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Fit for Growth by Deniz Caglar, John Plansky

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8OutsourcingLet External Providers Generate Value for You

Outsourcing is an important tool for companies seeking to transform cost structures. It can reduce costs, improve service levels, and guarantee annual productivity gains by enabling a company to hand off necessary but nondifferentiating business processes to external service providers with specialized expertise in a wide range of processes. Providers offer services for back-office functions such as the IT help desk, accounts payable, and payroll; operational activities including transportation and warehousing; and customer-facing processes like sales and call center operations. They deliver value through leveraging their technical platforms, process expertise and standardization, continuous improvement, economies of scale, and labor-cost arbitrage by moving work to lower-cost locations. Outsourcing also serves the primary objective of a Fit for Growth cost transformation: freeing up time and resources so that companies can focus on capabilities that support their unique way to play.

What Is Outsourcing?

What comes to mind when you think of outsourcing? Vast call centers in southern India where customer service agents earning a fraction of Western wages field inquiries from consumers in North America and Europe? Massive contract-manufacturing complexes in China churning out gadgets for multinational consumer electronics companies? Both impressions are accurate examples of outsourcing, but neither captures the full picture. ...

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