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Specialists are often able to perform an activity at a lower cost than the company, because they are able to realize scale economies or other efficiencies not available to the company. For example, performing HRM activities, such as managing benefit and pay systems, requires a significant investment in sophisticated HRM IT; purchasing these IT systems represents a considerable fixed cost for one company. But, by aggregating the HRM IT needs of many individual companies, companies that specialize in HRM, such as Exult and Paychex, can obtain huge economies of scale in IT that any single company could not hope to achieve.

Some of these cost savings are then passed to the client companies in the form of lower prices, which reduces their cost structure. A similar dynamic is at work in the contract manufacturing business. Once again, manufacturing specialists like Foxconn, Flextronics, and Jabil Circuit make large capital investments to build efficient-scale manufacturing facilities, but then are able to spread those capital costs over a huge volume of output, and drive down unit costs so that they can make a specific product—an Apple iPod or Motorola XOOM, for example—at a lower cost than the company.