ABSTRACT
The
study examined the impact of outsourcing on organizational performance, a study
of MTN, Airtel and Etisalat in Umuahia. The specific objectives were to
identify the effect of business process outsourcing on by MTN, Airtel and
Etisalat performance in Umuahia, to ascertain the benefits of technology
outsourcing to MTN, Airtel and Etisalat performance in Umuahia, to establish
the relationship between outsourcing and organizational performance in MTN,
Airtel and Etisalat in Umuahia, to determine the effect challenges of
outsourcing on performance of MTN, Airtel and Etisalat in Umuahia. Primary data
wassourced fromquestionnaires that were issued to staff of MTN, Airtel and
Etisalat in Umuahia. Descriptive survey design was adopted by the study. The questionnaire
was distributed to staff of MTN, Airtel and Etisalat in Umuahia. A test-re-test
was conducted to ensure validity and reliability of the data. The data were
analyzed using simple percentage, frequency, simple regression. The descriptive
result show that majority 53.2%,
58.5%, 57.4%, 53.2%, 47.9% and 48.9% of the respondents strongly agree
that support, printing, production, advertising, technology and distribution
service were business process outsourcing affecting MTN, Airtel and Etisalat performance in Umuahia, Abia State.
Majority 47.9%, 53.2%,
53.2%, 48.9%, 42.6%, 48.9%, 47.9% and
45.7% of the respondents strongly agree that reduction in operating cost, increased productivity and efficient, flexibility, better quality of product and
service, customers retention, strategies planning and flexibility, access to
expertise and focus on core business
were the benefit of technology
outsourcing on MTN, Airtel and Etisalat
performance. Majority agreed that 53.2% and 53.2% of the respondents
strongly agree that there is relationship between outsourcing and
organizational performance. Majority 47.9%, 53.2%, 53.2% and 48.9%, 42.6%,
48.9%, 47.9%, 45.7%, 42.6%, 48.9%, 47.9% and 45.7% of the respondents strongly
agree that loss of management control, loss of internal expertise skill, risk
to succession planning, doubtful cost savings, vendor, failure to deliver, cost
of delayed delivery or non-delivery, disclosure of corporate secrets, cost
escalation, interest conflict with outsourcing partner, loss due to disaster
and recovery cost. The empirical result show that there is significant difference between
support, printing, production, advertising, technology distribution services and MTN, Airtel and Etisalat performance in Umuahia, that reduction in
operating cost, increased productivity and efficient, flexibility, better
quality of products and services, customer satisfaction, technological
advancement, customers retention, strategic planning and flexibility, access to
expert have positive and
significant effect on performance
of MTN, Airtel and Etisalat in Umuahia, there is positive relationship between
outsourcing and organizational performance in MTN, Airtel and Etisalat in
Umuahia and that loss of critical skills, leakage of confidential information,
pirates, plagiarism, vendor failure to deliver, cost of delayed delivery or
non-delivery, disclosure of commercial secrets, cost escalation, interest
conflicts with outsourcing partners, loss due to disasters and recovery costs
had negative and significant effect on
performance of MTN, Airtel and Etisalat in Umuahia. It was recommended
that top managers of telecommunication companies understudied should paid more
attention to the identified main factors that constitute critical drivers like
reduction in operating cost, increased productivity and efficient, flexibility,
better quality of products and services, customer satisfaction, technological
advancement, customers retention, strategic planning and flexibility, access to
expertand to consider them while planning the strategy of outsourcing.
TABLE
OF CONTENTS
Title Page i
Declaration ii
Dedication iii
Certification iv
Acknowledgement v
Abstract vi
Table of Content vii
List of Table viii
CHAPTER
1: INTRODUCTION
1.1 Background of the Study 1
1.2 Statement of the Problem 3
1.3 Objectives of the Study 4
1.4 Research Questions 4
1.5 Research Hypotheses 5
1.6 Significance of the Study 5
1.7 Scope of the Study 6
1.8 Limitations of the
Study 7
1.9 Profile
of the Studied Organization 7
1.9.1 Profile of MTN 7
1.9.2 Profile of Airtel 8
1.9.3. Profile
of Etisalat 8
1.10 Operational Definitions of Terms 9
CHAPTER
2: REVIEW OF RELATED LITERATURE
2.1 Conceptual Framework 11
2.1.1 Outsourcing 11
2.1.2. Types of
sourcing 13
2.1.3. Benefit of outsourcing practice 17
2.1.4. Problem of outsourcing practice 18
2.1.5.
