Monday, June 6, 2011     17:19

Outsourcing Trends

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Outsourcing is when a company uses a third party to carry out some of its work. This typically involves work other than the company's own core activities. The probable benefits of outsourcing include lower costs, access to greater skills and experience and more effective scaling of the company's own business activities.

Specialization

Outsourcing a specific activity can be effective if the third-party firm specializes in that activity. Then it will almost certainly have greater experience, better contacts and better-trained staff for that activity than the company using outsourcing. This is accurate of many areas of business that don't relate to a company's own products and services. For instance, a butcher, a baker and a candlestick maker could all benefit from the same firm performing accounting or marketing services on an outsourced basis.

Economies of Scale

 In many cases a company offering outsourcing services will be larger than its customers. Even when this isn't the case, the company offering the services will be dedicating more resources to the specific activity in question. For instance, the butcher, baker and candlestick maker might each have to hire an in-house accountant at full-time rates but not really have enough work for the accountant to fill her hours. If all three firms outsourced their accountancy, the outsourcing company might be able to assign two accountants to carry out the work required for all three firms.

 

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