flipkart.com website is related to Business to Consumer (B2C).

iii. What first step does Abhay need to follow?

Ans: Before online shopping. Abhay has to register with the www.flipkart.com by
filling up a registration form. Registration is the first step in online transaction.
Abhay needs to login a particular website to buy particular gift articles.

2. Satvik purchases watch from Titan shop and his friend Shambhavi purchases
watch from online shopping site.

i. Which shopping is from traditional business?

Ans: Purchase of watch by Satvik from Titan shop is an example of traditional

business.

ii. Which shopping is from e-business?

Ans: Purchase of watch by Shambhavi from online shopping site is an example of e-

business.

iii. Which business involved high risk ?

Ans: e-business i.e. purchase of watch from online shopping site involves high risk
as there is no direct contact between Shambhavi and e-business owner.
3. Mr. Ved made his payment by cheque at the same time Mr. Shlok made his
payment by fund transfer.

i. Whose payment is faster?

Ans: The payment made by Mr. Shlok by fund transfer is faster than payment made
by Mr. Ved through cheque.

ii. Whose payment is related to traditional business?

Ans: The payment made by Mr. Ved by cheque is related to traditional business.

iii. Whose payment is related to e-business?

Ans: The payment made by Mr. Shlok by fund transfer is related to e-business.

Q.4. Distinguish between.

1) Traditional business and E-business.

Point of distinction Traditional business E- Business

1. Formation Traditional business takes E- Business is easy to form
lengthy and complicated
procedure to form
2. Setting up cost It takes huge capital in order to It takes a very nominal
setup cost
3. Risk involved Less Risk involved as parties High risk involved as
have personal interaction. there is no direct contact
between the parties

4. Scope of business Traditional business is limited to E- business covers entire

particular area so scope is world and so scope is vast
limited.
5. Customer Face to face interaction is In E-business there is
interaction possible absence of face to face
interaction.
6. Physical inception Goods can be inspected Goods cannot be
physically before purchase inspected physically
before purchase
7. Resources focus Traditional business resources E-business resources
focus on supply side focus on demand side

8. Delivery of goods In traditional business delivery In E-business delivery of

of goods is instant. goods takes time
9. Usage It is ancient and still in usage It is used to save valuable
where the digital network is not time and money
reachable.
10. Accessibility It is available during the limited It is available round the
time clock
11. Scope It is difficult to perform more More business can be
business in this model. done easily without any
hassles

2) E-business and E-commerce

Ans:

E-business E-commerce
1. Meaning: 'E- commerce involves commercial
E- business is conduct of business processes transactions done over internet
on the internet
2. What is it? E-commerce is subset of E-business
E- business is superset of E-commerce
3. Features: E-commerce just involves buying and
E-business includes all kinds of re- sale and selling of products and services
post-sale efforts.
4. Concept: E-commerce is narrower concept and
It is broader concept that involves market restricted to buying and selling
surveying, supply chain and logistic
management and using data mining
5. Transaction: It is more appropriate in B2C context
It is used in the context of B2B transactions
6. Which network is use? : E-commerce involves the mandatory use
E-business can involve the use of internet of internet
intranet or extranet

3) BPO and KPO

Ans:

BPO KPO
1. Meaning: KPO is another kind of outsourcing
BPO refers to the outsourcing of non whereby, functions related to knowledge
primary activities of the organization to and information are outsourced to third
an external organization to minimize party service providers
cost and increase efficiency
2. Degree of complexity: KPO is complex
BPO is less complex
3. Requirement: KPO requires knowledge expertise
BPO requires process expertise
4. Talent required in employees: KPO requires professional qualified
BPO requires good communication workers
skills
5. Focus on: KPO focus on high level process
BPO focus on low level process

Q.5. Answer in brief.

1) What is outsourcing? Illustrate with suitable example.

