Organizations that outsourcing seek to realize benefits or address the following issues:

  • 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 and cost re-structuring. This means access to lower cost economies through offshoring called labor arbitrage generated by the wage gap between industrialized and developing nations.
  • Focus on Core Business – Resources (e.g. investment, people, and infrastructure) are focused on developing the core business. For example often organizations outsource their IT support to specialized IT services companies.
  • Improve quality – achieve a steep change in quality through contracting out the service with a new service level agreement.
  • Knowledge – Access to intellectual property and wider experience and knowledge.
  • Operational expertise – Access to operational best practice that would be too difficult or time consuming to develop in-house.
  • Capacity management – An improved method of capacity management of services and technology where the risk in providing the excess capacity is born by the supplier.
  • Risk management – An approach to risk management for some types of risks is to partner with an outsourcer who is better able to provide the mitigation.