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Is Outsourcing Really the Right Way to Cut Down on Production Cost?

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November 20, 2012

Is Outsourcing Really the Right Way to Cut Down on Production Cost?

By David Gitonga, TMCnet Contributing Writer

For a while now, private sector players have been forced to outsource most of their finance jobs – something most government agencies have enforced some immunity to until recently. Shrinking budgets and backfiring shared service schemes, however, are forcing them to dive into outsourcing headlong.

But many analysts and experts believe this is merely postponing impacts of the problem and that the best way out is by automating transactional roles in finance departments. NSW Planning and infrastructure department chief financial officer (CFO), Stephen Payne, believes the long-lasting escape route from the murk is by focusing on process improvement.

Speaking recently at a CPA conference, Payne said that technology is the biggest key to this. He believes automating cost and people out of the picture is the way to actualizing a technology ‘coup’ that ultimately leads to reduced and lasting operational costs.

The major problem with shipping tasks to a cheap work center is that it never really yields quality returns. Though termed as easy, the quality of the outsourced job will depend on how much a firm is willing to pay to have the job done.

This is an option that can allow for the soliciting of substandard and incompetent workers while pursuing short-term revenue gains without knowing that reduced quality has a negative effect on a company reputation in the end.

In cases where technology cannot fully take over, a new approach that outsources entire firms rather than individuals is the next option out. Carl Ward, head of the public sector of Accenture (News - Alert) in Australia, explains that the option gives room to transform the outsourced firm to suite specific preferences while maintaining operational costs lower than what would be if the outsourcer hires directly.

A discussion on the offshore outsourcing business will be incomplete without mentioning pseudo offshoring. With this kind of outsourcing, big consultancy firms like Accenture and CSC (News - Alert) use cheap offshore resources to accomplish given tasks after which they charge high rates to the onshore consumer.

While this might seem to be a money-minting scheme, it promises better quality.

What all the outsourcing business does is pack the services of several offices into one office. While this reduces on the head count, Payne insists it will have drastic impacts on the quality delivered. The increased workload puts off those with an alternative, leaving stressed and desperate individuals to do the job.

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Edited by Braden Becker

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