As a small business owner, you’ve probably entertained the thought of outsourcing an aspect of your business. The benefits of software outsource seem obvious, praised by experts in many industries as the response to cost cutting for business functions ranging from information technology to accounting, marketing and human resources; It seems possible that you could run an entire company without ever hiring a single employee.
But is there more to outsourcing than the bottom line? What are some other reasons why companies choose this route? What about ramifications for aspects of your business that are not so easily quantified?
In this article, we will discuss the 3 Rs of outsourcing: Reasons, Risks and Rewards, especially with regard to information technology (IT). And, as a bonus, we will provide you with some tips to help you manage successful relationships with your IT service providers (whether full-time or outsourced).
The reasons
According to the Outsourcing Institute’s Outsourcing Index 2000, there are many reasons why companies outsource. Here are some of the main reasons:
Reduce and control operating costs. When you outsource, you eliminate the costs associated with hiring an employee, such as management oversight, training, health insurance, employment taxes, pension plans, and so on.
Improve the attention of the company. It is neither practical nor possible to be a jack of all trades. Outsourcing allows you to focus on your core competencies while another company focuses on theirs.
Access exceptional capabilities. Your return on investment is so much greater when you outsource the information technology to a company that specializes in the areas you need. Instead of just knowing a person, you benefit from the collective experience of a team of IT professionals. Outsourced IT companies generally require that their IT staff have appropriate training and certifications for the industry.
Releasing internal resources for other purposes. You may have someone in your office who is pretty good with computers or accounting, but most likely these are not the jobs he or she has been hired to do. If they spend time taking care of these things, who does what they were hired to do? Outsourcing allows you to retain employees for their optimal and maximum use, rather than wasting their time on things that may take them longer than someone who is trained in these specific areas.
Resources are not available internally. On the other hand, maybe you do not have anyone in your business capable of managing your IT needs, and hiring a new employee is not in the budget. Outsourcing can be an achievable alternative, both for temporary and long term.
Maximize the benefits of restructuring. When you restructure your business to improve cost, quality, service or speed, your non-essential functions can be set aside. They still need to be treated, however, and outsourcing is an optimal way to do it. Do not sabotage your restructuring efforts by not meeting non-essential needs.
Function difficult to manage or out of control. This is certainly a scenario when outsourcing to experts can make a big difference. But do not make the mistake of thinking that you can forget the problem now that it is “manipulated”. You still need to be involved even after the check is regained.
Provide capital funds. By outsourcing the non-strategic functions of the business, you can spend your capital funds on items that are directly related to your product or customers.
Reducing risks. Maintaining the technology required to run your business is costly and time consuming. Because IT professionals outsourced work with multiple clients and need to follow industry best practices, they generally know what is right and what is not. This type of knowledge and experience greatly reduces your risk of implementing a costly wrong decision.