Outsourcing is a powerful business tool used by millions of companies all over the world. In this section, we will look at the benefits of outsourcing:
- Cost Savings
Lower cost is one of the primary reasons for outsourcing. The cost savings are commonly based on the wage difference between the Western world and offshore destinations such as India, China and the Philippines. Other factors such as economies of scale and specialization could also have a considerable impact.
- Knowledge & Expertise
Outsourcing gives you access to knowledge pools that you might not have inside your own company. A good example is outsourcing your accounting by which you rely on the knowledge of external accountants instead of learning their skills in-house. Outsourcing also enables you to focus on your company's core business and competences.
- Risk & Quality Control
Outsourcing agreements can be structured in a way that the responsibility to produce a certain quantity/quality of output is placed at the outsourcing provider, thereby giving you a better way of managing risk. The responsibility of the provider can be defined in so-called Service Level Agreements (SLAs).
- Capacity Management
Outsourcing gives you a tool to manage your output or production capacity in a flexible way.
- Staffing
By using external resources, you can overcome possible shortages on the job market. This is especially the case for highly specialized roles in, for instance, the information technology industry.
- Time Zone Coverage
In using external providers, you can cover time-zones that are not covered by your domestic operation.
The combination of these benefits makes outsourcing a strategic tool that has proved to give early adapters a competitive edge over the competition. In the next section, we will have a look at some of the drawbacks of outsourcing 
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