Outsourcing is a frequently used method of cost-cutting or of eliminating or¬ ganizational activities that are not viewed as core competencies. However, out¬ sourcing also creates new costs and, sometimes, new problems.

Some companies have found themselves locked into long-term contracts with outside suppliers that are no longer competitive. Indeed, multimillion-dollar technology-outsourcing contracts are often so complex that companies are hiring consultants at fees as high as $700,000 simply to evaluate the proposals.

[SOURCE: lohn A. Byrne, “Has Outsourcing Gone Too Far?” Business Week (April 1, 1996),

р. 27.]

a. Discuss some benefits and drawbacks to outsourcing the following activities:

(1) finance function, (2) data-processing function, and (3) travel arrangements.

b. How might outsourcing of manufacturing functions affect the (1) prevention,

(2) appraisal, and (3) failure costs of a company?

с. What effect might outsourcing of each of the activities in part a have on an organization’s corporate culture?

LO1