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THE TOP FIVE REASONS WHY COMPANIES OUTSOURCE

 

One of the most important insights gained from working with hundred of companies looking into and implementing outsourcing is the simple but too often overlooked fact their for outsourcing to be successful, management must have a clear set of goal and objectives in mind from the start. Outsourcing may entail significant organizational upheaval, transfer of important assets, dislocation of people, and long-term contractual relationships with an outside partner. None of these make sense unless the benefits to be gained and the risks involve are clearly understood and managed from the outset.

(1)Accelerate reengineering benefits

Reengineering aims for dramatic improvements in critical measures of performance such as cost, quality, service and speed. But the need to increase efficiency can come into direct conflict with the need to invest in core business. As non-core internal functions are continually put on the back burner, systems become less efficient and less productive. By outsourcing a non-core function to a world class provider, the organization can begin to see the benefits of reengineering.

(2)Access to world class capability

World class providers make extensive investments in technology, methodologies, and people. They gain expertise by working with many client facing similar challenges. This combination of specialization and expertise gives customers a competitive advantages and help them avoid the cost of chasing technology and training. In additional, there are better career opportunities for personnel who transition to the outsourcing provider.

(3)Improve company focus

Outsourcing lets a company focus on its core business by having operational function assumed by an outside expert. Freed from devoting energy to areas that are not in its expertise, the company can focus it resources on meeting it customersí needs.

(4)Reduce operating costs

Companies that try to do everything themselves may incur vastly higher research, development, marketing and deployment expenses, all of which are passed on the customer. An outside providerís lower cost structure, which may be the result of the greater economy of scale or other advantages based on specialization, reduces a companies operating costs and increases its competitive advantage.

(5)Resources not available internally

Companies outsource because they do not have access to the required resources within the company. Outsourcing is a viable alternative to building the needed capability from the ground. New organizational, spin-offs, or companies expanding into new geography or new technology should consider the benefits of outsourcing from the very start.