DUE DILIGENCE IN OUTSOURCING What is outsourcing

DUE DILIGENCE IN OUTSOURCING

What is outsourcing? Outsourcing is the act of one company contracting with another company to provide services that might otherwise be performed by in-house employees.

Why outsource? Reasons for outsourcing: lower costs (due to economies of scale or lower labor rates) variable capacity the ability to focus on core competencies by ridding yourself of peripheral ones lack of in-house resources increased efficiency access to specific IT skills increased flexibility to meet changing business and commercial conditions tighter control of budget through predictable costs lower ongoing investment in internal infrastructure access to innovation and thought leadership.

Define your objectives and goals What do you want to outsource? What are your goals in outsourcing? How much do you plan to spend?

Example: About us: We are big bank with foreign capital. Our topmanagers decided to decrease our OPEX. After some calculations we choose 3 main streams that could be outsourced: 1. 2. 3. IT infrastructure HR department Security

HRO (HR Outsourcing) Advantages : 1. Increase product and service value, customer satisfaction, and share-holder value 2. Obtain expertise, skills, and technologies that would not otherwise be available 3. Acquire innovative ideas 4. The lower personnel expense 5. to speed up production time, because OS company provides the bank with HR-functions

Disadvantages : 1. Require considerable care in coordinating information flow with the agency 2. Need additional expenses 3. Increase employees` insecurity, whether staff remain in the Organization or are hired by the Agency 4. Reduce corporate robustness by changing support functions