In an environment of global competition becoming even harsher, businesses are directed not only toward concentrating their own resources on such business that forms the core of the company, but also toward concentrating their functions on the function that forms the core, with the other functions being entrusted to external experts. By doing this, the fixed expenses are transformed into variable expenses, thereby reducing financial risk and maintaining competitiveness.

The functions, skills and know-how to form this core are called core competence, and the aim is to convert non-core competence activities to variable expense items through outsourcing (placing an order with an external source). Although the work of the corporate center is indispensable for a business, it does not form the core of corporate competitiveness. In this sense, there are many examples in Europe and the U.S. in which businesses have put the function of this corporate center to outsourcing.

Outsourcing does not mean mere placing orders with an external source for some work or entrusting it to temporary workers. For example, in some cases a business has required employees in the support center it owned to retire from the company, and be transferred to an outsourcing company, with which it has concluded an outsourcing contract, thus continuing the work as ever (See Table 4-8-11). There also are some examples of selling equipment such as computer systems, etc. to an outsourcing company, to reduce the fixed expenses by means of the lease-back, etc. An idea would also holds that functions and information other than the core competence are not to be retained internally, but to be put to outsourcing entirely.

A business that has sprung from such an idea is the Application Service Provider (ASP) business, and suppliers providing such services by means of the Internet are called ASP. By using ASP, initial investment can be kept at not more than one tenth of the amount required conventionally, with almost no plant and equipment investment being required except the terminals of the system. Ordinary system maintenance expenses are also inexpensive as seen from the overall cost, and can also be transformed into variable expenses.

By entrusting an external source with the support center, a change of fixed expenses and assets into variable expenses is pursued.

Ideas on expenses

Based on the idea that profit and risk are shared with the customer at the outsourcing unit, expenses are determined by the ratio of sales, gross profit, etc. to the business result.

Forecast value of expenses when operated individually

Forecast value of expenses when operated individually

Transition of information systems expenses by outsourcing


Re-investment on the fundamental work systems

Transfer of personnel

It will also be possible that the customer has only the minimum personnel required for devising information-oriented strategy.

To specialize in the information-oriented strategy

Personnel of the information systems department

To be transferred to other section

To be transferred to outside of the

Transfer of things

Management of hardware, software, etc. is also subject to outsourcing. In many cases, large-scale improvements in efficiency and business reform beefed up by IT reform can be made possible.


External source

Hardware asset Software asset Network asset

Acquisition Transfer to leasing contract

Outsourcing Survival Kit

Outsourcing Survival Kit

Tired Of Being Tied Down By Time? Wish You Could Achieve More And Earn More Within The Deadlines You Are Given? Want To Branch Out To Other Lucrative Areas Without Sacrificing Your Current Business?

Get My Free Ebook

Post a comment