Are there economic advantages to keeping an existing outsourcing relationship?
The existing infrastructure often can’t be duplicated economically in-house. Companies that have outsourced their application design and testing to an offshore firm, for example, typically maintain a dedicated communications line and have in-house people to manage the relationship. “If a company were to cut back on its relationship with the offshore company, it still would have to maintain that infrastructure,” says Colleen Niven, an analyst at AMR Research Inc. in Boston. In other words, economies of scale can weigh in favor of an existing outsourcing relationship. 2 Can the outsourcing deal be renegotiated? “Utility outsourcing,” used when companies want to cut costs by outsourcing essential but nondifferentiating activities, has dominated over “transformational outsourcing,” which focuses on enhancing business processes and relationships, according to Linda Cohen, an analyst at Gartner Inc. in Stamford, Conn. Excess costs are typically squeezed out in the first two to three years of
Related Questions
- What are the various advantages of the proposed product over the current existing products and technologies?
- How will this help the country cultivate existing advantages over outsourcing rivals like India and China?
- What are the advantages of outsourcing animal caretaking and related activities to Charles River?
