There can be significant savings when a business function is outsourced. Employee compensation costs, office space expenses and other costs associated with providing a work space or manufacturing setup are eliminated and free up resources for other purposes.
Focus On The Business Core
Outsourcing allows organization to focus on their expertise and the business core. When organizations go outside their expertise, they get into business functions and processes that they may not be as knowledgeable about and could potentially take away from their main focus.
An example of this is when a grocery store decides to add a florist to their operation. If too much focus is put on that part of the business they lose focus of the core business which is grocery.
Improved quality can be achieved by using vendors with more expertise and more specialized processes.
An example of this would be contracting out a cleaning service. An outside service would have the resources for hiring, proper training and facility inspections that may not be available if the function were kept in-house.
The advantage of having a vendor contract is they are bound to certain levels of service and quality.
An example of this is if your IT function is outsourced and the technician calls in sick, it is the vendor’s responsibility to find someone to replace them and meet your support needs.
Outsourcing gives an organization exposure to vendor specialized systems. Specialization provides more efficiency that allows for a quicker turnaround time and higher levels of quality.