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There are also many cases where an external service provider has
capabilities that an enterprise doesn't have, or it has economies of scale that an
enterprise cannot achieve. In these cases, it makes a lot of sense to outsource
selectively.
The internal IT operations group can solidify its position as the preferred service
provider by defining current services, developing granular cost information and
leveraging its potential for customer intimacy.
Often, the business units do not understand the demands placed on the IT
operations group. To close this gap and ensure a strong partnership with the
business units, the IT operations group must first improve its quality of service.
When time, money or expertise is missing, selective outsourcing can enable the
IT operations group to keep IS an operations service up-to-date and efficient. If
leveraged properly, several IT services can deliver high rewards.
OUTSOURCING:
Outsourcing is subcontracting a process, such as product design
or manufacturing, to a third-party company.[1] The decision to outsource is often
made in the interest of lowering cost or making better use of time and
energy costs, redirecting or conserving energy directed at the competencies of a
particular business, or to make more efficient use of land, labor, capital,
(information) technology and resources Outsourcing became part of the business
lexicon during the 1980s. It is essentially a division of labour
The competitive pressures on firms to bring out new products at an ever rapid
pace to meet market needs are increasing. As such, the pressures on the R&D
department are increasing. In order to alleviate the pressure, firms have to
either increase R&D budgets or find ways to utilize the resources in a more
productive way. There are situations when a firm may consider outsourcing some
of its R&D work to a contract research organizations or universities. Reasons why
a firm could consider outsourcing are:-
COMPETITIVE RESPONSE
PROBLEMS OF QUALITY/YIELD.
The key drivers for R&D outsourcing are emerging mass markets and availability
of expertise in the field. In this context, the two most populous countries in the
world, China and India, provide huge pools from which to find talent. Both
countries produce over 200,000 engineers and science graduates each year.
Moreover both countries are low cost sourcing countries. Other strategic drivers
for outsourcing R&D are access to expertise and intellectual property, filling gaps
in the capabilities of the R&D function, managing risk better, reducing the time
to market, and focusing on the core competence or activities of the firm.
Cost savings.
The lowering of the overall cost of the service to the business. This will involve
reducing the scope, defining quality levels, re-pricing, re-negotiation, cost re-
structuring. Access to lower cost economies through offshoring called "labor
arbitrage" generated by the wage gap between industrialized and developing
nations.
2. Cost restructuring.
3. Improve quality:
Achieve a step change in quality through contracting out the service with a new
service level agreement.
4. Knowledge:
5. Contract:
Services will be provided to a legally binding contract with financial penalties and
legal redress. This is not the case with internal services.
6. Operational expertise:
Access to operational best practice that would be too difficult or time consuming
to develop in-house.
Access to talent:
Capacity management:
COM modification:
Risk management:
Venture Capital:
Some countries match government funds venture capital with private venture
capital for startups that start businesses in their country.
Tax Benefit:
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