Seeing Beyond the Bright Side of Outsourcing

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In the age of globalization, the business sector had to ride the waves of rapid changes in its many structures to keep up with the upsurge of their competitors' innovations and strategies. In line with this, many global companies are lapping up their chances in doing away with unnecessary costs in production…

Introduction


At present, outsourcing has become a very popular source of competitive advantage. By paying other companies to run IT and other support divisions, many U.S. companies are cutting staffs, costs, and increasing efficiency. The immediate benefits can be great, allowing smaller companies to gain cheaper access to expensive technologies and allowing large firms to expand there IT usage without risk of obsolescence. As with any potentially rewarding activity, there are risks involved. Companies need to weigh the risks, rewards, and costs involved before making a decision to outsource. The more vital the task, the more care should be taken with this decision (Kakumanu and Portanova, September 2006). But, first what is outsourcing
According to Webster's New World Finance and Investment Dictionary (2003), outsourcing is an increasingly popular process where a company contracts with another company to manage services that it needs but that it doesn't want to provide itself. Typically, outsourced services are non-core activities such as janitorial services, information technology, and food catering for the employee cafeteria. Sometimes companies outsource manufacturing and focus on sales and marketing. As such, outsourcing became popular because it allowed companies to reduce short-term costs. ...
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