StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...

The Three Important Benefits That IBM Will Receive From Outsourcing Their HR Functions To Fidelity - Essay Example

Cite this document
Summary
The Three Important Benefits That IBM Will Receive From Outsourcing Their HR Functions To Fidelity.
Companies generally have to tend to many secondary fields like health and benefits to its employees, in addition to the primary fields in which they have specialization…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER92% of users find it useful
The Three Important Benefits That IBM Will Receive From Outsourcing Their HR Functions To Fidelity
Read Text Preview

Extract of sample "The Three Important Benefits That IBM Will Receive From Outsourcing Their HR Functions To Fidelity"

Download file to see previous pages

This is called outsourcing. Many large companies now outsource jobs such as call center services, e-mail services, and payroll. These jobs are handled by separate companies that specialize in each of the services by means of contracts. Today more and more companies are resorting to outsourcing. This is attributed mainly to the increased efficiency and cost cuts. Earlier small companies and companies which were newly established would resort to outsourcing, but today even giants like IBM are making use of it.

In July 2002, a deal was negotiated between International Business Machines Corp. and Fidelity's Employer Service Co. According to the deal, Fidelity's Employer Services Co. unit was to take over key human-resources functions for 260,000 IBM employees and retirees. Fidelity was to hire 450 of IBM's 1,200 U.S. human-resources employees. Among the jobs Fidelity would handle for IBM were health-plan administration, career services and pension administration. IBM would continue to provide other functions in house, including payroll (Johannes L.

and Armstrong D. 2002). According to the article "The benefits of outsourcing for small businesses (n. d)", "Though reducing expenditure is not the prime reason for outsourcing, it is certainly a major factor. Outsourcing converts fixed costs into variable costs and releases capital for investment elsewhere in the business. Outsourcing makes the firm more attractive to investors, since of the ability to pump more capital directly into revenue-producing activities." Though true for small companies, it applies equally well for giants like IBM.

In the case of IBM this is exemplified by the fact that the human resource functions of 260,000 workers and retirees have been taken over by Fidelity which has specialization in the field. If the former were to do the same job, it would certainly prove more costly than that of the latter. The funds saved, if invested elsewhere in the company would improve revenues. Also this would make IBM more attractive to investors, as the saved capital can be invested in the revenue generating areas and core fields.

Increase in efficiency: As IBM is a research oriented company specializing in manufacturing computers, it has a high research and development expenditure. Fidelity's cost structure and economy of scale can give IBM Corp an important and strategic advantage. This would help in decreasing the labor costs. The success of IBM depends upon short term projects that it undertakes. Hiring and training workers for short-term projects can be very expensive and short term employees don't always live up to the desired expectations (The benefits of outsourcing for small businesses).

IBM's deal with fidelity will play a leading role in improving overall efficiency by decreasing labor costs. About 450 workers in IBM Corp.'s Raleigh employee service center will transfer to Fidelity Investments beginning Aug. 1, as part of an agreement that allows Boston-based Fidelity to administer IBM's pension plan, the 12th largest in the United States (450 IBM employees to transfer to Fidelity. July 2002). The transfer of 450 out of 1200 members in the human resource division would certainly decrease the labor costs by more than one third in that particular division.

Also as the number of employees is decreased, it increases the scope for other employees to make their jobs secure. More security means more productivity which in turn means more efficiency.Focus on core businesses.IBM, too, like any other company has

...Download file to see next pages Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“The Three Important Benefits That IBM Will Receive From Outsourcing Essay”, n.d.)
The Three Important Benefits That IBM Will Receive From Outsourcing Essay. Retrieved from https://studentshare.org/business/1500254-what-three-important-benefits-will-ibm-receive-from-outsourcing
(The Three Important Benefits That IBM Will Receive From Outsourcing Essay)
The Three Important Benefits That IBM Will Receive From Outsourcing Essay. https://studentshare.org/business/1500254-what-three-important-benefits-will-ibm-receive-from-outsourcing.
“The Three Important Benefits That IBM Will Receive From Outsourcing Essay”, n.d. https://studentshare.org/business/1500254-what-three-important-benefits-will-ibm-receive-from-outsourcing.
  • Cited: 1 times

