Long before the term outsourcing became recognised business parlance in the early 1980s, the practice had been adopted by businesses large and small.

Outsourcing, or the subcontracting of a service such as product design or manufacturing to a third-party company, may sound quite straightforward. In reality, however, it can be very complex and far-reaching, ranging from one extreme where it could be the relatively simple sub-contracting of a organisation’s janitorial services to the other where the complete order fulfilment process is managed and provided as a service by the outsource partner.

Outsourcing managed properly can greatly improve business performance but managed badly it can introduce significant risk. Consequently it needs to be considered and implemented professionally.

The benefits of outsourcing vary enormously and are dependent upon the type of business and the nature of the service being outsourced. However, the most common reasons for considering outsourcing are to:

  • Increase focus on core business
  • Reduce and restructure costs
  • Improve quality
  • Utilise the outsourced partner’s specialist skills and talents
  • Increase capacity flexibility
  • Provide a catalyst for change
  • Reduce time to market
  • Better handle a commodity
  • Manage risk more effectively
  • Optimise tax-saving opportunities
  • Facilitate scalability

The list is long and by no means complete, and every outsourcing scenario is different. There may well be equally compelling arguments against any sort of outsourcing arrangement. It is therefore important that ALL factors are considered fully before embarking upon any form of outsourcing. To that end the business must establish:

  • That outsourcing is a valid course for a realistic period and not simply a knee-jerk reaction to a short-term problem
  • A clear definition of the scope of the processes and/or functions to be considered for the outsourcing
  • Agreement on the expected benefits
  • The performance metrics and measurement techniques to be used
  • How the relationship with the outsource partner/s will be managed
  • The steps necessary to affect a successful transition

So whatever form of outsourcing your organisation is considering or currently operating, it is vital that these fundamental principles are applied to the level that is appropriate to the potential business impact and risk of the outsource. It is also imperative that these are applied throughout the lifecycle of the outsourcing.

At MLG we have a wealth of experience in this practice ranging from local outsourcing (near-shoring) of both Manufacturing and IT service and infrastructure, through to off-shoring of the same to full Business Process Outsourcing of mission-critical processes. If you would like to discuss your specific outsourcing requirements and see how MLG could assist you with any aspect of outsourcing simply click here.