What causes companies to outsource? The top three drivers that most often lead to an outsourcing event to be:
- Cost or internal headcount needs to be reduced.
- Internal capacity is constrained by increasing market demand.
- Internal manufacturing or service performance is insufficient or does not meet requirements (see Figure 1)
Interestingly, senior management chose constrained capacity rather than the need to reduce costs as the primary driver of outsourcing reviews. The overall result may indicate that those below senior management may be assuming that outsourcing is being considered because costs are out of line. Perhaps management could lower the resistance to outsourcing by more deliberately communicating the rationale and objectives of each outsourcing program.
In the largest companies, the strategic sourcing process primarily drives an outsourcing review. This is a sourcing risk management best practice, and is one that should be adopted by all organizations.
Two common types of outsourcing are Information Technology (IT) outsourcing and Business Process Outsourcing (BPO). Most companies are looking to improve business performance through 3 critical drivers:
- Reduction in cost
- Focus on core business operations for competitive advantage
- Achieving superior customer satisfaction and use it as a competitive strategy
Non core business functions, however critical
Have high volumes
Are repetitive and routine
Reflect consistent customer needs
Have opportunities to leverage
Are service and efficiency driven
Are easily measurable in terms of performance
Core business functions and business drivers
Support key business processes
Get influenced by external forces
Require high content expertise
Are ad-hoc, periodic future oriented projects
Are difficult to measure
Have high impact on organization as a result of non performance, failure or mistake
The steps need to be followed before outsourcing your projects
- Learn the benefits of outsourcing
- Point out the benefits you are looking for while outsourcing the projects to
- Find out the best location that suitable for your business
- Find out the best Service Provider from that location which can meet gain the benefits of outsourcing