Outsourcing

Outsourcing
Outsourcing involves the transfer of the
management and/or day-to-day execution of an
entire business function /activity to an external
service provider.

Reasons for Outsourcing

Cost savings: The lowering of the overall cost of the
service to the business.
Cost restructuring: moving from fixed to variable cost
and also by making variable costs more predictable.
Improved quality
Knowledge: Access to intellectual property and wider
experience and knowledge.




Reasons for Outsourcing

Cost savings: The lowering of the overall
cost of the service to the business.

Cost restructuring: moving from fixed to
variable cost and also by making variable
costs more predictable.

Improved quality

Knowledge: Access to intellectual property
and wider experience and knowledge.

Operational expertise: Access to operational
best practice that would be too difficult or time
consuming to develop in-house.

Staffing issues: Access to a larger talent pool
and a sustainable source of skills.

Capacity management: An improved method
of capacity management of services and
technology where the risk in providing the
excess capacity is borne by the supplier.

Catalyst for change: An organization can use
an outsourcing agreement as a catalyst for
major step change that can not be achieved
alone. The outsourcer becomes a Change
agent in the process.

Pros:

1. Lower labor costs

2. Low investment risk

3. Improved access to better skills and
expertise not found in-house

4. Time-to-market improvement: Products can
be launched closer to the point of
consumption

5. Introduction of new and legacy products in
new markets is more efficient, because of
local familiarity with the market.

Cons
1. Potential security problems
2. The Challenge of Identifying
qualified and reliable suppliers
3. Disruption of supplies
4. Low product quality and longer lead
times
5. Difficulty in protecting confidentiality