Outsourcing

Outsourcing

Sean P. Dixon

Business 630: Managerial Accounting

Oscar Lewis

June 27, 2011

Introduction

The global market is a competitive place for businesses of today’s world. In order for a business to be successful, it must advantage of any business aspects through which they can gain and maintain a competitive edge over other companies in the same line of business. One such business aspect that has become popular is outsourcing. Outsourcing gives companies the opportunity to hire an outside company to complete some of its production and/or service at either a reduced cost or increased productivity rate, or both. Outsourcing, however, does not always indicate an increase in profits. A business needs to decide if outsourcing is the right answer for their company by considering many positive and negative factors.

Outsourcing

Companies need to have a complete working knowledge of outsourcing to determine whether or not it would benefit the business. According to BusinessDictionary.com, outsourcing can be defined as “contracting, sub-contracting, or ‘externalizing’ non-core activities to free up cash, personnel, time, and facilities for activities where the firm holds competitive advantage” (2011). To expand the definition further on the popular topic of outsourcing, BusinessDictionary.com states that, “firms having strengths in other areas may contract-out data processing, legal, manufacturing, marketing, payroll accounting, or other aspects of their businesses to concentrate on what they do best and thus reduce average unit cost” (2011). Outsourcing is often an integral part of downsizing or reengineering/reorganizing, and may also be known as contracting out.

Dean Meyer has an article titled “4 Advantages to Outsourcing” that is posted on the SOURCINGmag.com website. His article includes four points that must be taken into consideration when determining whether or not a company would benefit from outsourcing. The four advantages to outsourcing...