Essay on A Brief Introduction to Outsourcing Management

Introduction Outsourcing is a business trend that has greatly increased in recent years with more and more companies outsourcing part or whole of their functions/activities. Outsourcing can be defined as the transfer of a business function or activity previously produced in-house to an external supplier which then takes prime responsibility for fulfilling the task (Finn, 2007). Although companies may perceive outsourcing as an alternative to reduce costs as a result of access to economies of scale and improve performance as a result of unique expertise that a large outsourcing vendor can deliver (Roodhooft and Warlop 1999 cited by Jiang and Qureshi 2006), outsourcing has many hidden cost and risks that can lead to create various†¦show more content†¦A research examining the outsourcing practices of more than a 100 western companies, found that the primary rationale to outsource was to save on overheads through short-term costs savings (PriceWaterHouseCoopers, 1999 cited by Kakabadse and Kakabadse 2002). Furthermore in the IS/IT industry companies outsource primarily for financial reasons as stated by (Karyda et al, 2006) where companies are expecting to improve rate of return investments (ROI), reduce costs and achieve economies of scale that would not be achievable internally. The cost reduction achieved by outsourcing providers is mainly due to specialisation and achievement of economies of scale, since providers are often servicing a large number of clients; they often achieve lower unit costs than any single company can, what is more outsourcing providers are more likely to be able to invest in new technologies and innovative practises than any company not specialising in that activity are (Alexander and Young, 1996 cited by Bryce and Useem, 1998). Further factors contributing to the ability of outsourcing providers to offer cost reduction to its customers are globalisation and new technology which have allowed outsource providers to move business processes to areas where labour costs are substantially lower (Finn, 2007). Example By moving business processes to countries with lower costs such as China where labour costs forShow MoreRelatedImplementation Of The Planwise Au Information Security Policy824 Words   |  4 Pages1. 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