According to the Outsourcing Index 2002, provided
by The Outsourcing Institute, the main reasons behind outsourcing
are as follows:
Improve Company Focus. Outsourcing allows
you to focus on your core business. Freed from devoting energy
to areas that are not in your expertize, you can concentrate
your resources on meeting thrg the customers' needs.
Reduce the operating cost. iIt happens many
a times that company that tries to do everything themselves
incurs huge research & development expenses, advertising and
marketing expenses and so on, which are passed on to the customers.
An outsider's lower cost structure will reduce the company's
operating cost and increae it's competitive advantage.
Free Resources. Every company has limited
availability of resources, specially, the quality HUMAN RESOURCE.
Outsourcing will help them to redirect their available resources
towards activities which serve the customers. The organization
can redirect these people onto activities focused on the customers.
Access to world class capabiities. Specialized
service providers make extensive investments in technology,
mwthodologies and people. The combination of the specialization
combined with expertise gained by working with clients facing
similar problems, gives the user of this service a competitive
advantage. He can do so even by staying away from the pressure
of chasing technology and training.
Access to limited resources. New companies,
spin-offs or organizations expanding their geographical areas
or service and technology should consider the benefits of outsourcing
from from the word GO.
Re-engineering benefits The need to increase
effeciency, many a times, come into direct conflict with the
need to invest in core business and the system becomes less
efficient and less productive. Outsourcing the non-core fuctions
to a specialized provider helps you to enjoy the benefits of
re-engineering.
Difficult or complicated functions. Outsourcing
can be one option for addressing this problem. However, if the
expections or needed resources are not clearly understood, then,
insted of improving the situation it may further de-grade it.
Get hands on capital funds. Outsourcing
can help to reduce the need to invest the funds in non-core
business functions. Instead of acquiring the resources, they
are contracted on an operational expense basis.
Reduce risk. Outsourcing providers make
investments on behalf of many clients. This way, sharing of
investments spreads risks and reduces the risk born by a single
company.
Cash infusion. Outsourcing may invlove transfer
of assets from customer to the provider. He, then uses these
assets to provide services back to the client. This sale may
result in a significant cash payment to the customer.
