Outsourcing is a frequently used metbod of cost cutting or of eliminating organizational activities that are not viewed as core competencies. However, outsourcing also creates new costs and, sometimes, new problems.
Some companies bave found themselves locked into long-term contracts with outside suppliers that are no longer competitive. Indeed, multimillion-dollar technology-outsourcing contracts are often so complex that companies are biring consultants at very bigh fees simply to evaluate the proposals.
soufcE: John A. Byme, "Has Outsourcing Gone Too Far? Business Week (April 1, 1996), p. 27.
a. Discuss some benefits and drawbacks to outsourcing the following activities: (1) finance function, (2) data-processing function, and (3) travel arrangements.
b. How might outsourcing of manufacturing functions affect the (1) prevention, (2) appraisal, and (3) failure costs of a company?
c. What effect might outsourcing of each of the activities in part (a) have on an organization's corporate culture?