A Potential Resurgence of Outsourcing

Essential Questions Answered

Charles E. Davis, PhD, CPA, and Elizabeth Davis, PhD, CPA

For some, the word “outsourcing” conjures thoughts of domestic jobs transferred overseas. For others, it calls to mind images of potential bottom-line improvement. And for at least one company—Renesas Electronics Corp., which produces 40% of the microprocessors used by automakers around the world—it is a way to hedge against supply-chain interruptions; the company recently reported plans to outsource 25% of its production by 2013 (up from 8% currently) in response to the earthquake and tsunami that hit Japan in March 2011 (Chester Dawson, “Even Japan Inc. Looks Offshore,” Wall Street Journal, April 11, 2011). Regardless of one's personal view on outsourcing, it is a business practice that is here to stay—and it is likely to increase in the future. Businesses and their advisors should keep the following considerations in mind when looking to outsource operations.