Ans: Outsourcing is the process of contracting a business function or any specific

business activity
to specialized agencies mostly the non-core areas such as sanitation, security,
household pantry etc. are outsourced by the company. The company makes a formal
agreement with the agency.

Company benefits in two ways.

1. It reduces its own cost

2. It uses the expertise of the firm which specializes in a particular kind of service.

Examples of outsourcing -

The establishments such as shops, malls, housing societies, offices etc. outsource
facilities like canteen, sanitation , security etc. In the same way arrangements for
wedding, anniversary, birthday celebration can also be outsourced.

2) What is BPO? Explain in detail.

Ans: Business process outsourcing or BPO, is a business practice in which one

organization hires another company to perform a task ( process) that the hiring
organization requires to operate its own business successfully.
Meaning - BPO is a subset of outsourcing that involves the contracting of the
operations and responsibilities of specific business process to a third party service
provider. BPO refers to the outsourcing of peripheral activities of the orgnisation to
an external organization to minimize cost and increase efficiency.
BPO refers to the outsourcing of peripheral activities of the organization to an
external organization to minimize cost and to increase efficiency. For example,
customer care centres for various banks, service providers etc.

3) What is KPO? Explain in detail.

Ans: KPO is described as the functions related to knowledge and information

outsourced to third party service providers.
KPO is the sub segment of BPO, in which the outsource service provider is hired not
only for its capacity to perform particular business process or function but also to
provide expertise around it.
KPO is a form of outsourcing, in which knowledge related and information related
work is carried out by workers in a different company or by a subsidiary of the same
organization. Which may be in the same country or in an off share location to save
cost.
KPO requires advanced analytical and technical skills as well as a high degree of
specialist expertise. KPO allows both core and non-core activities.

4) What is LPO? Explain in detail.

Ans: LPO is a type of KPO that is specific to legal services, ranging from drafting legal
documents,
Performing legal research to offering advice.
LPO refers to the practice of law firm or corporation obtaining legal support services
from an outside law firm or legal support services company. LPO is the industry in
which in house legal departments or organizations outsourced legal work to such
areas where it can be done at less cost.
For example, areas like US or Europe outsourced legal work to India, where it can be
performed at significantly decreased cost. LPO is high-end industry that has been
growing rapidly in the recent
Years.
Legal outsourcing has gained tremendous ground in the past few years in India. It
achieved
Success by producing service such as document review, legal research and writing,
drafting of briefings etc.

Q.6. Justify the following statements

1) It is easy to set up e-business as compared to traditional business.

Ans: (1) e-business is run, managed and carried out with the help of information
technology, i.e. web (internet). However, traditional business is run, managed and
carried out in accordance with specific old custom or a trading practices of long
lasting

(2) In traditional business large, physical space is needed, to arrange and display the
variety of goods. It needs large amount of capital to have infrastructure, staff and
other required facilities. e-business can be started, managed and operated with the
help of the internet from any place or even from one's own home. Naturally, it
requires very less capital. It is also easy to set up.

(3) In traditional business, time is required to travel, to convince, to negotiate and to

interact with the customers. In such process lot of time, energy and money are
wasted. While in e-business required information is provided and accepted with
terms and conditions more instantly.

(4) e-business is also free from most of the problems as faced by the traditional
business. Thus, it is easy to set up e-business.

2) E-business allows user to work across the globe in any field.

Ans: (1) e-business i.e. electronic business may be defined as the application of
information and technologies to support all the activities of business. It involves
electronic buying and supply, chain management, process orders electronically,
online payments via debit or credit cards, handling customer service, etc.

(2) In order to begin with e-business, a business owner must have an internet
presence. He has to obtain an e-mail address for communicating the same to the
customers and other business associates. This helps speedy communication
between business firms and customers. Communication is easy as there is no face to
face interaction.

