Outsourcing, the process of acquiring goods or services instead of producing them, has been rapidly spreading throughout the business industry as a break of having increased budget flexibility and control. Different organisations find it advantageous because of the reduced expenses they pay for the services, employees’ salary, and other capital expenditure. The practice can also lower costs due to economies of scale. This idea became popular in America during the early years of the 21st century.
Companies reason that, by outsourcing the low value activity, they can concentrate on the innovative and creative activities that will make them money and the company’s core functions. This will grant them greater flexibility and ability to define what they need to be doing more readily.
- This may be finding specific supplier benefits;
- delivering higher quality service due to greater ability to focus;
- improvement in internal management disciplines resulting from the exercise itself;
- a lessening of dependency upon internal resources;
- greater control over the company’s budget; quicker setup of the service;
- a reduction in investment required in internal infrastructure;
- an uplift in the ability to control delivery dates;
- an increase in flexibility to meet changing business conditions;
- ability to purchase industry best practice;
- improved risk management; acquisition of innovative ideas;
- increased commitment and energy in non-core areas;
- improved credibility and image by associating with major providers;
- generation of cash by transferring assets to the service provider;
- access to markets and business opportunities through the supplier’s network;
- and the opportunity to turn fixed costs into variable costs.
Still looking for the best reasons? Well, this activity can mainly cut your expenses without degrading the quality of service delivered. You can pay more attention to your core activities and focus on departments that may need improvement. Lastly, outsourcing can free up internal staff for large projects, thus growing the business. Outsourcing is another stepping stone made possible by technology, another practice in which companies can have a choice of spending less while lowering costs and maximising flexibility.