Outsourcing can be defined as “the strategic use of outside resources to perform activities traditionally handled by internal staff and resources.” Outsourcing is a strategy by which an organization contracts out major functions to specialized and efficient service providers, who ultimately become valued business partners. And in some cases, outsourcing involves the transfer of employees from the company to the outsourcing company.
1. Lower operational and labor costs are among the primary reasons why companies choose to outsource. When properly executed it has a defining impact on a company’s revenue recognition and can deliver significant savings.
2. Companies also choose to outsource or offshore so that they may continue focusing on their core business processes while delegating mundane time consuming processes to external agencies.
3. Outsourcing and offshoring also enable companies to tap in to and leverage a global knowledge base, having access to world class capabilities.
4. Freeing up internal resources that could be put in to effective use for other purposes is also one of the primary benefits realized when companies outsource or offshore.
5. Many times stranded with internal resource crunches, many world class enterprises outsource to gain access to resources not available internally.
6. Outsourcing, many a time is undertaken to save costs and provide a buffer capital fund to companies that could be leveraged in a manner that best profits the company.
7. By delegating responsibilities to external agencies companies can wash their hands off functions that are difficult to manage and control while still realizing their benefits.
8. Outsourcing and especially offshoring helps companies mitigate risk and is also among the primary reasons embarked upon.
9. Outsourcing also enables companies to realize the benefits of re-engineering.
10. Some companies also outsource to help them expand and gain access to new market areas, by taking the point of production or service delivery closer to their end users.
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