Outsourcing can be considered a dirty word in many businesses, with many business owners wanting to stay in ultimate control of every commercial operation, believing that quality of service can only be achieved internally.
Although this is understandable, outsourcing – by no means a new concept – is also a growing trend, especially in young businesses that are expanding yet don’t want the additional expense of taking on too many staff, too quickly. Or, with those that simply need an expert resource.
Ultimately, there are many benefits of outsourcing, including saving time and money on those mundane, repetitive tasks that really can be done outside of the company, but the main reasons for doing it are:
1) Stick to your knitting
Every person and every company have things they are particularly good at. The commercial environment today is global and desperately competitive, and it makes sense to concentrate on your core business – the things you do well – and outsource where you are less able.
This can have interesting results; in the 1980s, a mid-sized brewery realised any of the two or three big boys in the industry could make its beers profitably and still sell them to the mid-sizers for less than it cost the mid-sizers to brew them themselves. So the brewery stopped brewing – and concentrated on the things it did really well, which were:
- Running a chain of quality hotels
- Distribution – instead of using their fleet only for their own products, they rebranded and carried goods for anyone willing to pay.
2) Staying up-to-date in a changing world
In some high-tech areas, the speed of change is frightening. Staying abreast of current trends in IT, for example, if you keep it in-house, will mean hiring expensive staff and spending money on training courses to keep them updated, to say nothing of equipment costs. If your business is running a datacentre, fine – but if you’re a baker or a manufacturer of road signs, wouldn’t you be better served by outsourcing your IT needs?
3) You are world-class in your business; they are world-class in theirs
This is not merely a restating of point 1; if you want to thrive in today’s world, then everything you do has to make the customer think of you as world-class and you can’t be world-class at everything. Other people can, though, so use them and focus your internal resources on mission-critical tasks.
The three points so far are what we can think of as strategic. There are also tactical reasons for outsourcing:
4) Skills gap
The British education system does not turn out enough people with high-level skills in IT, engineering, maths or a number of other areas. You can recruit from eastern Europe, but what happens if we vote to leave the EU later this year? Or you can not only outsource but offshore and get those design, accounting and IT tasks done for you in places like South Africa where they speak your language and charge less into the bargain.
5) Seasonal workflows and one-time tasks
There are things you will do occasionally, seasonally or once only. It makes sense to put them in the hands of people who do them all the time.
In more than 25 years as a specialist outsourcing and business development consultant, I’ve seen changes I felt were driven by fashion: vertical integration; divestment; companies considering vertical integration once more. Those moves had the benefit that they at least made organisations look at the way they were structured and consider whether changes would help. Through it all, the trend to outsourcing continued.