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MCQ Outsourcing

25 MCQs

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Prasenjit Rakshit
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361 views6 pages

MCQ Outsourcing

25 MCQs

Uploaded by

Prasenjit Rakshit
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Multiple-Choice Questions (MCQs) on Outsourcing

1. What is outsourcing?

A) The process of hiring additional internal employees


B) The process of contracting an external entity to handle business functions
C) The process of training in-house employees for new skills
D) The process of expanding internal departments

Answer: B) The process of contracting an external entity to handle business functions

2. Which of the following is a common reason for outsourcing?

A) Increased operational costs


B) Reduced staffing flexibility
C) Access to specialized expertise
D) Decreased efficiency

Answer: C) Access to specialized expertise

3. What type of operations do companies typically outsource?

A) Core business functions


B) Non-core business functions
C) Only financial activities
D) Only manufacturing processes

Answer: B) Non-core business functions

4. Which of the following is NOT a benefit of outsourcing?

A) Cost reduction
B) Increased in-house expertise
C) Staffing flexibility
D) Focus on core business

Answer: B) Increased in-house expertise

5. Which document defines the responsibilities and expectations in an outsourcing


contract?
A) Memorandum of Understanding (MoU)
B) Service Level Agreement (SLA)
C) Annual Report
D) Business Proposal

Answer: B) Service Level Agreement (SLA)

6. What is a key risk associated with outsourcing?

A) Increased productivity
B) Loss of business knowledge
C) Better customer satisfaction
D) Improved IT security

Answer: B) Loss of business knowledge

7. What is the primary purpose of a Service Level Agreement (SLA)?

A) To outline financial statements


B) To define services, responsibilities, and performance metrics
C) To terminate contracts
D) To monitor competitors

Answer: B) To define services, responsibilities, and performance metrics

8. What is one way organizations can mitigate vendor failure risks?

A) Ignore vendor performance metrics


B) Use vague contract terms
C) Establish contingency plans
D) Avoid signing contracts

Answer: C) Establish contingency plans

9. What is an example of outsourcing in IT?

A) Hiring new in-house software developers


B) Contracting a third-party company to manage cloud computing services
C) Expanding internal data centers
D) Training employees in networking

Answer: B) Contracting a third-party company to manage cloud computing services


10. What is a key element of vendor/contract management?

A) Ignoring vendor performance reports


B) Conducting regular vendor assessments
C) Reducing vendor communication
D) Avoiding contract negotiations

Answer: B) Conducting regular vendor assessments

11. Which of the following is an example of cloud computing outsourcing?

A) Running all servers in-house


B) Storing business data on vendor-hosted servers
C) Hiring additional IT staff
D) Printing physical records

Answer: B) Storing business data on vendor-hosted servers

12. What is the main disadvantage of scope creep in outsourcing?

A) Cost reduction
B) Increased project complexity and cost
C) Faster project completion
D) Improved vendor relationships

Answer: B) Increased project complexity and cost

13. How can organizations ensure data security in outsourcing?

A) By ignoring vendor security practices


B) By documenting and enforcing strict security policies
C) By outsourcing all IT functions
D) By using low-cost vendors

Answer: B) By documenting and enforcing strict security policies

14. What is a common reason vendors fail to deliver outsourced services?

A) Overestimation of project scope


B) Proper contract management
C) Strict adherence to SLAs
D) Clear vendor communication

Answer: A) Overestimation of project scope

15. Which industry frequently uses outsourcing for customer support?

A) Manufacturing
B) Banking
C) Retail
D) Call Centers

Answer: D) Call Centers

16. What does outsourcing typically help businesses achieve?

A) Greater in-house operational burden


B) Higher expenses
C) Improved focus on core activities
D) Limited market reach

Answer: C) Improved focus on core activities

17. What is an important factor to consider when selecting an outsourcing vendor?

A) The vendor’s marketing strategy


B) The vendor’s financial stability and past performance
C) The vendor’s physical office location
D) The vendor’s social media presence

Answer: B) The vendor’s financial stability and past performance

18. Which of the following is a challenge associated with overseas outsourcing?

A) Limited availability of skilled labor


B) Higher costs compared to local outsourcing
C) Legal and data privacy concerns
D) Reduced efficiency due to cultural similarities

Answer: C) Legal and data privacy concerns


19. What is a major advantage of outsourcing IT infrastructure management?

A) Higher in-house maintenance costs


B) Reduced scalability of IT systems
C) Access to the latest technology without large upfront investment
D) Increased reliance on internal staff

Answer:C C) Access to the latest technology without large upfront investment

20. What is the main purpose of benefit realization in outsourcing?

A) To analyze whether expected savings and advantages are being achieved


B) To terminate outsourcing contracts
C) To ignore financial performance
D) To ensure all functions remain in-house

Answer: A) To analyze whether expected savings and advantages are being achieved

21. What should a company do to prevent loss of business knowledge in outsourcing?

A) Keep all business functions in-house


B) Maintain proper documentation of business processes and system development
C) Avoid contract negotiations
D) Ignore vendor performance reports

Answer: B) Maintain proper documentation of business processes and system development

22. Which outsourcing risk is related to frequent changes in vendor staff?

A) Scope creep
B) Turnover of key personnel
C) Vendor failure to deliver
D) Increased IT security

Answer: B) Turnover of key personnel

23. Which factor is NOT considered when drafting a Service Level Agreement (SLA)?

A) Performance metrics
B) Responsibilities of the vendor and client
C) Organizational culture
D) Penalty and incentive clauses
Answer: C) Organizational culture

24. What is one way to mitigate external (overseas) outsourcing risks?

A) Relying solely on local vendors


B) Establishing clear legal contracts with compliance requirements
C) Ignoring data privacy laws
D) Limiting communication with vendors

Answer: B) Establishing clear legal contracts with compliance requirements

25. What should an organization do if an outsourced service fails to meet SLA


requirements?

A) Ignore the issue


B) Implement corrective measures or penalties
C) Terminate all outsourcing contracts immediately
D) Shift to another service provider without analysis

Answer: B) Implement corrective measures or penalties

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