(3) Once the owner of e-business has acquired an electronic means of contact, he
may sell goods to the customers residing in any part of the world. There is no need
of any wholesalers, retailers, etc. This reduces costs and increase profit. In e-
business, goods can be purchased on internet from any place across the globe,
payments can be made with the help of debit, credit card, internet banking and the
goods are physically delivered at the doorstep of the buyer.

(4) Similarly, he can do trading in any field. e-business uses internet to connect
people and processes. The World Wide Web (WWW) offers lot of exposure to e-
business on a global platform. International relationship is very strong in e-
business. The Government also offers lot of support to e-business. Thus, it allows
one to work across the globe in any field he likes.

3) Online transaction is done with the help of the internet.

Ans: (1) Online transactions take place when a process of buying and selling are
completed through the internet. For online transaction, registration is required. The
consumer needs to login a particular website to buy a particular article or service.
The customer's email ID, name, address and other details are saved and safe with
the website for further contact.

(2) When a customer likes a product or service, he/she selects, pick ups and drops
the items or things in the shopping cart. The shopping cart keeps the systematic and
detail record of what items have been picked up while browsing the online store.

(3) The buyer then proceeds to the payment option after selecting all the products.
Payment can be made by accepting cash on delivery mode of payment, after
receiving physical delivery of goods. The customer may pay in cash or by debit or
credit card. The buyer also sends a cheque to the seller and the seller sends the
products after the realisation of the cheque.

(4) If the payment is transferred by the buyer from his account to the seller's
account electronically, then after the payment is received by the seller, he sends the
goods to buyer. The credit card or debit card is also used by the card holder for
making payment of purchases. The amount gets immediately transferred to
vendor's bank account. After the successful transfer of funds, goods are delivered by
the vendor to buyer. Thus, all the aspects of online transaction are completed with
the help of the internet.

Q.7. Attempt the following.

1) What are the advantages and disadvantages of e-business?

Ans: Advantages of e-commerce are as follows:

1) Ease of formation:
The formation of traditional business is difficult, whereas to form e-business is
relatively easy to start.

2) Lower Investment requirements:

Investment requirement is low as compared to traditional business as the store
does not have physical existence and can be managed with less manpower so if
trade does not have much of the investment but have contact (network), he can do
fabulous business.

3) Convenience:
Internet offers the convenience of 24 X 7 X 365 days a year. Business is going on any
time and flexibility is available. Yes, e-business is truly a business that has enabled
and enhanced by electronics and offers the advantage of accessing anything,
anywhere, any time.

4) Speed: This benefit becomes all the more attractive when it comes to information.
Much of the buying or selling involves exchange of information that internet allows
at the click of mouse.

5) Global access:
Internet is truly without boundaries. On one hand, it allows the seller an access to
the global market. On the other hand, it offers a freedom to the buyer to choose
products from almost any part of the world. No need of face to face interaction
between buyer and seller.

6) Movement towards a paperless society:

Use of internet has considerably reduced the dependence on paperwork. Thus,
recording and referencing of information has become easy.

7) Government support:
The government provides favorable environment for setting up of e-business. This
support ensures maximum transparency.

8) Easy payment:
The payment in e-business is done by credit card, fund transfer etc. and it is
available round the clock.

The Disadvantages of e-business are a follows:

(1) Lack of personal Touch : E-business lacks the personal touch. One cannot touch
or feel the
products. So it is difficult for the consumers to check the quality of products.

(2) Delivery Time : The delivery of the products takes time. In traditional business
you get the product as soon as you buy it. But that doesn't happen in online
business. This time lag often discourages customers e.g. Amazon now assures one
day delivery. This is an improvement but does not resolve the issue completely.
(3) Security issues : There are a lot of people who scam through online business.
Also, it is easier for hackers to get your financial details. It has a few security and
integrity issues.
This also causes disturbance among potential customers.

(4) Government interference : Sometimes the Government monitoring can lead to

interference in
the business.

(5) High Risk : High Risk is involved as there is no-direct contact between the
parties. In case of frauds, it becomes difficult to take legal action.

