Page 92 - 100 Great Business Ideas: From Leading Companies Around the World (100 Great Ideas)

36 OUTSOURCING

It is often possible for businesses to delegate non-core operations
to external partners specializing in that operation. This can be cost-
effective and allow firms to take advantage of a specialist company’s
expertise and its economies of scale.

The idea

Outsourcing is not simply purchasing services from another group:
it involves a considerable degree of two-way information exchange,
coordination, and trust. Out-tasking is slightly narrower—with
very small segments of the production process being taken over,
often on a short-term basis—but still requires mutual knowledge
and communication. There are many advantages associated with
outsourcing, in both cost and quality.

A specialist company will usually be able to complete the service
more cheaply by negotiating supplier contracts and economies of
scale. Variations in international economies and differences in
exchange rates can make outsourcing more cost-efficient. Quality
can also improve, as the specialist company should know how best
to carry out the task.

However, when not properly handled, outsourcing can gain an
organization a bad reputation. Strict quality management, diligent
research, and attention to ethics are important when deciding which
company to outsource to. This is demonstrated by technology firm
Dell, whose outsourcing of customer service duties was alleged to
have led to falling quality and customer dissatisfaction.

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