The Question: Outsource or Employ?
Determining whether to outsource or directly employ is an important decision for a company. Outsourcing affects many aspects of your business’s daily activities such as employees, projects, outcomes and, ultimately, its success.
While many outsourcing success stories do exist, there are also numerous instances where companies experienced painful failures and ordeals with vendors. The decision to outsource is rarely black or white. There is no accurate formula for success, however all factors must be taken into consideration before making a decision.
This blog intends to provide essential facts to assist you in making the right decision of whether to outsource or directly employ.
Deloitte’s 2016 Global Outsourcing Survey interviewed workers from organizations with over $1 billion in annual revenues. Their conclusion was that the majority of employees are involved in legacy roles such as IT, finance, and HR; with 72% revealing that they currently outsource IT services. In addition, outsourcing is expected to see growth in the year 2018 across all functions surveyed, particularly industries relating to IT, data security, innovation, finance, and HR.
Making an informed decision about whether outsourcing is right for your business requires you to answer the following questions as part of any in-depth decision making process:
- How crucial is this function for your business?
Mission critical functions should be performed in-house, even though it might be less profitable. This is because the risks of outsourcing are too great.
- What is your budget? How much money will outsourcing save your business? Although cost saving is one of the major reasons to outsource, money isn’t everything. The key is to evaluate all relevant factors and implications, and prioritize accordingly.
- What is the scope of the project and how complex is it?
The project’s scope is of vital importance. It is always tempting to believe your company has the ability to deal with any challenge; however, as we mentioned in our blog “Outsourcing for companies without legal entity,” one of the great benefits of outsourcing involves the information added to the service. Therefore, you should ask yourself, “Does my firm have all the resources and data required to handle the project?”
When the project’s scope is too large in comparison to your knowledge and resources, you should consider outsourcing to vendors proficient in this area of expertise or ones who can provide consulting for the project’s working plan. Similarly, when the essential knowledge for the project exists outside your company’s boundaries and when acquiring such knowhow is costly, you should seriously consider outsourcing.
- How many employees are required?
Hiring employees takes time – and time equals money. Do you have the resources and desire to hire, manage and maintain a large number of employees? If the answers are ‘No,’ outsourcing is a good solution.
- Can you provide mentoring for your employees?
Mentoring is essential for every business and project, especially for new and less experienced employees. A mentor may be a manager, another employee, or an external consultant. In either case, it is necessary to share knowledge, advise and instruct your employees. Bear in mind that internal mentoring is an additional expense, so remember to account for it when doing your costings.
- Do you trust your supplier as a trusted partner?
Outsourcing vendors will know internal data about your project, company and business, so make sure to outsource with a reliable partner.
As you can see, there are many issues to consider before deciding to outsource. The correct decision is company specific and project specific yet entails many considerations beyond the scope of just dollars and cents. These must be analyzed, accounted for, and objectively assessed to ensure you make the right decision.