10 Considerations for Outsourcing

In the fast changing business environment, speed has become a key competitive advantage. Many companies seek to outsource work that others can deliver in a complementary manner. It is a
strategic decision. Companies can garner abundant benefits when it is done well.

There are 10 things to consider for determining when to outsource:

1. Expertise to do the work. There are two scenarios relating to expertise. First, there is a lack of expertise within the company; hence, outsourcing is a quick way to get the work done. Second, there is internal expertise but the resource is better used for higher value work. In this case, outsourcing would free up the resource in demand.
2. Ease of communicating needs. When the needs are clear and well defined, there is little confusion. For work that involves numerous unpredictable variables, the chance of miscommunication and rework could hamper results. Friction would be created between your team and the outsourcing service provider.
3. Necessity for control. Certain aspects on how the work is carried out would not be under your direct control. Through the outsourcing agreement, you could stipulate specific input, quality control and requirements that affect the outcome. Nonetheless, you need to be comfortable with parting some of the control for the parcel of work outsourced.
4. Speed of change in needs. When your needs change constantly, you need additional buffer time to communicate the changes. This requires a tight process to manage the communication. Otherwise, confusion leads to delays and errors. It is less demanding to outsource routine work that doesn’t change too often.
5. Trade-offs between cost and benefit. Doing the work in-house incurs costs such as labour, materials, and associated overhead. There is the opportunity cost of pulling resources away from higher value work. If the benefits from outsourcing exceed the costs, it would be worthwhile to do so.
6. Frequency of work. A one-time need is simpler to manage. An ongoing commitment requires a well-coordinated ‘system’ to ensure smooth transitions between your team and the outsourcing service provider.
7. Despite internal familiarity with the business, unbiased external input enriches the quality of output. The collaboration could bring new ideas especially when the outsourcing service provider has an established track record in the industry.
8. Ability to monitor performance. As you lose some control of the outsourced work, the ability to monitor performance becomes crucial. When there are specific parameters that you could use to monitor performance, you have a good handle on injecting proactive feedback for corrective action.
9. Management of contract. Managing work that involves external partners requires someone with the tenacity to follow through and a collaborative mindset to build a healthy working relationship. The ownership of the outsourcing contract needs to reside with someone with the proper skills.
10. Risk of poor delivery. The risk of subpar performance affects the quality of the finished product, which has an impact on your business and your customers. When that happens, you need a plan to redirect the work either in-house or an alternative service provider. If the options are readily available, the risk of poor delivery is manageable.

Outsourcing work to the right partner allows you deploy resources optimally. Once you have chosen the work that is a good fit for outsourcing, commit the time to vet prospective partners before diving in.