OUTSOURCING

Outsourcing is having a third party provide services that would ordinarily be offered in-house. It can be used for just about any function or process. The only question is whether it is cost-effective vis-à-vis the same function or service in-house.

Outsourcing offers three benefits. One, it can save money. Two, it can provide better quality of service, and three, it can provide flexibility. However, outsourcing can boomerang in three ways: it can cost more in the long run, can cause dependency on third parties, and can demoralize the workforce.

for Deciding Whether to Outsource

• Define requirements for functions and/or processes.
• Select from a list of outsourcing vendors.
• Identify critical and noncritical functions and processes.
• Perform cost-benefit and value analysis under different scenarios.
• Investigate the history of each outsourcing vendor.
• Determine each vendor’s capability to provide the desired level of service.
• Include a contract service-level agreement, replete with rewards and penalties.