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Outsourcing: Costs
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Outsourcing effectively does away with the requirement of heavy investments in infrastructure and set up costs. Hence, it cuts down on the organization’s infrastructure and overhead costs. Over and above that, when organizations choose to outsource to a country like India, they acquire access to cost-effective and trained workforce.
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Firms that select outsourcing providers on the basis of price alone face a greater risk of problems, according to a white paper published last week by the LSE. The authors of the white paper, entitled The CEO guide to selecting effective suppliers, looked at 450 sourcing case studies and found that many firms still select suppliers based on price. They found this approach was contributing to a situation where one fifth of deals cost customers far more than originally expected.
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It's no surprise that a solid 75 percent of buyers participating in DiamondCluster's fourth outsourcing survey are outsourcing to India. But Canada is making headway as a haven for outsourcers. U.S.-based buyers apparently believe that the higher cost of outsourcing to Canada is worth the gains in proximity, language and culture.
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According to the election-year bluster of politicians and pundits, the outsourcing of American jobs to other countries has become a problem of epic proportion. Fortunately, this alarmism is misguided. Outsourcing actually brings far more benefits than costs, both now and in the long run.
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-- Joan Kraft, president and CEO, Beacon Partnerships, Inc., formerly Department of the Navy, has been an active leader for change in the outsourcing relationships between government and industry leaders. In 2000, Kraft was awarded the Vice-President's Hammer Award for "outstanding contributions to creating a government that works better and costs less."
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There are ... those who argue that even if there were no outsourcing, people would still be losing jobs. Sooner or later, most firms would try to cut costs by laying-off employees. With increasing mechanization and technology development, lay-offs are inevitable.
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