Used strategically, outsourcing can be a valuable tool, but used irresponsibly, you could end up losing control over key parts of your company
How often do you hear advice like ‘outsource as much as you can?’ If you’re a business owner, you probably hear it a lot. Outsourcing can be a great tool, and you can use it to tap into specific types of expertise that you simply don’t have (nor want to gain). But while working in the outsourcing industry, I’ve also seen it misused. Outsourcing is not the catch-all solution many seem to think.
So instead of taking the easy route and just outsourcing, ask yourself these four questions — does the process I am outsourcing touch any of my customers?, is it possible that I could sacrifice quality by outsourcing?, am I getting a lot of things that I don’t need bundled with the outsourced service?, and if I had the same resources at my fingertips, could I manage this better than the outsourcer?
If you answered yes to any of these, then you may want to step back and seriously look into other options. Outsourcing has a clear, distinct place in building your business. Used strategically, it can be a valuable tool. But used irresponsibly, you could end up losing control over key parts of your company.
Sometimes companies outsource too much. Those that are looking to outsource — especially startups and fast-growth businesses — need to think carefully about what benefits they are truly pursuing, then determine how to get those benefits while retaining as much control and quality as possible.
How much is too much outsourcing?
I had an interesting conversation with well-known business guru, author and speaker Geoff Burch in the UK. He told me a story of two British bicycle makers who manufactured their products in China. One completely outsourced manufacturing and end-to-end management to another company. The other company managed, supervised and controlled the entire process themselves. Both built their bikes in China, but the completely outsourced bike — the one where British management washed their hands off the process — ended up a poor-quality product. The other bike — where processes were managed, quality controls were in place and the company truly owned the work — was of high quality and equal to or better than what could have been made back home.
The company that completely outsourced their bike’s manufacturing concluded that the quality was poor because they had it made in China. But what about the other company? They ended up with a high-quality, competitively made product.
Consider that you might be the problem
It’s much easier to blame an entire foreign country for poor quality than consider that perhaps the way you did things was wrong. That’s an example from off-shored manufacturing. Now, take another example from off-shored services: India and its ubiquitous call centres. How often have you heard arguments that attribute bad service to the fact that they were outsourcing to India?
Often, bad service is a result of bad processes and bad policies. Blaming a nation for poor service is way too simplistic an explanation for a poor result. Businesses are after cost savings, talent or capabilities. But just like with anything worth having, you should examine in detail the model that you’re after.
It’s how, not where, you leverage talent
The world is changing. There are skilled and talented people all around the globe; the best talent is not only found in developed markets. But bringing talent into your company from a different country is not as easy as bringing on locals. You need to consider cultural differences, geographic differences and different working norms.
We’ve found that the companies that are most effective at leveraging global talent are the ones that are also very involved in the hiring and management of that talent. These companies have discovered that outsourcing management to third parties doesn’t solve fundamental problems. This is true especially in areas where they don’t require outside expertise; areas where they should be managing functions and people themselves.
Burch told me of managers who outsource simply to get a problem off their hands. But as in the bike story above, there are different ways to do things internationally, and not all include completely outsourcing to another business.
4 questions to ask yourself before you outsource