Organizational performance 20
2.1.6 Outsourcing
and organizational performance 22
2.2 Theoretical
Framework 24
2.2.1 Resource
based view (RBV) theory 24
2.2.2 Transaction
cost economic (TCE) theory 25
2.2.3. Core
competency theory 26
2.2.4.
Contractual theory 26
2.3.
Empirical Review 27
2.4. Summary
of Reviewed of Related Literature 33
2.5. Gap in
the Literature 33
CHAPTER
3: METHODOLOGY
3.1 Research
Design 35
3.2 Sources
of Data 35
3.3 Population
of the Study 35
3.4 Sample
Size Determination 35
3.5.
Sampling Technique 36
3.6. Description of the Instrument 36
3.7. Validity of Research Instrument 36
3.8. Reliability of Research Instrument 36
3.9 Method of Data Analysis 36
CHAPTER
4: DATA PRESENTATION AND ANALYSIS
4.0
Introduction 38
4.1 Rate of return questionnaires 38
4.2.1 Socioeconomic characteristics of the respondents 39
4.2 Data Presentation 41
4.3
Test of Hypotheses 45
CHAPTER
5: SUMMARY OF FINDINGS, CONCLUSION
AND
RECOMMENDATION
5.1.
Summary of Findings 51
5.2.
Conclusion 52
5.3.
Recommendations 53
5.4.
Areas of Further Studies 53
REFERENCES
APPPENDICES
LIST
OF TABLES
4.1.:
Return of distributed questionnaire from the staff of MTN,
Airteland Etisalat 38
4. 2.: Socioeconomic characteristics
of the staff of MTN, Airtel and Etisalat 39
4.3.: What are the effect of business
outsourcing on MTN, Airtel and Etisalat performance
inUmuahia 41
4.4.: What are the benefits of
technology outsourcing on MTN, Airtel and
Etisalat
performance in Umuahia 42
4.5.:
Is there any relationship between outsourcing and organizational
performance in
MTN,
Airtel and Etisalat in Umuahia, Abia State 43
4.6:
What are the challenges of outsourcing in MTN, Airtel and Etisalat in
Umuahia 44
CHAPTER 1
INTRODUCTION
1.1 BACKGROUND
OF THE STUDY
The business environment in which organisations operate has witnessed a
tremendous change in the time past. The increase level of globalisation find
themselves operating in a highly competitive international market and the use
of highly advanced technologies has challenged the very basic principles and
ideologies of business management to compete in a global environment, therefore
organisations have had to change in order to sustain growth and break new
frontiers. As a result, most industries have transformed completely from manual
processes to complicated, automated and computerised technologies (Minoli, 2016).
In other words,
information communication technology usage and faster information flows have
revolutionised our way of life and the way business operate. The needs and
demands of consumers are also forcing organisations to reform and restructure
to ensure that they keep up with market demand (Entrekin and Lourt, 2001;
Schultheis and Summer, 2016).
The overall effect of this is that practice is
business and economic activities are constantly changing (Kong,2007).There is
no gain saying that if an organisation must survive in the business world today
it must focus on speed, flexibility and agility. To survive in a competitive
global market and to accomplish long term growth, organisations need to develop
and focus on their core competencies (Li-ttua and Simon, 2007; Merrifieeld ,
2016). In this situation , organisations needed to focus on main and core competencies whilst contracting
non-core function to an external entity
which will carry out those function as one of their core activities.
However global outsourcing has been identified as
concept that relates to building competitive capability or advantage by many
organisations, that is in either manufacturing or service oriented
business. It means organisations use
outside organisations for a broad set of service (Noe, 2003). Management of
most organisations see outsourcing as a strategy to improve organisational
performance or organisational development. In general, outsourcing can be
described as organisations delegating their non-core functions to an external
organisation that provides particular service functions or products ( Hausen,
2016) Outsourcing is defined as the procurement of products or services from
sources that are external to the organization (Rundquist, 2015).
Thus, outsourcing referred to a process in which an
organization delegates in-house operations/processes/services to a third party.
