Outsourcing

            Outsourcing, strategic-sourcing or whatever the new buzzword is in management circles these days the goal is still the same, contract functions that fall outside the company's core competencies. The goal is to reduce costs and streamline production. The company that we have been asked to evaluate is IBM who is currently in the process of outsourcing their human resource functions to Fidelity. We have been tasked to answer the question; what three important benefits will IBM receive from outsourcing their HR functions to Fidelity and how will they benefit IBM? The three benefits that I have chosen to concentrate on are; cost savings, improved services and freeing the company to concentrate on core competencies. It is important that we as managers become familiar with outsourcing and its potential benefits if we what to become effective and efficient managers. The first area that I will explore in this paper is cost savings.
             The question being ask by IBM employees is no different than the one ask by thousands of government employees when a function is outsourced. How can this possibly save the company money? We are dedicated employees who care about the success of our company and strive to implement cost saving procedures. The answer to that is not always as simple as one would think but if you take out the human emotion then most would agree that it is in the best interest of the company. The first way that they can save money is the fact that it is a flat negotiated fee. In other words there are no hidden fees such as retirement, workman's compensation, health insurance, vacations and so on. Bottom line is that IBM will pay Fidelity an agreed upon amount no matter what it costs them to perform the service. In other words if they can find ways too streamline and create a more efficient operation then they will realize larger profits. Standards, which are normally performance based, will be written into the contract.