Eyes Wide Open: The Pros and Cons of Outsourcing

The decision to outsource or not is a fundamental one for most businesses. Firms need to be fully aware of the pros and cons and enter the agreement with their eyes wide open.

| March 10, 2015

Consulting on Consulting
By Steven Young

The decision to outsource or not is a fundamental one for most businesses. Firms need to be fully aware of the pros and cons and enter the agreement with their eyes wide open. The appetite for outsourcing traverses the world and most major industries. In 2013, global outsourcing market revenue was $82.9 billion, up from $45.6 billion in 2000. Yet many firms envision greater efficiencies and reduced costs without truly understanding the benefits and pitfalls. For those contemplating outsourcing, here is a brief overview of some of the key points to consider.

MORE FOCUS AND AGILITY

The biggest single advantage of outsourcing is that it provides the firm an increased ability to focus on where it competes by concentrating its management, intellectual capacity, IT spend and corporate energy on its core competencies and the primary goal of making the firm more competitive. The firm can effectively offload all of the business functions where there is no competitive advantage (as its peers all undertake that task in the same manner).

With increased focus, firms generally become more agile. Management is much more attentive to its core competencies and the firm can react to changes in market conditions more readily. A firm can often expand into other sectors and geographies where its outsourcing provider already has a presence. In effect, firms can benefit from leveraging off their outsourcer's scale and experience.

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