Question 2 Outsourcing Explain why an organisation may outsource some of its primary or support activities. 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 propor- tion of total cost over the last 3 years and the directors are considering outsourcing the financial accounting, payroll, creditor payments and debtors 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. Requirements Summarise how AB should proceed to outsource the financial accounting, payroll, creditor payments and debtor functions. Discuss how the directors may be assured of the quality of the service which is subsequently received for these activities.
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