What makes a firm enter outsourcing as a business? A firm decides to enter
outsourcing in a particular area because they believe they have expertise in that
area, possess excess capacity so that they can serve new or additional clients,
and obviously make money doing it. The long-term nature of the contract is also
an incentive, along with an almost virtual guarantee that unless they really screw
it up or the business changes, the client will remain with them How does an outsourcer make money? They have to do the work that you do
at lower cost, they have to provide added value, or achieve some combination of
these. Here are some specific steps taken by outsourcers:
• Achieve economies of scale by sharing resources (hardware, network, facilities, software, people).
• Provide smarter or lower-cost resources to do the work.
• Charge for add-on requests and services that were previously done internally and taken for granted.
• Use more modern or more capable tools and methods that increase effectiveness and efficiency.
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