Outsourcing: Positive and Negative Aspects
According to wikipedia.com, outsourcing is subcontracting a process, such as product design or manufacturing, to a third-party company. In his book, “Crafting & Executing Strategy”, Arthur and his co-authors outlines that outsourcing involves a conscious decision to abandon or forgo attempts to perform certain value chain activities internally and instead to farm them out to outside specialists and strategic allies.
Outsourcing has become one of the fastest growing trends in the business world. There are many reasons that a company would elect to use outsourcing. Among them is the fact that it provides an almost immediate opportunity for savings resulted from outsides that can often perform certain activities better or cheaper. Outsourcing allows a company to focus its entire energies on those activities at the center of its core competencies and that are the most critical to its competitive and financial success.
In order to achieve deemed advantageous of outsourcing, following criterion have been discussed in the chapter 6 – Supplementing the Chosen Competitive Strategy of the book “Crafting & Executing Strategy”:
1. An activity can be performed better or more cheaply by outside specialists
2. The activity is not crucial to the company’s ability to achieve sustainable competitive advantage and won’t hollow out its core competencies capabilities, or technical know-how
3. It reduce the company’s risk exposure to changing technology and/or changing buyer preference
4. It improves a company’s ability to innovate
5. It streamlines company operations in ways that improve organizational flexibility and cuts the time it takes to get new products into the marketplace