Strategic Outsourcing
Outsourcing is the transfer of control of a process or product to a
supplier. Companies outsource operations or processes that are not
one of their critical core competencies for economic gain or better
quality. At the strategic level, outsourcing allows not only the
transfer of control to an outsider, but also the method of
production using a different technology or process. In strategic
outsourcing a company may outsource an entire service, product,
a product line, or an entire plant for strategic value.
The largest single concern in strategic outsourcing is the
giving up of control of a process or product. The risks involved can
be decrease of quality, delayed deliveries, poor production, theft
of proprietary design or process, and unintentional creation of a
competitor.
A question one might ask is does strategic outsourcing
actually benefit an organization? Will it really benefit the company
in the long run?
Many large multinational companies have chosen outsourcing as a
strategic business decision to accumulate tangible and intangible
benefits in the near future as well as in the long run.
Outsourcing is best adopted after carefully looking at ones
business needs and available options. It is vital that the
outsourcing relationship provides strategic business benefits in the
future.
Outsourcing does in fact provide a company competitive
strategy benefits in a number of ways. It enables ease of
management, less manpower, reduction in cost, and frees up internal
resources.
Strategic outsourcing is not a short term endeavor. Although
it can, and frequently does, provide companies both long- and
short-term gains, provided they have a strategic objective for
outsourcing. Medium and long-term benefits are best realized by
selecting a provider who brings value to a company’s core business
processes, rather than selecting one that can provide you with the
lowest prices.
All things said, outsourcing is a strategic business decision
that should be made only if a company recognizes true business
benefits in it. Poorly-planned outsourcing could result in
deterioration of service value and cost buildup, but a well-planned
outsourcing decision leaves a company assured, knowing that
their processes are in safe hands.
Certain recommendations can be made as to the decision making on
strategic outsourcing:
• Understand different business perspectives and how they affect
outsourcing decisions.
• Understand how the perspectives must be controlled in order to
drive outsourcing decisions.
• Develop a structured sequence of steps for the outsourcing
decisions.
• Develop internal outsourcing decision roles
• Develop evolving governance architecture to support outsourcing
decisions.
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