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Outsourcing as the Growth Industry of the 1990s

Outsourcing is the growth industry of the 90s. Previously, the decision to outsource company business functions was an indicator of corporate mismanagement or financial trouble. Today, corporate giants like DuPont Co., PepsiCo Inc., Aetna, and Sears all choose outsourcing as a means to enhance profitability.

Firms have come to rely on outsourcing for a variety of reasons. The accelerating pace of technological advancement is the deciding factor for many companies. For this reason, computer consultants such as Electronic Data Systems (EDS), Computer Sciences Corp., and IBM's Integrated Systems Solutions Corp. are among the major players in the outsourcing field. As one outsourcing litigation expert puts it, "People want to buy knowledge, not develop it themselves" (Verity, 1996, p. 47). Although the outsourcing of computer-related functions is not new (EDS has been active in the field since the 1960s), the recent growth rate of the industry is impressive. Worldwide, projected revenues from computer-related outsourcing alone are expected to reach almost 130 billion by the year 2000, up from about 75 billion in 1995 (Verity, 1996, p. 47).

A readers' poll conducted by Nation's Business magazine revealed that 87 percent of its respondents outsource at least some of their business functions. Some respondents outsourced only one function, others outsourced several. The most common functions farmed out related to taxes/accounting/auditing, equipment maintenance/janitorial services, payroll/benefits administration, and manufacturing/processing/assembling. When asked what prompted their decision to outsource the most frequent response was lack of in-house skills. Cost reduction, both for administration and production, was another important motivating factor. Outsourcing ultimately frees management to focus resources on core business activities. The readers' poll concluded: "Outsourcing has clearly become a standard practi...

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Outsourcing as the Growth Industry of the 1990s. (1969, December 31). In LotsofEssays.com. Retrieved 10:24, March 29, 2024, from https://www.lotsofessays.com/viewpaper/1681976.html