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Outsourcing

Satisfactory Essays
Introduction

Outsourcing can be defined as a contract service agreement in which an organization hires out all or part of its company responsibilities to an external company.

More and more companies are leaning towards outsourcing it could be said that this may be caused by the growing complexity of Companies and the changing business needs of an organization. As a result, an organization may find that it is not possible to have all its company services supplied from within its own company. Given this, a Company may decide to choose to seek assistance from an external contractor/company to supply their services the organization lacks. In addition, the business competition has set the pace for an organization to continue to strive for internal efficiency. It also needs to look for a way to transfer non-core activities or "in house" services and support activities to external specialist organizations who can deliver quality services at a lower cost.

Fundamentals

In deciding whether to use outsourcing or not, the main objective of outsourcing is based on the price of delivery of services by an external contractor/company. Although price of delivery is a primary factor for outsourcing, other issues should be considered e.g. price should be measured against the overall package offered by the external contractor/company. Briefly if it's a good competitive price in relation to the services rendered by the company and in respect to their skills/competency and experience, and timely delivery. The organization also needs to consider outsourcing in light of its long term strategic directions and its information needs.

Competition is another area to be carefully considered. Competition opens up opportunity for all potential suppliers to conduct business with the organization. Through the competitive process, it allows organizations/Companies to derive the best outcome. From the open and effective competition, the organization is then able to judge soundly in determining the best strategy after it has taken into account of the competition and value for money principle.
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