Corporate America needs to develop a clear understanding of what it will take to become profitable and build on or Extend market share. Developing tactical strategies to attain these goals should be based on short-term and strategic long-term goals.  

Reduce and Control Operating Costs

The single most important tactical reason for outsourcing is to reduce and control operating costs. Access to the outside provider’s lower cost structure, which may be the result of a greater economy of scale or some other advantage based on specialization, is clearly and simply one of the most compelling tactical reasons for outsourcing. Excellent outsourcing choices are:

• Antivirus (Spyware, Malware)
• Exchange (BES)
• DDoS
• Penetration Testing (externally)
• Vulnerability Assessments (scheduled / unscheduled)
• Some Application Development
• Virtualization
• Disaster Recovery / Hot Sites
• Web Backups
• Some aspects of Human Resources
• Some Aspects of accounts
• Contractor Management

Additionally, companies that try to do everything themselves may incur vastly higher research, development, marketing and deployment expenses — expenses that have to be passed onto the ultimate customer. Today’s customers are too sophisticated to accept the costs associated with an organization’s attempt to maintain singular control over all its resources.

Outsourcing often involves the transfer of assets from the customer to the provider. Equipment, facilities, vehicles, and licenses used in the current operations all have a value and are, in fact, sold to the vendor.

The vendor then uses these assets to provide services back to the client and, frequently, to other clients. Depending on the value of the assets involved, this sale may result in a significant cash payment to the customer.  

Make Capital Funds Available

Outsourcing is a way to reduce the need to invest capital funds in non-core business functions. Instead of acquiring the resources through capital expenditures, they are contracted for on an ‘as used,’ operational expense basis.

Outsourcing makes capital funds more available for core areas. It can also improve certain financial measurements of the firm by eliminating the need to show return on equity from capital investments in non-core areas.

There is tremendous competition within most organizations for capital funds. Deciding where to invest these funds is probably one of the most important decisions that an organization’s senior management is called upon to make.

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