Few companies function completely independently. Instead, businesses form partnerships with suppliers as well as with contractors. Working with outside contractors, or outsourcing, can allow companies to do business more efficiently and effectively.
However, knowing how and when to outsource can be complicated. Even describing outsourcing can be complicated. Companies generally outsource in one of two ways: they outsource a single component of their daily operations, or they establish outsourcing as a strategic part of their business. Apple, as an example of the latter, relies on outsourcing to fulfill their operations model. They design their products internally, and then their contractors operate a complex supply and manufacturing chain on their behalf. In contrast, outsourcing the printing of advertising fliers for your company is simply outsourcing a portion of your daily operations.
Outsourcing is also different from offshoring, which involves contracting work overseas. Any project that you opt against completing in-house falls into the realm of outsourcing. So – how can you strategically build outsourcing into your business plans? The guide below can help you decide how and when to outsource for best results.
1. What should you outsource?
The tasks that you choose to outsource may vary depending on your industry. In general, there are two broad types of tasks that lend themselves particularly well to outsourcing:
A. Tasks that are critical to your operations, and not a vital component of your strategy.
Pretend, for a moment, that your company manufactures organic fruit snacks. While you need to deliver your product to grocery stores and other outlets, how you choose to do so is unlikely to impact the people who ultimately buy your snacks. Given that there is little strategic advantage to shipping the product yourself, this might be a task that you outsource. If you can ensure that your deliveries will be cost-effective and timely – thus avoiding unnecessary extra delivery and storage fees – outsourcing may be able to help you more efficiently complete this task.
B. Commodity tasks. Commodity tasks are also well suited to outsourcing. For instance, many printing companies offer an array of services that come with overnight shipping. In order for you to quickly produce business cards of the same quality as one of these companies, you would have to invest upfront in commercial-grade inks and printers. Or take janitorial services – you can hire full-time team members to clean your office building, or you can leverage the economies of scale that a full-service facilities business offers. The funds that you save on full-time staff can thus be redirected to other areas of your company. Customer service call centers are another example of this kind of outsourcing.
2. When should you outsource?
One of the best ways to decide whether or not to outsource a task is to perform a cost/time calculation. You may have tasks that you could conceivably do in-house with the right amount of time and money – for example, perhaps you eventually plan to hire in-house developers to increase your software design flexibility. But in the meantime, you still need to update your website and your back-end systems. In the short-term, you can outsource this work to a contractor, with the long-term goal of recruiting in-house developers.
One-time events also work hand-in-hand with outsourcing. Unless you rebrand, chances are you will only create your company logo once. If you have current team members with experience in graphic design, you might decide to develop your logo in-house. Otherwise, it may be more cost-effective to take this project to a third party that has expertise and can deliver a professional-looking logo in a timely manner.
As you conduct a cost/time analysis, keep in mind that outsourcing requires you to clearly establish goals and a timeline with your contractors. While you may experience base cost savings if you outsource your development work to a contractor, whether they be in another state or another country, you will also need to factor in the need for clear communication. Getting your point across via phone calls, emails, and other media is different than being able to go back-and-forth in-person with an in-house team. Technology has greatly increased the efficiency of managing a project that you outsource. At the same time, you have to be cognizant of differences in culture and language. For example, contractors may not be aware of the “lingo” you use within your own company, and you should take the time to make sure that you are truly on the same page with regards to goals and milestones, or something as simple as using the same phrases and terms to describe things.
When properly utilized, outsourcing can enable you to streamline your business operations. It can help you more strategically utilize your resources, maximize your time, and move forward with key growth initiatives now.
To learn more about outsourcing, check out these videos:
Chuck Cohn is the CEO and founder of Varsity Tutors, a technology platform for private academic tutoring and test prep designed to help students at all levels of education achieve academic excellence.
This article was written by Chuck Cohn from Forbes and was legally licensed through the NewsCred publisher network.