Outsourcing of non-key operations and functions as a business strategy has long been a part of the way modern organizations do business.
In simplest form outsourcing is the removal of non-core operations from in-house production or performance to external sources (Vendors).
In some circumstances such removal may include people as well as technology and possibly machinery and equipment.
Usually decisions to outsource are based on a desire to lower cost and enhance efficiency, with factors such as capital, availability of people, equipment and/or technology driving such decisions.
I want to re-examine the basic logic and principles that drive "outsourcing" as it relates to improving efficiency and operation of business entities.
When does it make sense to do so and when does it not.
Often the decision to outsource certain functions is driven by necessity and no serious analysis of alternatives is needed.
If major capital investment in equipment, technology or people is not a solution, the decision is made easily with little or no analysis.
Conversely, if the investment of equipment and training of people has been made, the decision is also made with little or no analysis.
Unfortunately, opportunities not dictated by circumstance are too often overlooked as a potential source of improved efficiency and cost reduction, and are often not recognized by executive management.
When is outsourcing right? When business functions are not clearly critical element of your "core functions", efficiency and costs can be improved with no additional cost to the company and when vendors can offer improved tools and technology along with service you cannot duplicate within acceptable costs and time parameters.
When is outsourcing not right? When it is obvious that lack of control over "core functions" can materially affect the outcome of the delivery of our product and service to our consumer, new product introduction or services are introduced without sufficient information and/or experience with them.
The reasons for outsourcing are varied.
Implementation of a strategic decision to make our competition irrelevant by changing the rules of the market place to our advantage by improving price with efficiency and service, creation of internal cost profile that enhances bottom line profits and to better serve our clients while driving value to shareholders through greater productivity.
If any of the above sound like what you might be hearing in the corporate boardroom, then it is time to examine your business functions and evaluate outsourcing as a viable opportunity to improve your business.