While outsourcing is not new, technology and economics are driving it to higher levels. More and more businesses must consider outsourcing as a strategy if they are to survive and prosper. However, it is not something that should be rushed into. Any business considering it must look at all the options carefully while considering its advantages and disadvantages.
At its core, outsourcing is simply hiring other contractors, consultants or freelancers to do jobs that could technically be performed in-house. It is nothing new, but technologies that allow online marketplaces, instant and virtually free communication as well as the exchange of data have made outsourcing easier and more practical than it ever was before. However, it should never be attempted without an outsourcing plan.
A good outsourcing plan starts by examining the advantages and disadvantages of outsourcing.
Some of the advantages of outsourcing are as follows:
- Potentially lower labor, investment and facility costs
- Greater flexibility with labor and possibly with the product line
- Freeing up time and resources allows firms to focus more on their core business.
Some of the disadvantages include:
- Loss of control of employees and workflow
- Danger of losing good employees
- The need to share information with outsiders
- Possible negative publicity and tarnished image
- Potential problems with quality control, different attitudes towards work, having to coordinate between different time zones, late delivery and other things that can go wrong when a degree of control is given up or when overseas workers are used.
With these points in mind, make an outsourcing strategy that considers the following and any other pertinent points.
Strengths and weaknesses
Every outsourcing strategy needs to consider a firms strengths and weaknesses. Outsourcing is not always the best route to go. Start in areas of weakness and expand outsourcing from there as needed.
Outsourcing brings a new legal environment that requires its own strategy. Particularly when offshoring to a place with a different legal climate, it is crucial to be prepared with a plan to handle any disputes. Contracts become more important.
Keep an eye on the customer
Customer wants and needs must always be kept center stage. While outsourcing can help lower costs and bring in new ideas, it may make meeting quality control standards and deadlines more difficult. Never let the rush to outsource lead one away from serving customers in the best way possible.
Outsourcing can often be done domestically just as well as internationally. Outsourcing overseas has more potential problems, which may negate any cost savings gained from cheaper overseas labor. Outsourcing domestically can sometimes offer many of the advantages of outsourcing without the problems can potentially come with it.
While nobody knows for sure what the future holds, one should still keep an eye towards the future when outsourcing. Shortsighted outsourcing stratagies will often cause companies to lose people and expertise they will need again.
One advantage of modern outsourcing is that firms can get far more bidders than they ever did in the past. Take advantage of the internet to post work on sites where it can attract the maximum number of qualified bids. From greater quantity, it is often possible to find just the right quality.
Remember that outsourcing is about specializing. The vendor should be able to demonstrate specific knowledge and expertise in the tasks to be performed.
The single greatest advantage of outsourcing for most apart from lower costs is the ability to refocus a business on its core functions. If the outsourcing strategy is not allowing for this, it probably needs more attention.
Outsourcing always involves a learning curve, so it makes sense to start small. Start with smaller jobs and expand outsourcing when appropriate as lessons are learned.
From major corporations to individuals with small, home-based businesses, outsourcing can be a great tool. With the right outsourcing strategy, risks can be minimized and benefits maximized.