Tactical Reasons

Top Five Tactical Reasons for Outsourcing

One time applications

Applications that need to be developed or modified for a specified time require high manpower resources at one point of time. For this the organizations need to ramp up/ ramp down in a relatively short notice. This in-turn is expensive. For this outsourcing are the best solutions. For e.g. Y2K, Euro, porting from one-platform to another etc.

Reduce or Control Operating Costs

The single most important tactical reason for outsourcing is to reduce or controloperating costs. Access to an outside provider's lower cost structure is one of themost compelling short-term benefits of outsourcing. In a recent outsourcing Institute survey, companies reported that on average they saw a 9% reduction in costs through outsourcing.

Make Capital Funds Available

Outsourcing reduces the need to invest capital funds in non-core business functions. This makes capital funds more available for core areas. Outsourcing can also improve certain financial measurements by eliminating the need to show return on equity from capital investments in non-core areas.

Generate a Cash Infusion

Outsourcing can involve the transfer of assets from the customer to the provider.Equipment, facilities, vehicles and licenses used in current operations all have a value and are, in effect, sold to the provider as part of the transaction, resulting in a cash infusion.

Secure Resources not available internally

Companies outsource because they do not have access to the required resourceswithin the organization. For example, if an organization is expanding its operations, especially into a new geography, outsourcing is a viable and important alternative to building the needed capability from the ground up.