Which of the following is true about outsourcing?

Outsourcing refers to the practice of hiring external companies to perform tasks and services that are typically done in-house. It’s an increasingly popular business strategy that offers many benefits, including cost savings, access to specialized skills, and increased efficiency.

The Myth of Job Losses

One of the biggest concerns people have about outsourcing is that it will lead to job losses. However, research has shown that outsourcing often creates more jobs than it destroys. A study by the consulting firm McKinsey found that for every $10 million in annual revenue generated by an outsourcing project, 45 full-time equivalent jobs are created.

This is because outsourcing allows companies to focus on their core competencies and hire external experts to handle tasks that require specialized skills. As a result, more people can be employed in high-value roles.

Another study by the Global Information Technology Services (GITS) found that the IT services sector alone accounts for 5.6 million jobs worldwide, with outsourcing companies contributing significantly to this growth. The study also found that outsourcing creates new job opportunities in areas such as project management, quality assurance, and technical support.

The Myth of Loss of Control

Another common misconception about outsourcing is that it leads to a loss of control over business processes. However, this couldn’t be further from the truth.

When companies outsource tasks, they often establish clear communication channels and protocols with their partners to ensure that work is completed to their satisfaction. In fact, many outsourcing relationships are built on long-term partnerships and ongoing collaboration between companies.

A case in point is the relationship between Dell and Infosys, which has been in place for over 15 years. The two companies have established a strong partnership that has allowed Dell to focus on its core competencies while Infosys handles a wide range of IT services, including software development, testing, and support.

The Myth of High Costs

Some people believe that outsourcing is expensive, but in reality, it can often be more cost-effective than performing tasks in-house. This is because outsourcing companies often have access to specialized skills and technology at a lower cost than companies can develop on their own.

In addition, outsourcing companies often operate on a pay-as-you-go model, which means that companies only pay for the services they need when they need them.

A study by Accenture found that outsourcing can lead to significant cost savings for companies. The study found that companies that outsourced non-core functions saw their operating expenses drop by an average of 25%.

The Benefits of Outsourcing

While there are many misconceptions about outsourcing, the reality is that it offers many benefits for companies. Some of these benefits include:

• Access to specialized skills: Outsourcing allows companies to tap into the expertise of external experts who may not be available in-house.
• Increased flexibility: Outsourcing allows companies to scale up or down as needed, without having to worry about hiring or firing employees.
• Cost savings: Outsourcing can often be more cost-effective than performing tasks in-house, particularly for non-core functions.
• Improved focus: By outsourcing tasks that require specialized skills or complex processes, companies can focus on their core competencies and improve their overall performance.

Real-Life Examples of Outsourcing Success

Many companies have successfully leveraged outsourcing to drive business growth and achieve their goals. Here are some examples:

• IBM’s Watson: IBM outsourced the development of its artificial intelligence (AI) platform, Watson, to a team of experts in natural language processing and machine learning.