Company > Why Outsource?

Modern society is built around specialization more tasks are outsourced today then ever before. We outsource things that have one or more of three characteristics they are complex, important, or distasteful. The decision to outsource is often made in the interest of lowering firm costs, redirecting or conserving energy directed at the competencies of a particular business, or to make more efficient use of labor, capital, technology and resources.

The main reasons and in turn the list of benefits that companies get when they get to outsourcing to address their issues include:

  1. Lower Cost The lowering of the overall cost of the service to the business. This will involve reducing the scope, defining quality levels, re-pricing, re-negotiation, cost re-structuring. Access to lower cost economies through off shoring called "labor arbitrage" generated by the wage gap between industrialized and developing nations.
  2. Cost restructuring Operating leverage is a measure that compares fixed costs to variable costs .Outsourcing changes the balance of this ratio by offering a move from variable to fixed cost and also by making variable costs more predictable and also thus have a control over budget.
  3. Improve quality Achieve a step change in quality throughcontracting out the service with a new Service Level Agreement.
  4. Knowledge Access to intellectual property and wider experience and knowledge.
  5. Contract Services will be provided to a legally binding contract with financial penalties and legal redress. This is not the case with internal services.
  6. Operational expertise Access to operational best practice that would be too difficult or time consuming to develop in-house.
  7. Staffing issues Purchase of industry best practice by accessing a larger talent pool and a sustainable source of skills and also acquiring innovative ideas.
  8. 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.
  9. 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.
  10. Reduce time to market The acceleration of the development or production of a product through the additional capability brought by the supplier like better security, continuity etc. Gain market access and business opportunities through the suppliers network.
  11. Commodification The trend of standardizing business processes, IT Services and application services enabling businesses to intelligently buy at the right price. It allows a wide range of businesses access to services which was previously only available to large corporations.
  12. 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.
  13. Time zone A sequential task can be done during normal day shift in different time zones - to make it seamlessly available 24x7. Same/similar can be done on a longer term between earth's hemispheres of summer/winter.