Appropriate or Inappropriate Outsourcing
When the idea of outsourcing some or all internal functions is introduced in a company, the initial reasons for looking at this option are usually economic. By shifting a significant business function into the outsourcing category, you reduce internal costs and head count which looks good on your annual report. And there are some valid business functions that do well in an outsourcing situation.
But when considering which parts of your business are appropriate for outsourcing and which are inappropriate, you must take into account many factors so you maintain the integrity of your core business and don’t compromise your ability to function as a business and respond promptly to market pressures in your zeal to jump on the outsourcing bandwagon.
The best functions that are good candidates for outsourcing are software development projects. Many times the vendors you contract to build a software solution for you may already have a product that fits part of your software specification. So starting from that base, you can write the functional specifications to adapt their solution to your business needs and come up with a valid business solution with much less overhead than what would be needed to develop that product internally.
Many times software projects must be tackled by a business that are just too large for the internal staff to develop. These are projects for which the software development lifecycle will be of a limited duration, perhaps a year of less and the size of the development staff will be large during that time frame. But after the bulk of that work is done, you can return to a reasonable size development staff. So this is a perfect situation to outsource much of that work so you don’t find yourself putting on staff only to lay them off when the work is done.
Areas of the business that should go under a greater scrutiny when they are reviewed for outsourcing are core functions such as computer operations, network management or project management at the team level. There are a number of reasons why trying to make captive operations, or “owning” these functions as a business makes a lot of sense.
Operational functions such as running the network, producing payroll or processing orders touch on the core of the life of the business. We have to keep in mind that no matter how high a level of trust you reach with a vendor to whom you outsource a function, that vendor is still a separate business whole corporate goals and objectives are not the same as those of your business. So the intensity of commitment and the sense of urgency for maintaining a high level of integrity of operations may not be as high with contractors taking care of your core operational business functions as they would when being managed internally.
Management functions are also business models that are carried out more efficiently by internal employees rather than contractors. Now in a project management situation for a short duration, outsourcing project management can work well if care is taken to integrate the contractors who are bringing their management expertise to the project with internal subject matter experts and build the lines of communications well. It’s a good idea to have internal management also be on top of the project management being done by contractors to assure communications are going well and to help facilitate the project development process.
By using wisdom and approach the concept of software development and operations outsourcing conservatively, you can find the appropriate functions to farm out to contractors without putting the core functions of your business at risk. And when you find that balance, you will realize the benefits of both approaches to business management in a way that is the best fit for your business.
