- Outsourcing has been around for thousands of years (really)
- As a business owner, you’ll need to know when to outsource
- As a consultant, coach, trainer or freelancer you may be the business other businesses outsource to
- Check out the reasons why and position yourself for success by using them
Firstly, let’s define the term “outsourcing.” We describe it as a business practice where one business (or person) hires another firm to perform some essential task.
Outsourcing has been around since… well, probably forever. Egyptians hired ancient Greek soldiers to defend their kingdom in 700s B.C. Bakers provided communal overs for townspeople to use in the middle ages in Europe. Today, just about any function of a business could be outsourced. Moreover, despite the recent political rhetoric, outsourcing doesn’t mean performing the task in another country.
If you think this doesn’t relate to you, consider this: if you set yourself up as a consultant, and more importantly, as a consulting business, you will need other people helping you out. The examples we usually highlight are these: you’ll need a lawyer, an accountant, and an IT guru, at a minimum. Plus, we should remind you to get a business coach, too.
It is pretty rare that someone does all of these functions. So, if you try to do so, then I would caution that you’re not spending as much time as you should with your clients, or in the work of getting more clients.
However, also note, that it’s not required to have these people on your staff full time.
Plus, there’s another side to this coin. That is, you, too, could be the person that other businesses outsource to. Here are what some of my Opterre clients now provide like services to other companies:
- Establish a digital presence on the Web and in social media
- Positioning your company for sale to outside investors
- Refining your ability to speak in public or large, corporate group settings
Since you may need, or be the provider of some essential task, let’s highlight how businesses decide to outsource:
Reasons to Outsource
- Cost. Cost is perhaps the most significant contributing factor why most companies consider outsourcing.
- Improving company focus. By letting someone else handle the bookkeeping, the business may invest more time in sales.
- Gaining access to world-class capabilities. For example, gain access to a tool that you can’t afford to use in-house.
- Freeing internal resources for other purposes
- Accessing experts or additional labor on an as-needed basis, or that are hard to bring in-house
- Speeding up, streamlining or increasing efficiency for time-consuming functions
- Sharing risks with a partner company
Reasons Against Outsourcing
- Loss of control of a process, or function. This is perhaps the most significant contributing factor why most companies do not follow-through on outsourcing. Despite someone else performing the service, you are still responsible for their actions and results.
- The outsourcing partner’s focus and priority may not align with the business. Their priority is to make a profit when performing a task. They want greater economies of scale and cheaper resources. That may not align with your company’ priority to do whatever it takes to delight customers.
- Confidentiality could be at risk.
- Your business security could be at risk
- Switching costs or the ability to move back in-house or to another partner could be very costly; consequently, locking you in
- Rates can become more costly over time. (My Quickbooks rate went up twice this year). Usually, there are incentives and bonuses, to sign up. However, after a period – usually, after 18 to 24 months, costs could jump.
- Disrupts the culture of your organization
- The ability to “get-things-done,” or their service commitment to you could degrade over time
- Their services no longer align to your business need. The only constant is change. So, your business may adapt to new functions, but the partner’s duties may not align with your requirement.
What to look out for a while outsourcing (and how to position yourself):
- Select an outsourcer who is going to be a partner, less a servant
- Select a partner whose business goals compliment your business. For example, if you’re not good a cold calling, select a partner who is.
- Select a partner who understands your business functions and can recommend improvements (that you could benefit from if you get to partner together)
- Draw up contracts that focus on service level guarantees.
- Avoid long-term contracts. The higher the investment, scope, scale, and complexity may merit a longer commitment. However, try to keep it to 3 years or less.
- Include key performance metrics
- Have a clear dispute resolution process.
- Security and confidentiality
- How to handle out-of-scope requests
- Include some exclusivity language, so that they don’t provide the same service to your competitor
- Include language to terminate for convenience or cause
Outsourcing is always going to be around. Also, as a business owner, you will need, as well as provide services that could fit into that label. So how will you prepare to respond?
Our Opterre business helps new consultants become successful consultants in their industries. We do this by providing you with insights, knowledge and practical steps to help you understand the services to offer for your practice. It’s this valuable knowledge that can help to get started on the right foot.
If you’d like to get started, then contact us here for a free, no-strings-attached consultation.