Outsource or Insource?

Should you outsource or not? That question comes up often and seldom has a simple answer.

For example, suppose your top sales rep just landed a contract to handle all of the electrical work for a planned shutdown nine months from now. Some of the things the customer wants done are outside your skill set. You’ve got time to send people to training classes and time to buy the test equipment and PPE needed. So it sounds as if you should skip outsourcing. But wait. The total time for that extra work will be about six hours.

In this case, outsourcing makes sense, right? Unless, of course, you want to get into that line of work yourself and need some small projects to build experience. And you do, so don’t outsource. Right?

But wait. This is a new client that has huge amounts of work within your existing skill set. You will have to work your people longer hours and hire more, just to handle that. Outside help would alleviate the pressure, and there’s the fact that you want this first engagement to be as flawless as possible. You don’t want your people making “learning mistakes” on this job.

Then there’s the question of to whom you will outsource these bits of work. What quality standards do they have? Are they reliable? Do they have industry certifications relevant to this particular work? Do they have the right test equipment and know how to use it? Who owns the test data? What’s the supervision chain of command? Rates, insurance, liability concerns…on and on it goes.

Questions like these may come up when you consider outsourcing. You don’t want to be forced into dealing with them when you’re buried in other things. Nor do you want to try thinking them through during a meeting when a client asks, “Will you do this relay testing yourself, or will you outsource it?”

If you don’t know the answer when you walk into the conference room, you could of course say, “We’ll get back to you on that.” But that kind of reply doesn’t inspire confidence.

The solution to the outsourcing question is to have an outsourcing strategy in place prior to any meeting. It is best developed with the involvement of your senior management team. And it’s not a question of what to do about a particular project. The strategy needs to address outsourcing as if it’s an ongoing practice (it may well be). It needs to spell out what specific resources you will outsource and under what conditions.

The strategy formation will have to consider your business strategy. We do A, B, and C. We outsource D and E to our trusted partner, ACME Electric. You don’t do F and G. If doing F and G is a requirement for getting a contract, maybe it is not the right firm for you. You haven’t been building expertise there and you don’t have an arrangement with a firm that does.

You also will have to consider your existing resources, the costs and benefits of expanding those resources, and the cost and benefits of outsourcing the resources you don’t have.

Will you outsource only to fill a skill gap? What about a headcount gap? Suppose one project is going to need six master electricians and you have only seven to cover all of your projects? Exactly how thin do you spread a resource like that?

Don’t try to develop a strategy document that accounts for all possible scenarios; that would make it an operating manual and one that would take too long to develop. A way to limit the scope is to identify four or five situations in which you would outsource, and four or five in which you definitely would not.

Anything outside what makes the list will just have to be decided if it comes up. You can use your pre-determined situations as a reference. We always outsource relay testing, for reasons A, B, C. What about transformer testing? Gee, the same reasons apply there; easy decision.

For those situations in which you would outsource, assign a manager to find prospective outsource “partners” (not actually partners in the legal sense, but in a loose agreement in which they are the ones you go to first). You can vet those partners the same way you vet prospective hires, and write up a contract the same way you do for clients.

It’s much better to do this work ahead of time with low pressure, than to have to locate an outsource partner when the clock is ticking and your back is against the wall.

So back to that question the clients asked about the relay testing. What they really want to know is if their trust in you will extend to that testing. “We’ll get back to you” does not put them at ease on this question. And what are these people supposed to tell their bosses? “We don’t know who is doing that testing.” Don’t put your client in that position.

How much better when you can say: “Thanks for asking. I’m happy to let you know that we’ve been working with ACME Testing for the past three years on all kinds of projects and are very pleased with their work. For that reason, we are outsourcing this particular part of the project to them. That will allow us to focus on the other work.”

And because you already have worked things out with ACME, you’re prepared when the client says, “Well, I’d like to meet someone from ACME or at least talk to them.”

No problem. You take out your phone and call Paul at ACME. You’d already told him about this meeting. You have that kind of relationship with your outsource partners.

Source: ecmweb.com -Outsource or Insource?

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s