To outsource or not to outsource?

How do you know when your business is well placed to benefit from outsourcing? New research announced this week from analyst group Gartner found that more than half of all European organisations are planning to increase their use of outsourcing...

Share

How do you know when your business is well placed to benefit from outsourcing?

New research announced this week from analyst group Gartner found that more than half of all European organisations are planning to increase their use of outsourcing services.

Gartner’s study found that 53 percent of organisations said they would outsource more in 2010, with 40 percent of organisations planning to boost spending on external services. If accurate, it’s a clear sign that people in industry are waking up to the benefits that outsourcing can provide in these times of economic turbulence.

However, it’s clear that when outsourcing relationships are entered into without correct preparation, and without clearly defined objectives, then problems can occur - any company thinking of entering into an outsourcing relationship would do well to bear this in mind.

So how does an organisation gauge whether or not they are suited to outsourcing? If you are part of an organisation that is struggling to decide whether or not you should be turning toward outsourcing, then there are some steps you can undergo to ensure you are making the correct decision.

Firstly, any company looking for an outsourcing partner should undertake a thorough analysis of its own systems and processes in order to determine which are performing most efficiently, and whether or not there would be any negative impact from outsourcing them.

An organisation’s senior management team should understand their core competencies and judge how good they are at performing them. A good rule of thumb is if its not core, then it’s a candidate for outsourcing.

If it’s not core but you do it very well, then maybe you can get others to share your service and reduce your management overhead and costs.

However, if it is core but you are not good at it, maybe outsourcing or investment is the answer, whereas if it is core and you are good, leave them alone and look somewhere else.

If you are outsourcing or considering a shared service then you need to set goals for each of its services and, once they have been outsourced, manage them effectively.

It’s worth remembering that an organisation that enters into any relationship for the wrong reason is unlikely to succeed - for this reason, so relationship due diligence is an important step. Which brings me on to my next point…

It’s key that once services are outsourced, the relationship is as open and as collaborative as possible. There’s no use in deciding, for instance, to outsource your IT services to an offshore partner if you never speak to them, share few cultural similarities, and yet still hope to achieve success.

Your outsourcing partner should be somebody who can share your organisation’s culture and values, and somebody you can work together with to achieve solutions to common problems.

Many organisations see outsourcing as a quick and simple solution; the truth is that unless you treat your partners as a vital part of your business, the relationship will not be a success, and before you enter into a relationship, it’s important that you understand this.

In a changing world, it’s clear that organisations are increasingly looking for ways to add value to their business. However, outsourcing is not a quick solution that offers overnight results.

Anyone considering using outsourcing as a business tool should take this into account before taking the plunge, and my advice would be to make sure you have done the necessary ground work, and are prepared to commit to the relationship before you start.

Of course maybe talking to some of your peers at an NOA meeting, might be good idea too.

Promoted