A necessary business evil or not?
The term outsourcing immediately conjures up a feeling of fear, creates a sense of foreboding and there tends to be a general misconception that it will lead to redundancies. Factor in a lack of awareness or understanding of the benefits that can actually be derived from outsouricng a particular business function or process of your organisation and you can understand why people pale in front of you when the “O” word is mentioned.
There are 12 good reasons why a company might like to consider outsourcing here!
As companies expand in size and in operations, management must become more focussed on core business activities and consider whether non essential, non core business activities can be outsourced to vendors who can provide the specialisation lacking in-house.
What is outsourcing?
Outsourcing business processes is when you contract out a business function either a task, role or process to a third party over a substantial period of time. The outsource provider ostensibly takes control of the function and becomes responsible for managing its effectiveness and ultimately its success.
Outsourcing has become synonymous with large enterprises who offshore manufacturing or call centre operations to remote providers based in China or India.
This is not a viable option for the SME or for organisations wanting to outsource maybe one or two business processes. An effective and cost saving option is to consider “nearshoring” the process by which a company outsources to a local service provider (when I say local I am referring to a UK based provider)
Outsourcing core business processes may save you money, note I suggest the word may. The success of the process and its overall effectiveness must be clearly defined and managed and there are some guidelines to consider here!
An outsourcing partner can give you flexibility and the help you need to manage growth this is offset with the benefits you derive by offering your business access to outside expertise and technologies without having to make massive investments in infrastructure change and maintenance. Outsourcing can be scaled to suit the changing needs of your business.
If you have found yourself asking the:-
- are my resources being used effectively?
- are my current resources capable of supporting new technology?
- is there a better and more efficient way of handling our processes?
- do the employees have the operational expertise to manage the tasks internally?
- what is this all really costing the business?
Then the benefits of outsourcing can be great.
Capital for start ups is limited and outsourcing some of your business processes can ensure you know exactly what your on-going monthly costs will be allowing you to allocate much needed funds to the development of the business.
Consider these points:-
- Will outsourcing allow my business to focus on its strengths?
- Will it improve efficiency of the business?
- Will your business gain a competitive advantage?
- Will it save me money?
How will outsourcing help me?
Firstly it will focus you and the business on what the company specialises in providing it’s customers, here I mean the core business function, whether it’s making hats and shoes or screws and plugs. You wont be distracted into unproductive and non-profit making business activities.
Internal resources will be re-directed and re-focussed into core business activity.
Migration to new technologies without you having to make investment internally reduces the risk of bad purchasing, minimum downtime and productivity ensuring that a move to newer technologies is minimal.
In any outsourcing partnership risk is further reduced because the outsource partner will have disaster recovery and back up mechanisms in place providing a rapid response to any problem that besets your company.
Points to consider
Think through what you need and how the company will benefit!
- What process(es) are you thinking of outsourcing and why?
- Weigh the costs of doing it in-house VS outsourcing
- Consider a consultant to help you set up a service provider
- Consider what the on-going costs would be if you don’t outsource it
- Are you prepared to invest in the time and management of the outsourcing relationship?
- Do you have realistic expectations?
- Are you outsourcing a key function which you really should keep in-house?
- Finally weigh up the risks of outsourcing VS managing the process in-house!
Whatever your decision, outsourcing or keeping the process in-house, you will need to consider the cost implications and the longer term impact on your business.
One final thing.
To reap true, tangible cost savings the process must be carefully managed and monitored. In other words the relationship must be built on trust, knowledge, security and ultimately become a partnership! Much like a marriage!
What do you think?
Have you outsourced a component of your business?
How successful was it?
Would you do it again?
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