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Effective outsourcing allows companies to focus on their core business - Essay Example
Author : uptonjasper
Pages 6 (1506 words)
Effective outsourcing allows companies to focus on their core business In the current competitive global economic environment, companies have to apply every possible strategy that will enable them maintain their profits at a good level. One of these strategies is outsourcing…
For example India has about 5-6% of the global outsourcing market share and from it, it was able to generate revenue of US $ 10.9 billion in the year 2008 (Bijan 2009). By description, outsourcing is a process by which a company contracts a third party to perform for them a particular function that is not considered as one of the company’s core activities. The third party can be another company or a person. Outsourcing is more prominent in countries with high wage rates where companies outsource their non-core functions to countries with low wage rates for example China and India. The main advantages or reasons for outsourcing include gaining access to globally competitive capabilities, control and reduce operation costs, accelerate re-engineering benefits, share risks, and reduce time and efforts for marketing. It also enables a company to utilize resources that are not available internally, free their resources for development of other resources and improve their focus on the core business activities of the company (Bijan et al 2002). The intention of this essay is to show how effective outsourcing enables/allows companies to keep a focus on their core businesses. Various writers have identified various dimensions that should be considered when making outsourcing decisions. This paper gives a discussion of four of these namely, core competencies, spatial, geographic and product innovation dimension. ...