To outsource or not...

Linda Singer (2005) defines outsourcing as the delegation of a specific project or task to an outside consultant or company. Outsourcing has been around for decades and companies still use it today as a business strategy. There are many success stories of outsourcing, and many more horror stories of failed outsourcing. Apple is great at outsourcing manufacturing of its products to China while on the other hand, the current explosive problems at Samsung with the Note 7 are an example of outsourcing gone wrong.

A common thread without a doubt is that outsourcing of non-core functions is extremely beneficial. It enables companies to concentrate on their core competencies, which in turn offers the highest return on investment and hence delivers the most value to shareholders. Especially because the IT world is a continuously changing environment. Technology is evolving at a rapid rate every year and has become a major expense to most businesses. Investing internally in technology means having to constantly upgrade and update which is often costly, hence the preference to outsourcing.

Jobs have been outsourced to markets with cheaper labour. Nike, Apple, Royal Bank of Scotland and many other corporate giants in Europe and the US have outsourced jobs to countries such as India, the Philippines, and China. The negative effects of outsourcing jobs include loss of jobs in home country and the effect of unemployment. Benefits are centred on lower costs of production and greater efficiency. In some instances, time zone differences can be favourable to the outsourcing entity.

One of the best ways to decide whether or not to outsource a task is to perform a cost/time calculation. Here, one looks at cost and time savings that result from the outsourcing and make a decision based on that. However, to outsource or not depends on several factors including economy that the company is operating in, industry and stage at which the company is at, among other things.

Thoughts by: Simanga Madhlabuta