To Outsource or Not to Outsource?
Outsourcing presents the possibility for business owners to do more with their businesses, to focus their expensive resources on more critical activities and to maintain the flexibility they need to grow or cut back in volatile times.
On the flip side, it also means letting go of some degree of control, and a misstep in choosing the right outsourcing partner could have bigger repercussions in terms of both the quality of output as well as the reputation and revenues.
So how do you decide whether you should outsource or not? Here is some help so you can navigate the perilous path of outsourcing with ease.
Know what to outsource
Certain critical areas of a business are best done in-house. If the area of work is non critical, then it is something you could outsource. However, if your business hinges on that area, it is something you should retain complete control over and do in-house and not outsource.
The same goes for anything that is client facing – including client facing administrative functions.Routine and repetitive jobs that are likely to cause fatigue and result in attrition of employees is prime for being outsourced.
The outsourcing partner can manage the churn by reassigning team members to other clients when boredom strikes, while your own employees will benefit from being able to take on more exciting jobs. This could also help improve productivity per employee for your business.
IT services, certain routine areas of HR function such as payroll, can be easily outsourced with several specialists available in the market. These functions are also technology enabled, allowing you to generate dashboards and get snapshot views of the status of things instantly.
In some industries like healthcare, outsourcing administrative functions at the back-end are helping bring scale and control costs. According to estimates from The Global Pharmacovigilance Industry 2015 Market Research Report, the global healthcare RCM outsourcing market is set to hit a compound annual growth rate of about 17.55% in the period between 2014 and 2019.
Know when to outsource
Outsourcing is best done when certain requirements are met. For instance, when outsourcing charges per hour are lower than your own lower hourly costs incurred to perform the same function in-house.
It is also a good idea when your partner has the ability to deliver the scale you need faster than you can deliver in-house. Also, they should be able to offer flexibility to scale back when needed without you incurring any major costs.
Before you outsource, have a plan. Is this a long term strategic move? Is it something to tide you over a medium term requirement? If you hope to outsource as a short-term or tactical move, many experts will advise not outsourcing at all due to the cost, effort and legal work involved in outsourcing.
Due to the short term nature of the contract, the vendor too, may not go the extra mile and neither side will have time to truly assimilate and integrate properly. The transition back may not be seamless either, and could cause business interruption and deny your clients seamless service.
Pick the right outsourcing partner
Having access to quality vendors and outsourcing partners is vital. Without this, the best plans can go awry. You need to work with a partner with proven expertise in the field – ideally a specialist with particular experience in your industry or sector.
This is something that’s driving growth of the Global Engineering Service Outsourcing Market, one that is projected by Radiant Insights to be valued at 415.7 billion dollars by as early as 2020.
Someone with geographical know-how is especially important when you outsource key client facing functions. Choose a partner whose organisational culture also aligns closely to yours.
Understand their security plan, their continuity of business plans, firewalls and IT security to assure yourself adequately that they are protected against intrusion. Have them upgrade to meet your requirements before you sign them on.
Should you outsource at all
Some important questions any entrepreneur or business head should consider before they turn to outsourcing are listed below.
This is an indicative list of things you should be reviewing, work with your senior management team to get into the relevant areas for your own business.
- Can outsourcing improve business performance?
- Will it hinder the development and career progress and opportunities for internal resources?
- How will your in-house team react to the outsourcing? Will it cause the exit of good employees?
- Is the work being outsourced core to your business profits? Is it directly impacting your competitiveness?
- Do you fully understand the cost structure proposed? Have you had it analysed thoroughly to check that projections and assumptions are spot-on?
- Is the work cyclical, repetitive or routine?
- Does it require highly specialized skills, hard for you to find in-house?
- How secure is your data, information and business in their hands?
- What is the exit strategy if you wish to reverse the outsourcing and fold it back in-house?
Take some time out to reflect on these before you take that step towards outsourcing and it should help you get better results out of this move.
And that’s the Dish. Until next time, Belinda.
I am Belinda Bow
I love all things marketing and I thrive on seeing a business become re-energised and flourish. I am excited about life and I adore my family.
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