2) What are the types of e-business? Explain.

Ans: Followings are the types of business:

1) Business to Business (B2B)

2) Business to Consumer (B2C)

3) Consumer to Business (C2B)

4) Consumer to Consumer (C2C)

5) Business to Administration (B2A)

6) Consumer to Administration (C2A)

1) Business to Business (B2B)

In this form the buyer and seller are both business entities and do not involve
individual consumers. Here, both the parties involved in e-commerce transactions
are business firms and hence the name B2B i.e. business to business.Transactions
between business firms come under this category. Business firms interact with each
other for a variety of services.

2) Business to Consumer (B2C): B2 C transactions have business firms at one end

and its customers on the other end.
The transactions under B2C are between business firms and consumer. Firms use
their sites for a range of marketing activities. The cost of products and services is
kept low through this method and the speed of transaction is also faster.
3) Consumer to Business (C2B)
In this electronic transaction the consumer requests a specific service from the
business. Consumer to Business is a growing arena where the consumer requests a
specific service from the business. It enables buyers to quote their own price for
specific goods or services. A consumer posts his request with a set budget online
and, companies review the customers’ requirements and bids out the project. For
example, pest control services, taxi services, door step food delivery etc.

4) Consumer to consumer (C2C)

It facilitates the online transaction of goods or services between two people.
Consumer to consumer (C2 C) involves the electronically facilitated transactions
between consumers through some third party. A common consumer posts an item
for sale and other consumers bid to purchase it. The sites are only intermediaries,
just to match the consumers.

5) Business to Administration (B2A)

This part of e-commerce encompasses all transactions conducted online between
business and public administration. For example, registration of companies,
payment of taxes, getting permits etc.

6) Consumer to Administration (C2A)

The consumer to Administration model encompasses all electronic transactions
conducted between individuals and public administration. For example, getting
passport, aadhaar card, licenses etc.

3) What are the advantages of outsourcing?

Ans: Advantages of Outsourcing:

1) Overall cost advantages- It reduces the cost and also saves time and efforts on
training cost.

2) Stimulates entrepreneurship, employment and exports- Outsourcing stimulates

entrepreneurship, employment and exports in the country.

3) Low manpower Cost- The manpower cost is much lower than that of the host
company.

4) Access to professional, expert and high Quality services- Mostly the tasks are
given to people who are skilled in that particular field. This provides us with a better
level of service and fewer chances of errors.
5) Emphasis on core process rather than the supporting ones- With its help
companies can focus on their core areas which lead to better profits and increase
the quality of their products.

6) Investment requirements are reduced - The organization can save on investing in

the latest technology, software and infrastructure and let the outsourcing partner
handle the entire infrastructure.

7) Increased efficiency and productivity - There is an increased efficiency and

productivity in the non-core areas of an organization.

8) Knowledge sharing - Outsourcing enables the organization to share knowledge

and best practices with each other, it helps develop both the companies and also
boosts goodwill in the industry.

4) What are the disadvantages of outsourcing?

Ans: Disadvantages of Outsourcing / Limitations of Outsourcing

1) Lack of customer focus- An outsourced vendor may be catering to the needs of

multiple organizations at a time. In such a situation, he may lack complete focus on
an individual organization.
As a result, the organization may suffer.

2) A threat to security and confidentiality - The confidential information of the

organization may be leaked to the third party, so there are security issues.

3) Dissatisfactory services - Some of the common problem areas with outsourcing

include stretched delivery time and substandard quality.

4) Ethical issues - The major ethical issue is taking away employment opportunities
from one's own country, when the function is outsourced to a company from
another country.

5) Other disadvantages -
i) Misunderstanding of the contracts.

ii) Lack of communication.

iii) Poor quality and delayed services.

Q.8. Answer the following.

1) Explain the steps involved in online transaction.

