In the past, the world was dominated by large corporations who tried their best to be all things for all people.
And in the past, this was a suitable strategy to secure their dominance in the market and to build a business empire that would stand the test of time. In a global market that is hyper competitive, companies that establish a temporary monopoly succeeds. Companies that establish a permanent monopoly endures.
The thing that stood out about these companies is that every aspect of the company was done in house; from training to logistics to administration to catering.
These companies were significantly bottom heavy with a large employee base. While this was a strategy that suited the market at the time, the present challenges that the market presents perhaps leans towards favouring outsourcing business functions.
We will be doing a series of articles on different aspects of outsourcing and what it may mean for your business.
Know your business intimately
A fascinating article on forbes.com explained the issue of outsourcing in more detail.
Before you move forward, it is imperative to compare the pros and cons of outsourcing. And it is also very important to understand the effect outsourcing can have on company culture. Knowing your business intimately will also give you insight into the true benefits of outsourcing.
The Forbes article points out the following advantages of outsourcing:
- You do not have to hire more employees. When you outsource, you can pay your help as a contractor. This allows you to avoid bringing unnecessary employees into the company, which saves you money on everything from benefits to training;
- Access to a larger talent pool. When hiring an employee, you may only have access to a small, local talent pool. This often means you have to compromise. Many companies have found that outsourcing gives them access to talent in other parts of the world. If you need specialized help, it often makes sense to expand your search; and
- Lower Labour Cost. Did you know there are approximately 300 000 jobs outsourced by the United States each year? Every company has its own reason for doing this, with many chasing lower labour costs. You do not want to trade quality for price, but outsourcing often allows you to get the best of both worlds. By searching a global talent pool, it’s easier to find the right talent at the right price.
Define your ROI
When it comes to outsourcing, it is often an issue of a fair return on investment (ROI).
When it comes to this, the owner of the company needs to sit with their boards to establish outlines and guidelines when it comes to this. The need to define what is acceptable and what is unacceptable when it comes to this issue.
Outsourcing is expensive. Often times, you are engaging with companies who are smaller than your company. Run by a single entrepreneur who does not have the benefits associated with a bug company, you are paying for their time, product and dedication.
Here, it is wise that companies do not cut their nose to spite their face. If outsourcing provides significant benefits over the long run, then it adds value. Companies need to ask if outsourcing a function will achieve a better result than if it is done in house.
It comes down to understanding your business. You have spent a good part of ten years building your business up making huge sacrifices on the way. You know your business better than anybody else. You should inherently know whether outsourcing is the right choice for what you want to achieve.