It is impossible to be able to do everything, let alone be able to do it well. The same goes for companies. Outsourcing has therefore become a thriving business without which our modern world would struggle to survive – or at least, many companies would cease to exist in their current form. If this is a fate you would like to avoid, you are in the right place.
Outsourcing is an abbreviation of the words ‘outside’, ‘resource’ and ‘using’, which describes its meaning perfectly: making use of resources outside of your own company. Individual tasks or entire structures are assigned to external service providers to make up for a lack of in-house expertise. The outsourcing evergreens are customer service, accounting, tax consultancy, IT and marketing.
Companies could also incorporate this expertise internally, but the cost of having employees or entire departments is disproportionate to the cost of outsourcing – outsourcing is the most affordable alternative in the vast majority of cases.
Finding the right option for you
However, not all outsourcing is the same. It can be divided into various different categories:
With application service providing (ASP), a company is provided with programs including a data centre. This enables them to use software without having to install it on internal computers. This service often also includes maintenance, preparation and data backup.
Business process outsourcing (BBO) involves outsourcing an entire business process. Areas requiring specialist expertise (such as finance and accounting) are assigned to external providers to allow the company to focus more effectively on its core business.
Business transformation outsourcing (BTO) combines outsourcing with management consultancy. An external service provider takes over the business and optimises and transforms the processes involved.
Complete outsourcing involves the full outsourcing of entire business areas. This sees entire departments such as HR being handed over to a service provider, often along with staff.
With managed services, all of a company’s information and communication activities are handed over to a service provider.
Outtasking is transferring individual, clearly defined tasks to an external provider. This often involves new websites, software development, or recruiting new employees.
With offshore outsourcing (offshoring), processes are shifted abroad to save money. This generally offers lower production and wage costs than the domestic market.
Outservicing users outsource their customer services to a special call centre or maintenance centre.
Transitional outsourcing can be used to bridge gaps when an area is being reorganised, in order to avoid downtime. The affected processes are transferred to an external provider for the relevant period.
What you need to know
Before you start thinking about outsourcing, it is worth taking a step back, as there are various things to consider. Researching and analysing potential partners is essential to ensure constructive collaborations. Think about the following questions: Do they fit the budget? How good are they at communicating? And how good is the chemistry?
However, it is not just partners that need to be chosen carefully – the choice of which processes and tasks to outsource should also not be made lightly. It must always offer added value for your company.
If you make the right preparations, you can enjoy the benefits offered by outsourcing:
Often, the specialisations of service providers and suppliers enable them to take advantage of economies of scale, reducing costs compared with on-site production.
Furthermore, outsourcing to specialist service providers can help to increase quality if you have chosen your partners with care.
This offers time savings, as there is no need to undertake the time-consuming process of learning new skills.
This extra time can be used to focus your full attention on your core skills.
Of course, outsourcing is not a perfect solution and also has a few disadvantages:
The biggest is probably the dependency it entails. The external service provider could run into trouble, resulting in expensive delays or failures.
Contractual obligations can also cause problems if they last for a long period of time. For example, this can make it difficult to switch to a cheaper provider.
Close collaboration requires a whole range of internal information to be exchanged, much of which is not intended to be seen by the public or competitors. This can complicate data protection processes, and breakdowns can have far-reaching consequences.
As well as the loss of data, another possibility is the loss of knowledge. If processes are made external, your own employees will not have the opportunity to undertake further training in these areas. In addition, all of the knowledge collected by an external provider is lost as soon as the contract comes to an end.
No rush
The decision whether or not to use outsourcing is always made on a case-by-case basis and should never be taken lightly: although the benefits may seem appealing, if you do not have a well-considered strategy, you are at risk of being blindsided by the disadvantages.
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