Finally, the executives of the mother ship have to learn how to operate in a foreign political environment in a foreign tongue. This can become an expensive process. But once an outsourcing vendor has spent these sunk costs to develop the infrastructure and has overcome the difficulties of operating in a foreign land, any incremental costs are now much lower. Suddenly, economies of scale appear. Now the outsourcing proposition becomes much more valuable.
Economies of scale come in many flavors.
Another potent form is offering a fractional use of a resource. All these fractions equal a whole, which equates to the full utilization of a resource for the vendor. Full utilization of a vendor's resource is a crucial ingredient for economies of scale. Outsourcing vendors, for example, specialize in providing office space around the world for companies with less than 500 employees. These firms acquire blocks of space at a great price per square foot and then staff them.