The lowering of the overall cost of the service to the business. This will involve reducing the scope, defining quality levels, re-pricing, re-negotiation, cost re-structuring. Access to lower cost economies through offshoring called “labor arbitrage” generated by the wage gap between industrialized and developing nations.

Resources such as investments, manpower, and infrastructure are focused on developing the core business. For instance, organizations often outsource their IT support to specialized IT services companies.

Operating leverage is a measure that compares fixed costs to variable costs. Outsourcing changes the balance of this ratio by offering a move from fixed to variable cost and also by making variable costs more predictable.

Achieve a steep change in quality through contracting out the service with a new service level agreement.