In the past decade, many leading corporations such as Shell, HP, IBM and Citibank, just to name a few, have decided to outsource non-core activities. Why have they done so?

To focus on core activities

A core activity is something you proudly tell your customer that you do very well. For example, if you were Nike you would want to tell the world that you make the best sport shoes. However, Nike never claim that they have the best accounting team or IT team. This is because having the best set of accounts does not differentiate Nike from its competitors.

By outsourcing it's accounting services to a third party, Nike can free up resources like human capital and financial capital and redirect its resources towards designing and marketing the world's best sport shoe, Nike's core competencies, which will ultimately lead to enhanced competitiveness and profitability.

To manage cost effectively

Many global companies use outsourcing as a tool to manage cost. By working with outsourcers who have access to cheaper resources, leverage economies of scale and enjoy higher productivity levels through specialization, companies can enjoy lower total cost and maintain fewer overheads.

To have realiable and accurate financial reports

Outsourcers do not only help companies manage their cost, but can also help companies enhance their ability to make better management decisions quicker, by providing companies with accurate and forward looking information in a timely manner.