Reasons for outsourcing

Organizations that outsource are seeking to realize benefits or address the following issues:
· Cost savings. The lowering of the overall cost of the service to the business. This will involve reducing the scope, defining quality levels, re-pricing, re-negotiation, cost re-structuring. Access to lower cost economies through offshoring called "labor arbitrage" generated by the wage gap between industrialized and developing nations.
· Cost restructuring. Operating leverage is a measure that compares fixed costs to variable costs. Outsourcing changes the balance of this ratio by offering a move from fixed to variable cost and also by making variable costs more predictable.
· Improve quality. Achieve a step change in quality through contracting out the service with a new Service Level Agreement.
· Knowledge. Access to intellectual property and wider experience and knowledge.
· Contract. Services will be provided to a legally binding contract with financial penalties and legal redress. This is not the case with internal services
· Operational expertise. Access to operational best practice that would be too difficult or time consuming to develop in-house.
· Staffing issues. Access to a larger talent pool and a sustainable source of skills.
· Capacity management. An improved method of capacity management of services and technology where the risk in providing the excess capacity is borne by the supplier.
· Catalyst for change. An organization can use an outsourcing agreement as a catalyst for major step change that can not be achieved alone. The outsourcer becomes a Change agent in the process.
· Reduce time to market. The acceleration of the development or production of a product through the additional capability brought by the supplier.
· COM modification. The trend of standardizing business processes, IT Services and application services enabling businesses to intelligently buy at the right price. Allows a wide range of businesses access to services previously only available to large corporations.
· Risk management. An approach to risk management for some types of risks is to partner with an outsourcer who is better able to provide the mitigation.
· Time zone. A sequential task can be done during normal day shift in different time zones - to make it seamlessly available 24x7. Same/similar can be done on a longer term between earth's hemispheres of summer/winter.
· Customer Pressure. Customers may see benefits in dealing with your company, but are not happy with the performance of certain elements of the business, which they may not see a solution to except through outsourcing