Outsourcing as Strategic Tool

Filed in archive Outsourcing Issues on April 18, 2004

When does outsourcing serve as a strategic tool? Does it have other purpose other than strategic?

In the last five years, however, we have witnessed rapid growth in business process, manufacturing and design outsourcing. While almost all forms of outsourcing are intended to reduce cost, we often simplistically refer them as "strategic tools."

Outsourcing serves as a strategic tool when:
1. It serves strategic functions in growing the business in terms of brand acceptance, gaining competitive advantage and increasing share price
2. It is primarily linked to company's philosophy and mission statement
3. It provides a long-term access in developing further business strategies
4. It provides a basis for business, particularly expansion, decisions

Other purposes of outsourcing include:
1. Cost reduction
2. Regulatory compliance
3. Immediate problem solver with short-term results