Outsourcing is a management strategy through which a company assigns some
non-core functions to more specialized, more effective and more efficient service
providers such that the organization can be left to perform and concentrate with
the core business activities. This outsourcing strategy can allow organisations
to focus on their core competencies in order to increase efficiency without
having to invest in people and technology (King, 2007; Lau and Zhang,
2006). Additionally, this strategy
permits organisations to become increasingly profitable, and better able to
service both local and international customers (Maidment, 2013).
Outsourcing had been in existence since the 1940s and
1950s in the western economy/word. However, it seems to appear recent in the
development of Nigeria organisation. Today in Nigeria, organisations contract
some of its functions to other organisations in order to concentrate on their
core functions. More specifically, communication organisations in Nigeria have
adopted outsourcing as part of their business strategy. In recent times, mobile
telephone network like MTN, Airtel and Etisalat have been involved in one form
of outsourcing project or the other. Example of some of the project these
organisations have outsourced in recent time include: customer service (call
centres), fleet management (transportation) and information that are common to
outsourcing are security, human resources (recruitment and selection), cleaning
etc. Therefore, the peculiarity of the operations of the information and
telecommunications organisations and the attendant of technically skilled
manpower have made these
organisations (MTN, Airtel and Etisalat)
to rely on external service providers. However, outsourcing is no longer
confined to information and communication technology (ICT) service, but has
expanded to engineering services, creative services, data management service,
hospitality and clinical, and human resources management (Adekunle, 2015).
1.2
STATEMENT OF THE PROBLEM
Outsourcing becomes one of the strategic directions of
doing business based on knowledge and technologies. However, business
outsourcing is not assessed unambiguously. Frequently, outsourcing strategies
are viewed negatively by the service receivers because of the fear of losing
control over the process. It takes time to build trust in a partnership with
companies. Therefore, initial trust would be a qualitative attribute that
managers should look for in their selection of vendors for outsourcing.
Moreover, organizations meet new challenges: “New tensions and conflicts are
the hallmarks of a network-based approach to human resource management (HRM)
and these are multiplied under certain sectorial and institutional conditions.
Also, the phenomenal growth in mobile
subscribers over the last few years has created huge opportunities for the
telecom infrastructure industry in Nigeria. The operators in developed markets
have already moved on to advanced active infrastructure outsourcing, operators
in developing markets are beginning to realize the potential of passive
infrastructure outsourcing. The intense competition in the telecom industry
forced all the operators to look for opportunities to reduce the cost of
operations by outsourcing tower infrastructure management related activities
which demand huge capital expenditure and operating expenditure.
The challenges faced by telecommunication (MTN,
Airtel and Etisalat) in implementing the outsourcing
strategy by Nigeria are numerous. These include; loss of critical
skills, leakage of confidential information and
interest conflict these factors most a time had negative impact on the
performance of telecommunication
companies in Nigeria.
Finally, Vendors on the other hand have been
disgruntled as the telecommunication have not adhered to service level
agreements and contracts. Resistance to change from staff is also often
witnessed in organizations that have decided to outsource some of its
operational functions.
Hence, the study examined the impact of outsourcing on organisational
performance, a study of MTN, Airtel and Etisalat in Umuahia
1.3 OBJECTIVES
OF THE STUDY
The general objective of this study is to examine the
impact of outsourcing on organisational performance, a study of MTN, Airtel and
Etisalat in Umuahia. Therefore, the study seeks to achieve the following specific
objectives to:
i.
identify the effect of business process outsourcing
on by MTN, Airtel and Etisalat performance in Umuahia.
ii.
ascertain the benefits of technology outsourcing to MTN, Airtel and
Etisalat performance in Umuahia.
iii.
establish the relationship between
outsourcing and organisational performance in MTN, Airtel and Etisalat in Umuahia.
iv.
determine the effect challenges of outsourcing on
performance of MTN, Airtel and Etisalat
in Umuahia
1.4 RESEARCH
QUESTIONS
The following
research question guide the study
i.
What are the effect of business process outsourcing
MTN, Airtel and Etisalat performance in Umuahia?
ii.
What are the benefits of outsourcing to
MTN, Airtel and Etisalat in performance in Umuahia?
iii.
