Why Outsourcing

It may have started as a way to cut costs, but executives for another reason now embrace outsourcing - it gives them more control over business outcomes. In a recent survey of more than 400 health, manufacturing, retail and travel executives in the UK and Europe, 86% said outsourcing gives them more control over business results in a variety of critical areas, the most important being the ability to plan. While cost cutting is among these key areas, the executives also reported equal levels of control in reliability, cost variability improvements and effective implementation of ideas. Furthermore, 55% of respondents said outsourcing allows their companies to implement strategies and change at a faster and more controlled rate. And more than half (57%) the executives surveyed said they experience control gains within the first eight months of an outsourcing agreement.
"Industry leaders are beginning to view outsourcing as a prescription for change versus an antidote to rising costs," says a Industry leader!
As for the overall prevalence of outsourcing, more than 80% of respondents said they are committed to outsourcing at least one business function permanently. Only 14% plan to use outsourcing on a temporary basis to improve key functions and return them in-house once efficiencies are realized. Which functions and processes are outsourced most frequently? Information technology is the most common at 43%, followed by supply chain (36%), learning/training (31%), human resources (25%), finance and accounting (21%) and customer relationship management (13%).

Advantages of Outsourcing:

  • Activity can be performed better or more cheaply by outside specialists
  • Activity is not crucial to achieving competitive advantage
  • Reduces firm's risk exposure to changing technology and /or changing buyer preferences
  • Streamlines firm operations in ways to
  • Cut cycle time
  • Speed decision-making
  • Reduce coordination costs