There are four reasons why companies should outsource their business operations, processes, and production.
First, outsourcing can bring many financial advantages. It is surely a very good cost savings measure. The cheap labor cost associated with outsourcing can increase company savings. The technology requirements of companies which could be provided by third party contractors can also add to the savings. Increasing company savings can definitely improve company financials. This improvement will therefore impact on the profitability of companies.
The second compelling reason why companies should outsource is the availability of technical expertise and competence of outsourcing companies. This will improve company capability in creating superior products and services. This will also improve the development of new products and innovative services which could enhance competitiveness.
Reduction of risk is another reason why companies should outsource. Normally outsourcing providers are primarily responsible for delivering quality products in the most efficient manner. It is usually stipulated in the Service Level Agreement that outsourcing companies shall make sure that the products and services of parent companies will conform to specified standards. There is a penalty for non-conformance. This therefore reduces the risk of business operations especially in the manufacturing and service delivery sector. If risks are reduced, companies can fully focus its quality efforts on higher end business operations.
Finally, companies can now perform critical research and development ventures to improve their products. This is made possible by outsourcing research to third party research institutions. The expense associated with research and development could be significantly reduced. This is highly beneficial in introducing innovations which could make companies more competitive.