The directors of AB plc are facing increasing pressure from shareholders to increase earnings per share. The overhead costs of the company have increased as a proportion of total costs over the last 3 years and the directors are considering outsourcing the financial accounting, payroll, creditor payments and debtor functions in order to reduce the levels of operational gearing. However, the directors are concerned that AB plc will not receive the same level of service from these functions after they have been outsourced.

Required:

2.1Explain why an organisation may outsource some of its primary or support activities.

2.2Summarise how AB should proceed to outsource the financial accounting, payroll, creditor payments and debtor functions.

2.3Discuss how the directors may be assured of the quality of the service which is subsequently received for these activities.