Tuesday, February 07, 2006
Diminishing Returns for Outsourcing?
Outsourcing has become so common among U.S. companies that the question no longer seems to be whether to engage in the practice but how far to extend it. The answer, according to the conventional wisdom, is the farther the better.
The benefits seem obvious indeed. To the extent a company can cut its costs by turning over non-core services to an outside firm, its earnings and stock price may increase. And consultants contend the impact can be transformational. The trick is to identify costly but ancillary functions that can be outsourced without sacrificing the quality of the support.
But there's the rub. In fact, outsourcing's benefits may be harder to come by than is widely assumed, according to recent studies. And they could become more elusive still, if a new international accounting rule is embraced by the Financial Accounting Standards Board.
posted by Brian Moran @ 10:30 AM