Outsourcing, freedom and sovereignity

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Cost saving not the best reason

Though it's wise not to overestimate the benefits (as the TPI survey shows), outsourcing is about COST SAVINGS, and healthy and growing companies find the most efficient way to spend their scarce capital.

Maybe you could've elaborated on this some more. From what I've heard, lowering costs is the worst reason to outsource a function. However, the reasons TO outsource sound like they are related to overall cost of running a business. I guess it's where the emphasis lies. From what I understand, the rational reasons to outsource are to improve quality of service, and to rid oneself of a function that is not core to the business. One of these relates to the cost of operations. If your quality of service goes up then you're spending less time dealing with problems in that area (save time and money), and again if you take out something that's needed in your business but not core to its function, that leaves you time to better develop your business, rather than dealing with something that's necessary but extraneous to what your true goal is.

The thing is that typically outsourcing ends up costing a little more than it would have if you were doing the same thing in-house. But you have to consider what you get in return. Even though it costs more, it may be worth it.

I think the emphasis in outsourcing should be on efficiency, not the term "cost savings". I think that misplaces the proper emphasis. A few years ago I was hearing from senior engineers who were telling it straight. Their company had outsourced software development to a foreign company. They did it to save money, because the labor cost was cheaper, but their efficiency went into the toilet. They complained that they got 3 versions of the software back, each time they had major bugs in them. IMO this kind of outsourcing was a mistake. It didn't satisfy the goals of what it should be.

Posted by: Mark Miller   Posted on: 04/14/06 You are currently: a Guest | Members login | Terms of Use

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