Is there any relationship between
outsourcing and organisational performance in MTN, Airtel and Etisalat in
Umuahia?
iv.
What are the effect of challenges of
outsourcing on performance of MTN,
Airtel and Etisalat in Umuahia?
1.5 RESEARCH HYPOTHESES
The hypotheses
below were formulated to aid the study.
H01: Support,
printing, production, advertising, technology and distribution services have no
significant effect on performance of MTN, Airtel and Etisalat in Umuahia.
H02: Reduction in operating cost and
technological advancement are not significant benefits of outsourcing to MTN,
Airtel and Etisalat in Umuahia.
H03: There is no significant relationship
between outsourcing and organisational performance in MTN, Airtel and Etisalat
in Umuahia.
H04: Loss of critical skills, leakage of confidential
information and interest conflicts with outsourcing partners are not challenges
of outsourcing on performance of MTN, Airtel and Etisalat in Umuahia
1.6 SIGNIFICANCE
OF THE STUDY
The outsourcing of non-core operations of business
organisations has several implications which include a change in the business
process, staffing, cost profile and profitability of the embracing
organisation. As a matter of fact, the business process of an organisation
changes with the adoption of outsourcing strategy. This study is expected to
shed more light on the nature and the extent of the effects of outsourcing on
the performance of organisations. The outcome of this research is expected to
be of immense benefits to organisations management, project managers, financial
and management accountants, internal auditors, information systems specialists
and consultants the academe and other researchers who may want to carry out
further studies on issues relating to this study Specially, this study will
help the management of business to embrace new business procedures that will
provide a cost effective method of remaining competitive in the market place.
It will provide an avenue to evaluate the entire process of the business into
what is core and non essential which will entail a redirection of scarce
resources into
more productive venture. It will also enable
managements to concentrate on enhancing the core business ability and increase
global reach. Project managers will benefit immensely from this study because
it will increase their understanding and knowledge and also sharpen their
evaluation skills on outsourced business. It will help them to improve on how
to analyse projects cost and benefit and also to monitor the delivery of
productivity on outsource business the expected outcome,
The significance of the study can also be seen in the
performance of the financial and management. This study will enable them to
appreciate the changes, whether positive or otherwise in the profitability of
the organisations that has outsourced its business. It will enhance the ability
of management accountants to prepare relevant reports to management on the
effect of outsourcing.
This research work is also significant to the academic
community. In the first instance, it will serve as a reference material for
further studies on related topics.
In addition, it will contribute to the available
academic knowledge in the field of business strategic management and other
related subject.
It will make the researcher to reinforce the privilege
of the business with regards to their incentive that have been trampled down by
poor organisation, reviving the need for the organisation to live up to their
responsibility in caring for the welfare of their business.
Furthermore it will make the researcher to known the
outsourcing on organisation performance problem in their organisation and how
it affected the performance of their business and practical solution that will
serve as a panacea to identified problems.
It will make the researcher to serve as a reference
point to other organisation when making the decision on issues concerning
outsourcing on organisation performance.
1.7
SCOPE OF THE STUDY
This study focused on the impact of
outsourcing on organizational performance. The study concentrates on MTN,
Airtel and Etisalat in Umuahia. The study would identify the types
of activities outsourced and the benefits of outsourcing to MTN, Airtel and
Etisalat in Umuahia. The study also will establish
the relationship between outsourcing and organisational performance and also
determine the challenges of outsourcing in MTN, Airtel and Etisalat in Umuahia
1.8 LIMITATIONS OF THE
STUDY
The study is constrained by the following.
Time:
The
time needed to really conduct an extensive research will not be enough based on
the fact that the work will be done at a limited time frame combined with
school activities and day to day activities of trying to make ends meet.
Funds:
Financial
constraint in sourcing for relevant information, running around and the general
expenses involved in the study will be encountered based on the fact that the
researcher has no sponsor(s) and will be limited to little funds squeezed out
from his day to day activities of trying to make ends meet.
Respondent’s Attitude: some of the
respondents in the study area might be unwilling or disinclined to release
relevant information towards the success of this study due to reasons best
known to them.
