Question

In an attempt to cut expenses, an organisation disbanded its IT department and outsourced its IT function to a business process outsourcing company. In doing so the company has managed to save 20% on its IT function expenditure.

The aim of this company's outsourcing was to make the organisation more profitable.
A.Conclusion Follows
B.Conclusion Does Not Follow

Answer 1

The conclusion that an organisation will be more profitable by outsourcing IT functions because of a 20% cost saving does not necessarily follow as profitability is multifaceted. Outsourcing and offshoring are common strategies to cut costs by leveraging lower labor markets.

Step-by-step explanation:

The question asks whether the conclusion that an organisation will become more profitable by outsourcing its IT functions and saving on expenditure follows from the provided information. While the company has managed to save 20% on its IT function expenditure through outsourcing, the conclusion of increased profitability is not definitively proven by this fact alone because profitability is influenced by many factors including but not limited to expenditures.

Outsourcing, particularly to countries with lower labor costs, has been on the rise as companies seek strategies to cut costs and increase competitiveness in a global marketplace. It moves jobs to countries like India and the Philippines, which have become notable destinations for BPO services due to their growing skilled workforce and infrastructure.

Offshoring is another cost-saving strategy used by companies seeking lower labor costs, but it differs from outsourcing as it involves moving the company's owned operations to an overseas location.