Resources not Available Internally

Companies prefer outsourcing because they do not have access to the required resources within the company. Outsourcing becomes an automatically a viable alternative to building the needed capability from the ground. New organizations, spin-offs, or companies expanding into new geographical area or new technology should consider the benefits of outsourcing from the very beginning. There are several reasons why resources may not be available internally: The organization may be expanding into new areas of business.

The organization may be expanding into new geographic areas, The resources may have been removed as part of a major reorganization or divestment. This last possibility is not necessarily caused by short-sightedness or bad management. A group of companies may have a centralized information systems function, and selling off a company from that group will cut that company off from IS expertise. Usually, organizations in this situation will be looking either at building an entire function from scratch or at expanding an existing function to several times its current size. In either of these situations, outsourcing is a viable option.

Indeed, in many cases, it is the best option. As well as these reasons why resources may not be available internally now, there are also some reasons for not making the resources available internally in the future. These include the scale of internal demand for those resources, the cost of acquiring and retaining the resources. In some instances, these two factors may both be at work at the same time. In an organization that has downsized so that it no longer employs specialists in a particular area, there may be a requirement for such a specialist for 10 hours each week.

In addition, the specialist's area of expertise may be in demand such that the market price of employing the specialist has risen by 25% since the downsizing exercise. The result could be re-employing someone for 25% of the time at 125% of the previous cost. Any organization will want to use its people effectively. The costs of employment, accommodation, taxes and levies, welfare and other services can make people the most expensive resource within an organization. Also, because organizations are moving to become "lean and mean", there is a constant pressure to reduce the number of people employed on non-core activities.