8/3/2019 The Top Ten Reasons for Outsourcing
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The Top Ten Reasons for Outsourcing
Outsourcing is the latest buzzword in global economy today, but
it also makes for good
business sense for a lot of businesses. A lot is being written
on the subject but the benefits of
outsourcing far outweigh the reasons why companies should not
opt for it. The top 10 reasonsfor outsourcing are:
1. Savings in Labor Cost - This is perhaps the most important
reason why companies should
opt for outsourcing some of their activities. The cost of labor
in some of the developed
countries is extremely high and creates a huge expense for the
employers. If the same jobs
were to be done at a far lower price by equally skilled
personnel then it is definitely
advantageous.
2. Growing Global and Local Market Shares - More importantly,
even if they do not
outsource, their rivals will. This will affect them adversely as
their rivals will gain in terms of
profitability and lower costs. Able to pass on high quality at
lower prices, rivals will walkaway with market shares, which a firm
cannot afford to lose. Stagnating corporate profits will
limit the creation of new capital and its reinvestment within
the domestic economy.
3. Communications - With the improvement in telecommunication
networks and lowering of
telecom costs across the world, outsourcing as an option
provides round the clock services to
companies and their clients without putting too much of a strain
on the existing manpower.
4. Speed - As a result of better communications, outsourcing has
helped a number of
companies reduce their turn around times by taking advantage of
the time difference between
countries. In the big picture, firms reduce time to market on
new products and improvements
beating rivals that do not outsource.
5. Tax Breaks - A number of companies in the US have benefited
through tax breaks from
outsourcing. According to Federal Law, companies can defer
payment of tax on profits
earned abroad for an indefinite period. These taxes are to be
paid only when they return these
profits to the US.
6. Move to Higher Segments of the Value Added Chain - The move
to outsource helps the
higher income earning countries to move to higher segments of
the value added chain as they
are now free of some tasks that have been outsourced.
7. Profitable Use of In-house Resources - Firms around the world
are attempting to make
the most of their in-house talent pool. Expertise and experience
are definitely in short
supply,much in demand and more importantly, expensive.
Outsourcing helps resolve this
dilemma and frees a large pool of in house resources for other
work.
8. Focus to Accelerate Business Transformation - This is done by
passing on various
specialized jobs to the outsourced vendor and focusing on the
core business. This results in
more time spent working on strategic issues for business
transformation and implementation
of the same.
9. Access to Skill Sets and World-wide Capabilities - The
growing shortage of skilledworkers in the US has prompted companies
to look elsewhere for these skill sets.
