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CIMA - Essay Example

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(Brian 2003, p. 68)
Outsourcing can be defined as the process of transferring responsibilities of a specific business functions from an "employee group" to a "non-employee group." simply it is the transfer of functions from their function center in the organization to a function center outside the organization. It is integrated in many business strategies due to it's seemingly benefit of cutting down cost through economies of scale. One of the most important features of outsourcing is the transfer of control. The buyer or the non-employee group doest not retain the power to instruct the supplier or the company on how the task is to be performed.
Outsourcing differs from other forms of business control in that the company retains the power to dictate how it wants the whole process to be carried out. Both parties makes agreement on how the whole process will be carried out and what the process is supposed to achieve at the end of the exercise. (Thomas 1996, p. 15)
It is based on mutual agreement which may be carried out physically or through other medium of communication. Outsourcing has been taking place across continents with companies moving to areas with low labour laws in a bid to exploit the benefits of cost reduction. However the concept of outsourcing has been claimed as not efficient by many people though many companies has reportedly adopted the benefits they have seen in the process. This paper will look closely into the aspect of outsourcing, it benefits and whether companies which have adopted the concept have achieved the benefit. (Mitchell 2007, p. 23)
Benefits of outsourcing
Many companies carry out outsourcing to meet the objectives that are drafted in its strategies. The motivation to outsource comes from the experience that a company had but the whole concept is implemented with an aim of achieving multiple benefits. At a glance most companies will pursue the concept with aims of reaping benefits like cost saving, a focus on competencies, having an access to modern technology, access to expertise, improved service delivery and solutions to politics Let us look closely at these benefits. (Jacob 2004, p. 78)
(i) Management of internal staff
If the outsourcing is well managed, it can enhance the development of the internal employees. In this case, contractors can be used to reduce the peak loads that take most of the employees' time. The staff is left with time to pursue other career development matters. In the same case, contractors can be used to bring to the internal workforce new ideas and can also be used to train the staff. (Meyer 2006, p. 84)
(ii) Sharing risk
Outsourcing can also be used to share risk. This is called portfolio effect in the financial businesses. The concept here is that there is diversified portfolio that ensures that money is invested in different accounts rather than putting all the money in one portfolio. In case one market goes down, the investor is assured of another market invested in another area. Outsourcing gives a chance for multiple companies to share a risk in putting up a common structure from which all the companies will be benefiting. (Waltner 1998, p. 4)
(iii) Saving costs
It has been proved that outsourcing is a primarily a time and money saving strategy that can be adopted by a company. It would be of no use if a ...Show more


The practice of outsourcing has become very common these days in the business world. It has become a powerful option for companies which are focused on growth. It has become a famous practice due to its seeming cost reduction measures and enhancement of service and competences in many businesses…
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CIMA essay example
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