1.9 PROFILE
OF THE STUDIED ORGANIZATION
1.9.1 Profile of MTN
MTN started their business in Nigeria in 2001. On
February 9, 2001, MTN started with four
available licenses to operate digital GSM (Global System for Mobile
Telecommunications) telephony from the Nigerian Communications Commission
(NCC). A licence fee of US$285 million was paid for an initial 15 year period,
allowing MTN Nigeria to provide and operate a 900 and 1800 MHz
second-generation digital mobile service within Nigeria.
With over 55 million subscribers, MTN Nigeria
Communications Limited (MTN) provides cellular network access and ICT solutions
to millions of Nigerians, connecting whole communities with each other and with
the rest of the world. It is also the largest subsidiary in the MTN Group – a
multinational telecommunications group offering world-class cellular network
access and business solutions to over 210 million subscribers in 22 countries
across Africa and the Middle East.
As a result of these massive investments, MTN Nigeria
now has the most expansive network coverage, spread across 3,340 cities, towns
and villages in all 36 states of the Federation, including the Federal Capital
Territory (FCT). MTN also provides network coverage to 89.24% of Nigeria's land
mass, while over 86.46% of the population have access to our services. We
continue to break new grounds in network expansion while providing
state-of-the-art network infrastructure
Since inception in 2001, MTNN has led the growth in
the voice market to become the biggest mobile operator in Nigeria and West
Africa. It is now pursuing new growth opportunities in the data and ICT space.
This lead position is evident in a differentiated and attractive array of
product and service offerings, as well as a growing bouquet of ICT products.
1.9.2
Profile of Airtel
fifth largest wireless carrier by subscriber base.
Airtel reported that its revenues for the fourth quarter of 2010 grew by 53% to
$3.2 billion compared to the previous year. The newly acquired Africa
division contributed $911 million to the total. However, net profits
dropped by 41% from $470 million in 2009 to $291 million 2010 due to
a $188 million increase in radio spectrum charges in India and an increase
of $106 million in debt interest.
1.9.3 Profile
of Etisalat
Etisalat started business in
Nigeria in 2008. Etisalat Nigeria launched one of the first
major broadband services in the country – EasyBlaze. The company is known for
its innovative products and services such as the Eco Sim and the first network
to offer special numbers to Nigerians as their mobile numbers via the
0809uchoose campaign. From
2012 to 2015, Etisalat Nigeria hosted the Etisalat Prize for Innovation,
established to promote African Internet
expansion.
In April 2013, Etisalat Nigeria announced it would
invest $500 million to expand its network, enabling further potential market
growth of 17%. In June 2013, it launched the Etisalat Prize for Literature
the first pan-African prize for debut published writers. In October 2016, Etisalat Nigeria announced
4G LTE with a frequency band 3 (1800 MHz). Speed test results indicate
28Mbit/s download and 11Mbit/s upload. This LTE network currently covers some
part of Lagos and Abuja.
In March 2017, Nigeria telecoms regulator pushed for
talks to halt takeover attempts by Etisalat creditors and reschedule its
outstanding $1.2 bln loan. In July 2017, Etisalat withdrew from the market
after its debt was not repaid or rescheduled. The local operator has renamed
itself 9mobile.
1.10 OPERATIONAL DEFINITIONS OF TERMS
Productivity:
This is the quantity and quality of goods or services produced by an employee
that meets or surpasses a given target. It is also measure in terms of the
input- output ratio where the ratio of the output is greater than input.
Quality
of Service: The outcome of sum of all the characteristic of a
service that impact their ability to meet or surpass the needs and requirement
of a customer..
Market
Share: The percentage of global system for mobile
telecommunication market that each organisation controls in Nigeria.
Customer
Satisfactions: This is the expectations of product
quality; service quality and price are met as measured by the number of
subscribers of the firm’s services.
Innovation:
This is the process of translating an idea or invention into a product or
service.
Core
Competencies: This is the core business of the firm,
where it has fundamental knowledge ability or expertise. It also means the main
products or service which the firm is established to offer.
Capacity
Management: Allocation of available resources
(equipment, machines or system and time) to meet planned demand.
Expertise:
This is proven knowledge and skills in an area of operation functions or
service delivery.
Risk
Transfer: This is defined as shifting of risk to external
service provider through outsourcing certain functions.
Outsourcing: This can be described as an organisation
delegating their noncore function to an external organisation that provides a
particular service, function or product.
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