This overview of outsourcing was prepared by Matthew Waldrop while a Business Administration major in the College of Business at Southeastern Louisiana University.

 

Introduction

This article briefly explains the benefits of outsourcing work to other countries. While outsourcing has a negative connotation, there are benefits in reach for companies large and small when dealing with outsourcing.

The Idea in a Nutshell

 

Outsourcing involves a conscious decision to abandon or forgo attempts to perform certain value chain activities internally and instead to farm them out to outside specialists and strategic allies. Two main reasons company’s outsource are that outsiders can often perform certain activities better and cheaper and that outsourcing allows a firm to focus its entire energies on those activities at the center of its expertise and that are the most critical to its competitive and financial success.

The Top Ten Things You Need to Know About Outsourcing

 

1.      Cost savings — The lowering of the overall cost of the service to the business. This will involve reducing the scope, defining quality levels, re-pricing, re-negotiation, cost re-structuring.

2.      Focus on Core Business —For example often organizations outsource their IT support to specialized IT services companies.

3.      Cost restructuring — Outsourcing changes the balance of this ratio by offering a move from fixed to variable cost and also by making variable costs more predictable.

4.      Improve quality — Achieve a steep change in quality through contracting out the service with a new service level agreement.

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5.      Operational expertise — Access to the best practice that would be too difficult or time consuming to develop in-house

6.      Access to talent — Access to a larger talent pool and a sustainable source of skills, in particular in science and engineering.

7.      Enhance capacity for innovation — Companies increasingly use external knowledge service providers to supplement limited in-house capacity for product innovation.

8.      Catalyst for change — An organization can use an outsourcing agreement as a catalyst for major step change that can not be achieved alone. The outsourcer becomes a change agent in the process

9.      Tax Benefit — Countries offer tax incentives to move manufacturing operations to counter high corporate taxes within another country.

10.      Venture Capital — Some countries match government funds venture capital with private venture capital for start-ups that start businesses in their country.

 

The Video Lounge

This video talks about how outsourcing is effective. It also shows how outsourcing works and as well as how many are actually doing nothing for their job and paying third world country people very little money to do their assigned work..Not only lower level employees but even high executives.

My Take

—  By lowering costs and allowing them to focus on more important tasks, outsourcing brings many advantages to a company .  However, employees are being laid off because of the small amounts of cost companies are having to pay for the outsourced work.  Also, there is a lack of communications, many of these outsource companies speak very little English so problems between the companies are very difficult to handle.  So outsourcing can help your company lower costs, but it also can hurt your company or employees.

References

 

            Thompson, T. (2010, August 20). Outsourcing .  Wisegeeks.  Retrieved September 8, 2010, from http://www.wisegeek.com/what-is-outsourcing.htm

            Parker, Shaun.  Outsourcing: Maximize Your Outsourcing Efforts. NBS. Retrieved September 11, 2010, from http://www.nbsusa.com/?outsourcing-maximize-your-outsourcing-efforts,77

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Contact Info: To contact the author of “Top Ten Management on Outsourcing,” please email Matthew Waldrop at Matthew.Waldrop@selu.edu.

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Biography

David C. Wyld (dwyld.kwu@gmail.com) is the Robert Maurin Professor of Management at Southeastern Louisiana University in Hammond, Louisiana. He is a management consultant, researcher/writer, and executive educator. His blog, Wyld About Business, can be viewed at http://wyld-business.blogspot.com/. He also serves as the Director of the Reverse Auction Research Center (http://reverseauctionresearch.blogspot.com/), a hub of research and news in the expanding world of competitive bidding. Dr. Wyld also maintains compilations of works he has helped his students to turn into editorially-reviewed publications at the following sites:

·      Management Concepts (http://toptenmanagement.blogspot.com/)

·      Book Reviews (http://wyld-about-books.blogspot.com/) and

·      Travel and International Foods (http://wyld-about-food.blogspot.com/).                

 

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