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What's Your Strategy For
Outsourcing?
June 20, 2005
Most companies view outsourcing from a cost-reduction
perspective and a source for non-core operations rather than
a way to grow revenue. The good news is that this viewpoint
is hitting the mark, with companies seeing an average cost
savings of 13-15%. Those who viewed outsourcing as a means
of growing revenue fell short of their expectations.
That's according to a recently released study,
"Outsourcing Strategically for Sustainable Competitive
Advantage," by CAPS: Center for Strategic Supply Research
,an organization affiliated with the Institute for Supply
Management and the W. P. Carey School of Business at Arizona
State University and A.T. Kearney that surveyed 165 companies
from 24 industries.
"It's clear there are two different
approaches to outsourcing at work," said Bill Markham,
a principal with A.T. Kearney and co-leader of the study.
"Companies seeking quick savings focus their efforts
on finding less expensive alternatives to operating their
business today. Companies focused on tomorrow's business needs
are seeking more significant long-term benefits and looking
to leverage marketplace skills, technologies and scale to
cut costs and increase revenue."
While it appears everyone is outsourcing
everything, the study found that 86% of the respondents outsource
less than 25% of their activities. Of those companies surveyed,
36% outsourced in the IT area, followed by 32% in distribution/fulfillment,
30% in legal/regulatory affairs and 24% in manufacturing/operations.
Some advice for those exploring outsourcing:
- Look at the political and social demographics of emerging
economies.
- Consider the dwindling natural resource supplies and
how it will affect the future.
- Seek skills and technologies from the marketplace rather
than assuming these skills must be developed internally.
- Align the roles and responsibilities from outsourcing
activities across the corporate functions involved.
Source: http://www.industryweek.com
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