Why
Should I Outsource?
o Improve Company Focus Outsourcing lets the company focus on broader business issues while having operational details assumed by an outside expert. o Access to World-Class Capabilities Often vendor capabilities are
the result of extensive investments in technology, methodologies, and people
investments made over a considerable period of time. In many cases, vendors’ capabilities
include specialized industry expertise gained through working with many
clients facing similar challenges.
This expertise may be translated in skills, processes or technologies
uniquely capable of meeting clients’ needs o Accelerate Reengineering Benefits Outsourcing is often a byproduct
of another powerful management tool-business process reengineering. It allows an organization to immediately
realize the anticipated benefits of reengineering by having an outside
organization, one that is already reengineered to world-class standards, take
over the process. o Shared Risk Outsourcing is a vehicle for
sharing risk across many companies.
Outsourcing providers make investments on behalf of their many
clients. By sharing these
investments, the risks borne by any single company are significantly reduced. o Free Resources for Other Purposes Every organization has limits on
the resources available to it. The
constant challenge is to ensure that its limited resources are expended in
the most valuable areas. Outsourcing
permits an organization redirect its resources from non-core activities
toward activates, which have the greater return. o Make Capital Funds Available Outsourcing makes capital funds
more available for core areas. It can
also improve certain financial measurements of the firm by eliminating the
need to show return on equity from capital investments in non-core areas. |
o Cash Infusion Equipment, facilities, vehicles, and licenses used in the current
operations all have value and, in many cases can be sold to the vender The vendor then uses these assets to provide services back to the client and frequently to other clients. Depending on the value of the assets involved, this sale may result in a significant cash payment to the customer. o Reduce and Control Operating Costs The single most
important tactical reason for outsourcing is to reduce and control operating
costs. Access to the outside
provider’s lower cost structure, which may be the result of a greater economy
of scale or some other advantage based on specialization, is clearly and
simply one of the most compelling tactical reasons for outsourcing. o Resources Not Available Internally Companies outsource
because they do no have access to the required resources within the
company. Or, perhaps a major
reorganization has divested the company of the resource, or a subsidiary was
spun-off, but needed functional areas such as logistics or a computer data
center remained with the parent company.
Outsourcing is
certainly one option for addressing these types of problems. Outsourcing does no however, mean
abdication of management responsibility. |