Reasons Of Outsourcing Or Outsourcing Factors

Outsourcing is subcontracting a process, such as product design or manufacturing, to a third-party company. The decision to outsource is often made in the interest of lowering firm or making better use of time and energy costs, redirecting or conserving energy directed at the competencies of a particular business, or to make more efficient use of land, labor, capital, (information) technology and resources.


Reasons Of Outsourcing

• Legacy systems and sometimes the staff that manages them can be replaced with something newer and better.
• An outside contractor handles personnel-related issues such as training, hiring and firing, and compensation. This may resolve problems with turnover, pay scales, job classifications, affirmative action, unions, and other personnel problems that management wants to avoid.
• The costs of the service are fixed and readily calculated
• Temporary work overloads becomes vendor's responsibility
• The company's resources can be allocated to the principal line of business
• The company may lack in-house skills or need to free up in house staff for other duties
• Higher service quality and cost savings are expected.

Other factors to consider in outsourcing agreement

• Software licenses may need to be transferred to the outsourcing vendor so that it can be authorized to act on your behalf. You may still be responsible for licensing, maintenance, and upgrade costs.
• Unless the contract provides specifically for disaster recovery, you may need to retain responsibility for managing the risks and planning for recovery actions.
• If the outsourcing vendor replaces your existing systems, you may have the responsibility of removing the old equipment and disposing of it.