In today’s economy, many organizations seek cost effective solutions to perform business functions. The lure of reducing overhead costs and leveraging specialized human capital and technological resources has many organizations considering outsourcing. A critical question then becomes- when is it the right time to outsource business functions?
Simply put, outsourcing is when an organization contracts out a business function(s) to an external expert involving an exchange of services and payment. For example, many companies outsource a chunk of their HR and/or IT functions to an outside agency, while some only outsource a particular sector such as payroll or training. Some companies may find it practical to outsource specific projects such as company restructuring.
When considering outsourcing for any reason, organizations should assess their goals and needs to determine if outsourcing is a viable option. Consider these steps when planning to outsource any business functions:
1. Review the mission and vision statements of the organization; determine the short-term and long-term objectives of the sector/project that is being evaluated for outsourcing;
2. Determine the tasks needed to realize these objectives;
3. Examine how outsourcing will help achieve these objectives;
4. Evaluate current in-house resources to determine if the organization has the workforce competency and technology to meet these objectives; and
5. Perform a cost benefit analysis to study the economics of an outsourcing venture.
So when is the right time to outsource business functions?
An organization may implement outsourcing when:
• It wants to reduce administrative duties so that members of the current workforce can focus on more instrumental business roles;
• It wants to reduce costs and control capital expenditures such as office equipment and software; or
• It wants an industry expert to assist in fulfilling specialized needs.
Successful outsourcing is dependent on defining measurable metrics that evaluates both parties involvement within the agreed upon services. Hence, organizations should translate vital business objectives into specific and quantifiable goals. Business leaders should have a clear vision of what outsourcing should achieve, along with aligned operating models to support it. Furthermore, it is vital to develop a comprehensive communication strategy for stakeholders to provide updates on outsourcing objectives and manage expectations. Appropriate training on new roles and processes is also necessary during the outsourcing transition.
The next step in the process is selecting the right business partner! Outsourcing is a long-term relationship and finding the right partner is critical to everyone involved. The investment in selecting the right partnership can save a lot of time and effort that can be devoted to profitable endeavors. Conduct a search and/or utilize Federal and State associations, outsourcing suppliers, online contractor services etc.
Gain the knowledge you need to make the best decision by requesting a written proposal and an official presentation, and considering the following factors:
• The business partner’s knowledge of the industry vertical, financial stability, reputation, infrastructure, and back-up systems; and
• The business partner’s corporate culture, values and goals; for example, check to see whether the vendor shares the company’s business values and standards.
When a business partner is selected, the company should consider the extent of the relationship and if a need for a written contract that defines any, some or all of the following considerations: the project timeline, pricing policies, business continuity plans, quality standards, and other responsibilities.