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Outsourcing: collaboration is the key... The principle benefit of and reason to outsource is that it allows a firm to focus its activities on its core competency. Simultaneously, the firm outsourced to will be acting in its core competency. That provider firm brings a number of advantages to the performance of its task including access to state-of-the-art technology; economies of scale with regard to hardware, software, and personnel; and aggressive use of low-cost labor pools. The outsourcing firm focuses on broader business issues, or maintains a clearer strategic focus, while operational details are assumed by an outside. Outsourcing can deliver considerable savings on office space, general overhead, company cars, pensions, insurance, and salaries. Since it is their core competency, providers are more likely to remain abreast of technological innovations in their field. The outsourcing firm then gains easier access to expertise and new technological developments. Providers can be more flexible with regard to workload than an in-house process; this can allow a firm to turn a fixed cost into a variable cost through outsourcing. They are more inclined to be flexible because of their customer/supplier orientation, an orientation that may well be absent in an in-house arrangement. In summary, outsourcing is thought to be beneficial because of economies of scale, improved access to new technology, and the flexibility inherent in the outsourcing relationship. Interesting links: Wikipedia -Outsourcing, Business Week
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