To Outsource or Not?

The rise of outsourcing has been unescapable and can offer significant benefits to businesses seeking efficiency by ‘buying in’ skills and expertise from specialist providers. As with all new options and opportunities there are certain risks associated so what should companies consider before embracing the idea? A good starting point would be defining what is the value proposition you offer to your customers and what are the core competences that give you competitive advantage in your chosen market? The answers to these questions should provide a list of things you should definitely avoid outsourcing…

Why? Why would you outsource what creates value in your business and let it be delivered by someone else? In the long-term they will gain the knowledge and expertise that you compete with and, as seen with many of the well-known international traditional outsourcers, they may reposition themselves in the Supply Chain and become your competition.

Short- and medium-term, no-one can know your business and offering as well as you. No one else is going to care as much about the quality of your product or service. What you are seeking to create and deliver may not always be immediately clear, well-defined and with an exact known end result. Things can change during the process and if a third-party outsourcer is doing this work for you, changing path, adding features, removing others, may not only slow down the process but also increase your costs and negate the very efficiency you were seeking.

What businesses should consider outsourcing when seeking efficiency in parts of their business are the non-core pieces they do not compete on but allow them to function. This could be any aspect of their operation, for example most companies already outsource their facilities management if working in a serviced office space, many use recruitment and resourcing companies to help with their hiring. Other functions such as HR, payroll and administrative tasks would also be areas where efficiencies could be gained through outsourcing to a specialist.

It’s important to mention it isn’t automatically outsourcing if the work occurs nearshore, offshore or onshore but in a different location. If the work being performed, and any IP being created is directly controlled and owned by you then the considerations above shall not apply.

In short, you may consider a new location to expand your own capability and deliver your products or services, but maintaining absolute direct control over what is delivered and those working for you is what must be the key factor in these decisions. The support services around this delivery in order to function is where you should consider third-party outsourcing providers.