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Wednesday, July 14, 2010

Should you outsource business functions or is it better to keep them in-house

In my opinion business functions should be outsourced rather than keeping them in-house. Outsourcing helps to communicate with the customers in real-time and can sort out their problems if any. It also helps to create a healthy bond.
Outsourcing is an effective cost-saving strategy when used properly. It is sometimes more affordable to purchase a good from companies with comparative advantages than it is to produce the good internally. An example of a manufacturing company outsourcing would be Dell buying some of its computer components from another manufacturer in order to save on production costs. Alternatively, businesses may decide to outsource book-keeping duties to independent accounting firms, as it may be cheaper than retaining an in-house accountant. Successful outsourcing requires a strong understanding of the organization's capabilities and future direction. Outsourcing can be undertaken to varying degrees, ranging from total outsourcing to selective outsourcing. Total outsourcing may involve dismantling entire departments or divisions and transferring the employees, facilities, equipment, and complete responsibility for a product or function to an outside vendor. In contrast, selective outsourcing may target a single, time-consuming task within a department, such as preparing the payroll or manufacturing a minor component that can be handled more efficiently by an outside specialist.

Advantages of outsourcing:
• Cost savings
• Focus
• Flexibility
• Knowledge

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