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Outsourcing is rapidly becoming an accepted management tool for redefining and reenergizing the corporation. It challenges today's executives to rethink the traditional, vertically integrated firm in favor of a more flexible organization structured around core competencies and long-term, outside relationships.
- The Outsourcing Institute
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By outsourcing your software development needs, your company can avoid historic problems with internal projects that have proven unmanageable or have spiraled out of control.
TOP 10 REASONS COMPANIES OUTSOURCE
1. Reduce and control operating costs
2. Improve company focus
3. Gain access to world-class capabilities
4. Free internal resources for other purposes
5. Resources are not available internally
6. Accelerate reengineering benefits
7. Function difficult to manage/out of control
8. Make capital funds available
9. Share risks
10. Cash infusion
Source: Survey of Current and Potential Outsourcing End-Users..
The Outsourcing Institute Membership, 1998
Companies that try to do everything themselves may incur vastly higher research, development, marketing and deployment expenses, all of which are passed on to the customer. An outside provider's lower cost structure, which may be the result of a greater economy of scale or other advantage based on specialization, reduces a company's operating costs and increases its competitive advantage.
Tremendous risks are associated with the investments an organization makes. Markets, competition, government regulations, financial conditions and technologies all change extremely quickly. Keeping up with these changes, especially those in which the next generation requires a significant investment, is very risky.
Outsourcing providers make investments on behalf of many clients, not just one. Shared investment spreads risk, and significantly reduces the risk born by a single company.
Sometimes companies outsource because they do not have access to the required resources within the company. Outsourcing is a viable alternative to building the needed capability from the ground. New organizations, spin-offs, or companies expanding into new geography or new technology should consider the benefits of outsourcing from the very start.
Top 10 Factors in Vendor Selection
1. Commitment to quality
2. Price
3. References/reputation
4. Flexible contract terms
5. Scope of resources
6. Additional value-added capability
7. Cultural match
8. Existing relationship
9. Location
10. Other
Top 10 Factors for Successful Outsourcing
1. Understanding company goals and objectives
2. A strategic vision and plan
3. Selecting the right vendor
4. Ongoing management of the relationships
5. A properly structured contract
6. Open communication with affected individual/groups
7. Senior executive support and involvement
8. Careful attention to personnel issues
9. Near term financial justification
10. Use of outside expertise
Source: Survey of Current and Potential Outsourcing End-Users
The Outsourcing Institute Membership, 1998
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