Ans: The online transaction moves through pre-purchase/sale, actual purchase/sale

and delivery stage. It involves following steps.

1) Registration - Before online shopping one has to register with the online vendor
by filling up a registration form. Registration is the first step in online transaction.
For online transaction registration is required. The consumer needs to login a
particular website to buy a particular article or service. The customers email ID,
name, address, other details are saved and are safe with the website. For security
reasons, the buyer's 'Account' and his 'Shopping Cart' is an online record of what
you have picked up while browsing the online store.

2) Placing an Order- It is second step in online transaction. When a customer likes a

product or service he/she puts the product in the shopping cart. The shopping cart
gives a record of all the items selected by the buyer to be purchased ,the number of
units or quantity desired to be bought per item selected and the price for each item.
The buyer then proceeds to the payment option after selecting all the products.

3) Payment - It is the last step in online transaction. The buyer has to select the
payment option.
These payment systems are secured with very high level encryption. The personal
financial information is completely secure. The following are some ways in which
we can make this payment.

a) Cash on Delivery- In this type of payment the buyer pay when he/she receives the
product. The payment is made at the doorstep. The customer can pay in cash or by
debit or credit card.

b) Cheque- In this type of payment, the buyer sends a cheque to the seller and the
seller sends the product after the realization of the cheque.

c) Net Banking transfer- In this type of payment, the payment is transferred from
the buyer's account to the seller's account electronically. After the payment is
received by the seller, the seller dispatches the goods to the buyer. It is an electronic
facility of transferring funds through the internet.

d) Credit or Debit card - The buyer makes payment through debit or credit card and
amount get deducted from customers account. Debit card or credit card popularly
known as "Plastic
Money". They are mostly used for online payments.

e) Digital Cash - Digital Cash is a form of electronic currency that exists only in
cyberspace and has no real physical properties, but offers the ability to use real
currency in an electronic format.

2) What is outsourcing? Explain advantages and disadvantages of outsourcing.

Ans: Outsourcing is the process of contracting some business functions to

specialized agencies. The company benefits in two ways.

1. It reduces its own cost

2. It uses the expertise of the firm which specializes in a particular kind of service.

Advantages of Outsourcing:

1) Overall cost advantages- It reduces the cost and also saves time and efforts on
training cost.

2) Stimulates entrepreneurship, employment and exports- Outsourcing stimulates

entrepreneurship, employment and exports in the country.
3) Low manpower Cost- The manpower cost is much lower than that of the host
company.

4) Access to professional, expert and high Quality services- Mostly the tasks are
given to people who are skilled in that particular field. This provides us with a better
level of service and fewer chances of errors.
5) Emphasis on core process rather than the supporting ones- With its help
companies can focus on their core areas which lead to better profits and increase
the quality of their products.

6) Investment requirements are reduced - The organization can save on investing in

the latest technology, software and infrastructure and let the outsourcing partner
handle the entire infrastructure.

7) Increased efficiency and productivity - There is an increased efficiency and

productivity in the non-core areas of an organization.

8) Knowledge sharing - Outsourcing enables the organization to share knowledge

and best practices with each other, it helps develop both the companies and also
boosts goodwill in the industry.

Disadvantages of Outsourcing / Limitations of Outsourcing

1) Lack of customer focus- An outsourced vendor may be catering to the needs of

multiple organizations at a time. In such a situation, he may lack complete focus on
an individual organization.
As a result, the organization may suffer.

2) A threat to security and confidentiality - The confidential information of the

organization may be leaked to the third party, so there are security issues.

3) Dissatisfactory services - Some of the common problem areas with outsourcing

include stretched delivery time and substandard quality.

4) Ethical issues - The major ethical issue is taking away employment opportunities
from one's own country, when the function is outsourced to a company from
another country.

5) Other disadvantages -

i) Misunderstanding of the contracts.

ii) Lack of communication.

iii) Poor quality and delayed services.