Outsourcing for Company’s Cost Optimization and Implementation of Core Competencies

In today’s global marketplace, creativity and innovation have assumed a great deal of importance and it is important for a Company to have a fresh and novel strategy if it is to succeed in the marketplace. Competitive strategy is about being different. (Porter,1996:64). Porter also states that Strategy is the creation of a unique and valuable position, involving a different set of activities……different from rivals. ( Porter 1996: 68). However, in an increasingly global, cutthroat economy, it is becoming difficult for Companies to sustain a competitive advantage and outsourcing of knowledge-intensive business services and activities has emerged a cost-effective operational strategy in the creation of an innovative business strategy. Increasingly, the assets that are being valued in a globalized economy are practical skills, knowledge, and creativity of individuals, unlike assets such as machinery, land and other natural resources which were the major drivers of the economy earlier. (Rikowski, 2000:158). Potter argues that in the modern day economy, the production itself does not ensure that a firm enjoys a competitive advantage, rather it is intellectual capital or the knowledge base of a firm which ensures that this objective is attained. (Potter, 1999). Outsourcing emerged as a popular, operational management strategy in the late 1980s to address the issue of organizational competitiveness in a global environment. According to Sharp (1997) outsourcing occurs when a firm turns over to outside suppliers, those activities that are outside the range of its own core competencies, or because skill levels for completion of certain business processes may be higher in other countries, because of the manner in which knowledge is managed within those contexts. Therefore knowledge management plays a significant role in contributing to organizational productivity and activities are outsourced to those businesses or firms which are able to generate and manage knowledge effectively. India has been emerging as the choice destination of those companies looking to outsource their business processing activities and knowledge management may play a significant role in this process. The educational system and the general educational and institutional framework in India are such that there is an increased focus on educational excellence and the fostering of certain talents and skills such as mathematical and scientific skills. King (2006) has taken up a survey of the factors that are taken into consideration by managers when the decision on whether or not to outsource is at hand. When the choice is made to select India, the factor weighing heavily in favor is often the availability of skilled labor at a low cost. This produces a significant advantage for India because once a decision has been made to outsource, a firm is unlikely to go back to the activity if it is dissatisfied with the services of a particular vendor. rather it is more likely to simply switch vendors.