Wednesday, 27 March 2013

OUTSOURCING





Given the current economic scenario, we expect customers to be spending more on outsourcing to reduce costs and improve productivity. However, we can expect outsourcing to gain some momentum only in the second half of 2013.

Generally, political decisions in their true sense are based on their financial viability and it is unlikely that any government will establish an agenda that jeopardizes economic interests. Also, Global business will continue to drive the growth of outsourcing industry in order to achieve core competencies, reduce and eliminate costs and achieve economies of scale.

Every company regardless of size and industry can take advantage of outsourcing some of its business activities such as IT, production, distribution, delivery, call center service, etc.

Any value chain activity in your business model can be outsourced - however it is up to the business management to make decisions whether outsourcing is a smart decision and what should be outsourced. On the other hand, those activities, processes and departments that are important to your business success - the ones that create your competitive advantage should be kept in-house.

Let's take a look at the following outsourcing pros and cons:

OUTSOURCING PROS

Businesses generally make decision to outsource some of its business activities and processes for the following major reasons for outsourcing:
  • Improves Business Focus. 
  • Reduces Production and Operating Costs. 
  • Gains better capabilities . 
  • Supplies the resources that are not available in the company. 
  • Reduces the time to market. 

OUTSOURCING CONS

Sometimes outsourcing can turn out to be a business failure because of the following reasons:
  • Quality Suffers. 
  • High Switching Costs. 
  • Loosing Control over Business Operations. 
  • Communication Issues. 

Outsourcing can be very profitable but on the other hand it could mean a risky move for some companies. Outsourcing decisions require performing accurate analysis and what-if scenarios by decision makers in order to minimize risk, time and cost with outsourcing. What works for one company can be a failure for another.

— Sources: iSixSigma, Vital Enterprises, Smarter Solutions, Forbes.



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