Outsourcing certain business functions
September 9, 2010, 12:00 am
Copyright © 2010 Integrated Profitability TM
The way in which companies staff themselves has changed dramatically in the past couple of decades. Many of the changes have been made possible by the advent of the internet and by huge advances in technology. At one point, seems like ages ago, companies internally staffed most functions needed to produce and deliver their products and services. For example, Ford owned Philco for more than a decade to supply radios for their automobiles.
As mentioned in “What to Do, Delegate, Outsource,” companies can take advantage of other companies whose business models focus on providing core services, especially in support and administrative areas, e.g.,:
● Payroll
● Financial bookkeeping
Outsourcing has expanded into infrastructure and operational areas:
● Customer Service
And there are what I would call hybrid-outsourcing arrangements:
● Commission-only sales
● Business process applications
e.g., car financing software packages or senior management MIS dashboards
Several areas are beyond the scope of this short article:
● The rapidly expanding SaaS (Software as a Service) market
● Equally rapidly expanding “cloud computing” applications
● A complete answer to the question: just because you can, should you?
The last question is essentially how to decide whether a company should outsource a particular function. That decision, which is not a trivial one, needs to consider two primary facets:
1. Cost/Benefit
should include both a financial quantification as well as a qualified review of impacts on your brand, quality, customer satisfaction, and long-term strategy
2. Risk
e.g., once outsourced, what could go wrong? What mitigation steps are necessary?
As with most business decisions, an “All-in” analysis, encompassing every aspect of your business that may be affected, provides the best answer.
Bill
William A. Stong
Email: william.a.stong@gmail.com
SBF&P # 79
Telephone: 925-202-6244
Copyright © 2010 Integrated Profitability TM
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