CHECK THESE SAMPLES OF The Three Important Benefits That IBM Will Receive From Outsourcing Their HR Functions To Fidelity

Human Resource Outsourcing

OUTSOURCING and number Date submitted Introduction Outsourcing is a phenomenon that focuses on a strategy where some functions of an organisation are performed by an outside organisation purposely to shorten workloads and lower management and operational costs.... Human resource functions that are handled by an outsourcer provider are functions that some employees are used to performing.... functions that can be outsourced include human resources, financial transaction processing (for accounts payable), procurement, distribution and logistics, and clinical data management....
8 Pages (2000 words) Assignment

Outsourcing Information System Functions

The paper presents the outsourcing of information systems and information technology which enabled services in United States, Europe, and Asia has experienced strong growth over the last several years due to an increasing need to focus on core competencies.... hellip; This paper clearly illustrates the various reasons for outsourcing, its advantages, and disadvantages.... It analyses the various economic, operational and social implication of outsourcing....
5 Pages (1250 words) Case Study

HR Outsourcing: Opportunity or Threat

One example is that of Hughes Electronics, which resorted to outsourcing its hr functions such as payroll, hiring and compensation management among other activities, in order to avoid the costs associated with an in-house upgrading of its legacy systems.... Jeffay et al (1997) point out that in a study that was conducted in 1996 by Hewitt Associates, 93% of the organizations surveyed outsourced their hr operations while 4% of the group indicated they were actively...
9 Pages (2250 words) Essay

Pros and cons of outsourcing Human Resource Managment Functions

The rising… outsourcing. The outsourcing of human resources has both its positive and negative outcomes though the benefits far overshadow the negative impacts of Organizations turn to outsourcing to slash their operational costs and improve financial position.... Human resource outsourcing aims at reducing expenses by relegating official work to countries that provide HRM services at the fraction of what a company will pay at its home base (Ivancevich, 2004)....
5 Pages (1250 words) Research Paper

ABB OUTSOURCING TO IBM

This explains ABB's confidence in choosing IBM as the ideal company to carry out its IT functions.... The outsourcing industry has been there for a very long time, but it started gaining momentum in the early 1990s.... outsourcing is not confined to a county's borders; many organizations are seeking outsourcing… This kind of outsourcing has played a big role in the process of multinationalization.... There are quite a number of reasons for outsourcing. Companies outsource their services in order to cut the cost of production....
12 Pages (3000 words) Essay

HR Business Process Outsourcing

In order to meet these needs as well as to ensure that the company can find a less expensive solution for the same, it is best to outsource the human resources functions so that a third party manages all the human resource functions.... There are a number of benefits of using outsourcing of the human resource functions as well.... Companies tend to benefit in terms of the costs as human resource functions generally involve very high profile and complex functions like recruitment, training and development, retention and also database management which involves not only high variable costs but also high fixed costs....
5 Pages (1250 words) Essay

Line Managers in HR Function

Recently line managers have been involved in the hr functions as they are supposed to have close interactions with the employees.... Various firms outsource the hr functions on the grounds of concentrating on core and strategic issues.... The decision to outsource or keep hr functions in-house itself is a strategic issue and requires deliberation.... With the devolvement of line managers in hr functions, this research would try to assess to what extent outsourcing hr functions is deemed necessary....
10 Pages (2500 words) Assignment

Benefits of Outsourcing: Macro

“Outsourcing is the latest buzzword these days for the cost and quality conscious companies all over the world, who are outsourcing their non-core business processes” (Hailey).... The paper "Benefits of outsourcing: Macro" presents that before going into the discussion regarding the benefits of outsourcing and its effects on consumer prices, let's get a better understanding of what outsourcing actually is.... outsourcing means to transfer a business function....
5 Pages (1250 words) Term Paper
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us