BENEFITS OF OUTSOURCING



 

Some Reasons Managers May Choose to Outsource Include:

  • Cost Savings

  • – Outsourcing to countries with lower labor costs.

  • Knowledge

  • – Access to intellectual property and wider experience and knowledge.

  • Focus on Core Business

  • – Companies can often be more efficient if they are able to concentrate on what they do best, rather than wasting resources trying to develop new areas of expertise.

  • Contract

  • – Outsourcing firms will guarantee the services they offer, whereas internal processes are not guaranteed.

  • Operational Expertise

  • – Access to operational best practices that would be too difficult or time consuming to develop in-house.

  • Access to Talent

  • – Access to a larger talent pool and a sustainable source of skills. Often the talent pool of the home market will not sustain growth.  Recruiting is also time consuming and expensive.

  • Catalyst for Change

  • – An organization can use an outsourcing agreement as a catalyst for major step change that cannot be achieved alone.

  • Enhance Capacity for Innovation

  • – Companies increasingly use external knowledge service providers to supplement limited in-house capacity for product innovation.

  • Reduce Time to Market

  • – The acceleration of the development or production of a product through the additional capability brought by the supplier.

  • Commodification

  • – The trend of standardizing business processes, IT Services, and application services that enable companies to buy at the right price, allowing businesses to access services that were previously only available to large corporations.

  • Risk Management

  • – An approach to risk management for some types of risks is to partner with an outsourcer who is better able to provide the mitigation.

  • Scalability

  • – The outsourced company will usually be prepared to manage a temporary or permanent increase or decrease in production.

  • Cost Restructuring

  • – Outsourcing offers a move from fixed to variable costs and also makes variable costs more predictable.

  • Creating Leisure Time

  • – Individuals may wish to outsource their work in order to optimize their work-leisure balance.

  • Improve Quality

– Achieve a step change in quality through contracting out a service with a new service level agreement.

Sources:
– Gareiss, R (2002, 18 Nov) Analyzing The Outsourcers.  Retrieved from Information Week.
– Drezner, D.W.  (2004) The Outsourcing Bogeyman.  Retrieved from Foreign Affairs 
– Engardio, P.  (2006) Outsourcing: Job Killer or Innovation Boost? Retrieved from Business Week
– Chakma, J., Calcagno, J., Behbahani A., & Mojtahedian, S.  (2009, October).  Is it Virtuous to be Virtual? The VC Viewpoint.  Nature Biotechnology, Volume 27(10).  Retrieved from Nature Biotechnology

Is Outsourcing for You?