Generally, larger companies outsource to become more responsive and efficient while smaller companies use it as a mechanism for growth and expansion. There is a point below which it does not make sense to outsource. Factors such as minimum processing costs, current active business, and projected growth are considered in the outsourcing equation. But the primary requirement is an understanding of the business to be outsourced and recognition of core competencies. Companies typically maintain those things that differentiate them from their competitors and provide a true competitive advantage.
Companies vary on the degree of services they consider core.
For most insurance companies, core functions include insurance product development and marketing. Many virtual companies choose to outsource everything else. Other insurers want to maintain select business functions such as customer service and underwriting and outsource others, such as management of their information technology infrastructure. Many see outsourcing as handing over responsibility and control. In fact, there are a number of controls to maintain and enhance a customer s management of the IT function through outsourcing.