ACCA AAA ^INT Syllabus D. Audit of Historical Financial Information - Should a Process be bought? - Notes ^{5 / 8}

The idea is here that some processes may be best not performed in house but rather bought in from outside ie Outsourced

Let's think of aCOWtancy.com

Should I outsource the materials writing and videos?

• I'm HOPING you're screaming "Nooooooooo!!!!"

• The reason being that the whole competitive advantage of aCOWtancy.com is the simplicity of the materials, videos (amongst a million other things :P)

• In all seriousness - this is one process I wouldn't outsource - because the suppliers competences don't match my needs

However, what about the design of the site?

Well I personally think design is of enormous strategic importance (like the materials and videos etc). 

However, here I do outsource some. Why?

• Well here my strength is in teaching accountancy and not in the design and usability of websites.

• I know a fair bit about these topics and i study them daily but it is sooooo important to me that I want to be the best in the world at it.

• So i outsource it to people who I believe are the best in the world.. Naomi, Dan, Miki... take a bow

Some processes are more suited too to outsourcing than others eg Standardised processes (you're not losing a competitve advantage then)

Never forget though also the external v internal costs of processing.

Is it cheaper or more expensive to have the process outsourced

Business Process Outsourcing

Under the right circumstances outsourcing can certainly provide significant opportunities for savings, though it is no panacea.

Sony announced plans recently to close 10 percent of its plants worldwide and shift more manufacturing to outsourcing

Different companies will have different expectations for their outsourcing partners. 

A niche business to business producers’ core competencies are very different than those of a provider that's set up to produce large volumes of a consumer-oriented product

The current economic environment presents an excellent opportunity to further utilise outsourcing as a way to reduce their manufacturing and design costs, there are challenges and difficulties that come with this kind of change.

The most successful situations are those where the customer understands that outsourcing is as much a cultural change as a strategic one for their organisation

The bottom line is that even in the best of economic times, the decision to outsource should be made based on a careful cost/benefit analysis. 

It is not a quick, short-term solution

Advantages of BPO

1. Cost savings

2. Improved customer care

3. Allows management to focus on core competencies

Problems of BPO

1. More outsourcing suppliers leads to fragmentation and a less cohesive business

2. Security problems

3. Managing of the outsourcers

4. Performance measuring problems