Why Outsourcing?

Outsourcing Pays

In weighing the benefits and costs associated with outsourcing, you may want to consider the reasons companies commonly cite for outsourcing non-core functions and the benefits they expect to receive, as reported by The Outsourcing Institute:
 

  • Improve Company Focus: Outsourcing allows the company to focus on its core activities while an outside provider handles support services. It can enable an organization to accelerate its growth and success through expanded investment in areas offering the greatest competitive advantage.

 

  • Gain Access to World-Class Capabilities: Outsourcing means specialization. Outsourcing providers can bring in worldwide, world-class capabilities. Just as their clients are outsourcing to improve their focus, vendors have honed their skills at providing the services in which they specialize; outsourcing is their core business.

 

  • Accelerate Re-engineering Benefits: It allows a company to immediately realize the benefits of re-engineering by outsourcing support functions to an organization than can immediately guarantee the improvements offered by re-engineering.

 

  • Share Risks: Outsourcing providers make investments not on behalf of just one company, but on behalf of many clients and eliminate the necessity of investment by the company.

 

  • Free Resources for Other Purposes: Outsourcing permits an organization to redirect its resources from non-core activities, or at least the staff slots they represent, into greater value-adding activities.

 

  • Make Capital Funds Available: By outsourcing, the company reduces the need to invest capital funds in non-core functions, making capital funds more available for core functions. It can also improve certain financial ratios by eliminating the need to show return on equity from capital investments in non-core areas.

 

  • Reduce and Control Operating Costs: Access to the lower cost structure of an outside provider may result in greater economy of scale and is one of the most compelling tactical reasons for outsourcing.

 

  • Resources Not Available Internally: Companies outsource because they do not have access to the required resources within the company and they don't want to build these resources from the ground up. A major reorganization may have divested the company of the resource; a subsidiary may have been spun off, etc. Similarly, rapid growth is a strong indicator that outsourcing may be right.

 

  • Function Difficult to Manage or Out of Control: Outsourcing cannot solve this problem and should not be asked to do so.