Outsourcing Reuters Introduction Chapter

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Outsourcing of back-Office operations as a way to improve profit at Thomson Reuters

The international business environment has evolved to be increasingly complex and highly competitive. As a result many organizations have been forced to streamline operations and to look for new sources of innovation in efficiency. Many organizations have turned to outsourcing to reduce costs in non-essential operations and processes. Thomson Reuters is no stranger to this trend. In 2008 the organization announced that it would shed fifteen hundred employees across all of its divisions globally and about half of these cuts were targeted in European positions (The Economic Times, 2008). The organization must now find ways to handle the same operations with a smaller staff.

In this environment redesigning operations and processes to take advantage of outsourced labor in non-essential business functions can allow the organization to secure resources to maintain the most critical functions in the organizations strategy. Outsourcing can create a wide range of objections and debate among academic and investors however (Benson, et al., 2010). For example, one disadvantage to outsourcing internationally in developing markets is that these countries often lack the judicial system to protect property rights (Goldberg, 2009). Thus by outsourcing processes organizations can make themselves vulnerable to certain risks.

However, there is also much that can be gained from outsourcing. Outsourcing can be defined as "purchasing ongoing services from an outside company that a company currently provides, or most organizations normally provide, for themselves"; these activities may range from manufactured parts to services, such as payroll, human resources, and accounting among many others (Godhar & Deshpande, 2009). Outsourcing of process and activities that do not directly add value to the goods or services that a company produces can allow it to focus its internal resources on processes that are value creating and improve its overall value proposition which can in turn make it more competitive.

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More and more companies have realized that information technology (IT) outsourcing, once viewed as a cost reduction tool, could facilitate and even enable the transformation of their core business processes and have dramatically extended the scope of interorganizational collaboration (Li, 2014). Through collaboration organizations can focus solely on their core competencies which have been shown to actually improve these competencies in some organizations. Therefore outsourcing can have significantly more benefits to an organization than just cost savings alone. By creating strategic and enduring outsourcing partnerships an organization can create value in a wide range of different perspectives. One study has even found that outsourcing functions such as research and development (R&D) has led to positive outcomes in product innovation (Bertrand & Mol, 2013)

Outsourcing functions such as information technology development has been a popular option for many years. However, some studies have suggested that non-IT expenses can increase when IT outsourcing is used (Han & Mithas, 2013). Yet the savings in IT related expenses generally justify these increases and an efficient internal IT team that can manage external IT outsourcing has also been shown to be a valuable strategy (Han & Mithas, 2013). The internal IT can then ensure that the overall IT strategy is being met by the external partners and act as project managers in the process which can reduce the expenses of other departments.

Research Objectives

The critical question is exactly which operations are suited to be outsourced and how best to handle creating these partnerships. Thomson Reuters….....

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