(This post first appeared on the ardent-software blog page)
Outsourcing is a much talked-about subject at the moment, so I thought it was worth setting out some sensible and objective pointers for those of you who may be considering it, but are nervous of what it might mean for your business.
Firstly, the obligatory definition – outsourcing is the when a business buys services, that could potentially be provided by an in-house resource, from a third party. That’s my definition, and you may find others, but that’s the essence of it.
You could be talking about outsourcing the copywriting of your website or marketing materials, or perhaps the HR, legal or financial aspects of your business. Equally, you could be outsourcing millions of pounds-worth of production. In the very late 1990s, I worked on a relocation project that involved the closure of an in-house printing works, and the outsourcing of all that production to printers based in far-flung parts of the country.
My outsourcing story …
This was my first practical introduction to outsourcing and it taught me a lot. Firstly, I could see an immediate drawback – we needed to close a factory, with the obvious impact of that decision on the people who worked there. Of course, this is a problem faced only by established businesses – if you are a startup or in a growth phase, then this won’t be an issue for you.
Secondly, I saw a significant benefit in terms of the flexibility it offered to our business. I also learned that the benefits are very specific to the business concerned, so there is no ‘golden rule’ that will tell you whether outsourcing is appropriate for you or not.
In my case, the business was a greeting card and stationery publisher. Now, anyone can print a picture on a bit of card and fold it, so (aside from making sure we had the best images) the only way to catch the attention of buyers was to add distinctive features to the product. That comes at a cost, of course, because you often need the right equipment to manufacture those features – the normal printing presses that we had in-house weren’t able to do it.
This meant that we were already outsourcing work, and also double-handling very often. We’d print the basics, and send the sheets out to be die-cut, or embossed, or whatever it was that we needed to do. Then back they’d come to be cut down and hand-finished and packed, ready for distribution.
It made a lot of sense to engage with partners who already had this equipment, and then just order what we needed. It made a lot more sense when it got to the point where we needed to get out the chequebook and pay over £1.5 million for a new printing press! So this was a factor in the decision to close the factory and relocate – it wasn’t by any means the only reason, as there were a host of strategic considerations, but in terms of helping you to make a decision about outsourcing for your business, it’s a tale worth telling.
The pros and cons …
The main point about telling this story is that it illustrates clearly that there are sometimes very specific and compelling reasons for outsourcing your work. It’s also very much easier when it is a self-contained part of a business, like a factory or a warehouse. There is a natural breakpoint in any case, so the cultural upheaval of starting to work with ‘outsiders’ is less.
On the other hand, take the example of outsourcing your sales or customer service operation – it might seem like a good idea to ‘get rid’ of all those phone calls, but it will also have a profound effect on your business culture, in that you will no longer be talking directly to your customers. Since your customer service is likely to be central to your business strategy (or it should be) you may not want to operate at arms-length from your client-base.
Almost all the other drawbacks of outsourcing that are regularly put forward boil down to one thing – a concern over surrendering control of part of your business to someone else. We see this all the time in any business, and in fact it has nothing to do with outsourcing. How many bosses have you seen in your working career who will trust nobody to do the monthly Board reports apart from themselves, because “they will only be done wrong, and it’s quicker for me to do it than to show someone else!”?
But think about the potential advantages as well. Partners to whom you outsource will normally be experts in their specific field – web development, copywriting, software systems, finance, HR, business law, and so on. Especially in the field of technology, where things move so fast, you need the right partner and they need to be specialists in the area that you need. With all due respect to your own IT department, they will often be generalists and will quite properly have a focus on your business and its day-to-day challenges, not on the latest solutions and methodologies.
Finding the right partner
As with most things, your final decision will come down to people. Sometimes outsourcing gets a bad press because of the huge corporates who offer their ‘outsourced’ services at enormous daily rates and quite often fail to deliver to the SME market because they don’t understand it.
Once you’ve decided that you have a valid reason for outsourcing, and that it is part of your business that you can comfortably hand over, build a relationship with a partner. You are not looking for a supplier – you can find them on Google – rather, you are looking for someone who will be part of your business on an ongoing basis. It takes time to find that person, but once you have (and they will be out there somewhere) you could find your business transformed.
As we move into a new business climate, and things begin to pick up after the lean years we have all experienced, I am convinced that we will find a new commercial climate – outsourcing, partnerships, joint ventures and project-based collaboration will be the way in which businesses will develop and evolve.
It’s a process that requires trust, and there will be casualties, I’m sure. But a lot of those casualties will be those businesses who are sitting there right now, as I type this, thinking that everything will go back to the way it was once we get out of these choppy waters.
Gone are the days of the huge monolithic, silo-based businesses, for the most part – day-to-day business will be the domain of people like you and me, looking for opportunities, working together to realise them, and remaining agile and flexible in the way that we work. Huge levels of fixed costs will not be sustainable in the future, and why would you want them in any case?
The business that will succeed in the 21st century will be those that are flexible and can adapt quickly and efficiently to change. Need another few thousand square feet of warehouse? No problem – here it is. Don’t need it for more than a year or two? That’s fine, as well. Fed up with your systems and website always being behind your competitors? Don’t worry – that can be sorted out easily enough.
It’s the bricks and mortar equivalent of cloud computing, in fact – the ability to flex resource availability as and when you need it. You don’t need to worry about over-stretching those resources because you can always access more, but then when you don’t need them any longer, they can be released.
It makes a lot of sense to me that the businesses that will succeed in the future are the organisations that understand this concept, and put it into practice sooner rather than later.