Can Outsourcing be a Strategic Move?

In many industrial environments, outsourcing policies are still looked at with extreme caution, as they were merely one of the possible solutions when it comes to getting something done externally, and often times they are considered to be a very hazardous choice. Part of this prejudice that sees outsourcing as a hazard comes from the fact that corporate cultures based on mastering everything inside the company are still very popular and widely supported by a very serious - and apparently flawless - logic:

You cannot master what you don't control, and if you don't master you'll never have control.

As a principle, this is quite true: there's no real control when you're not the direct operator, the only form of control you can assess is indirect and retrospective. The need for certainty is often regarded as more powerful than the need for improvement, therefore many companies actually choose to opt out from the chance of outsourcing for fear they'll lose grip on the matter.

Insourcing versus Outsourcing: how to decide?

The decision to tenaciously avoid outsourcing can sometimes cost a lot, both in terms of opportunities and resources. It has in fact to be taken into consideration that handling internally any particular task, function or business unit generates - upfront - a few stable outflows, such as:

  • employees salary
  • employees training (and sometimes hiring)
  • allocation of physical space and equipment
  • allocation of time and focus

There's indeed some deep dedication to be provided, in order to take care successfully of the above-mentioned task, function or business unit.

The important question is:

When is this dedication worth it, and when it is not?

While the context may vary from business to business and situation to situation, there's one universal answer that's a trusted and proven fit for any company, in any industry.

When the task, function, project or business unit is core to the company, when it becomes a representation of its identity and it's pivotal to the value offered - day in and day out - to Customers, then a centralised, internal structure that's able to provide dedication as well as full control is to be considered mandatory. In this case, insourcing wins over outsourcing and any sort of outsourcing policy shall be set as complementary and possibly limited to a predefined time span.

So, can Outsourcing be, sometimes, an understated weapon?

Short answer: yes, definitely. There's a whole range of possibilities where outsourcing does come across not only as a good choice, but overall as a great strategic move that can push the company forward.

Outsourcing as a way of increasing volumes

When you suddenly need to increase your production but can't face upfront the equipment investment required, outsourcing is definitely a very apt solution: you'll still cover the majority of the volumes internally and at the same time you'll take the chance of expanding your monthly revenue by adding the sale of the exceeding part that you outsource.

When it's done with the purpose of increasing the volumes you sell, outsourcing does not come with many risks, because you're not externalising a full function but just a fraction of something you already master internally and something you have great expertise on.  As long as you choose wisely your outsourcing Partner and as long as you perform quality inspections of any outsourced production batch, everything should run very smoothly and provide the best outcome with minimum effort.

Outsourcing as a way of leveraging expertise

Sometimes, the guidance of the best in the field can set you up for success faster and more effectively than any kind of insourcing could ever do. If you want to perform a strategic review with a specific goal in mind, you'd probably be better off outsourcing part of the task to a consulting company that can lead you there quickly and with less confusion or fuss. Just imagine, how good would it feel to instruct the experts in the field about your goal and then have them figure out for you which way to go to reach it sooner rather than later? You'd still have your decision power strong and intact, but you'd be guided by skillful and prepared professionals who've done this before and whose mission revolves around you reaching success faster than you could do alone. This kind of outsourcing does not come free, as experts usually charge for their expertise and for the time they dedicate, but in many cases it'll still be more effective than going solo.

Outsourcing as a way of testing before committing

According to the intrinsic nature of business, dynamism is key and new needs and opportunities are likely to arise quite often. In this hectic and moving environment, a serious company will keep an eye out for novelty but won't spread itself too thin and risk to lose sight of its core. In fact, well-rounded companies usually select with care their new business adventures and often times - before committing to one - they externalise the business to another company who already has experience in the field. By acting initially as intermediates between the market and their outsourcing partners of choice, the companies are able to test out the new business segment without fully investing in it upfront. Therefore, at the end of the trial, the decision has a much more solid base and the possible choice of taking the field becomes less hazardous, and it's reinforced by some tested evidence.

The One Prerequisite

Of course, there's one huge prerequisite that is essential for any reasonable outsourcing strategy aiming at great results: the Partner. The pivotal element in your outsourcing policy is in fact the Outsourcing Partner that you choose. The general rule is:

Do not compromise on anything: quality is essential, results are important, trust is a foundation upon which reciprocal success is built. Any company that does not offer you those elements as a guarantee shouldn't be allowed to be at your side.

When properly planned and executed, outsourcing can definitely prove itself strategic, it can contribute to the growth of a business and can even serve as a short-term cash flow saver by reducing the number of upfront investments that would otherwise be necessary to approach certain business situations. On a quite philosophical level, the concept of outsourcing is not that different from the concept of delegation: it may sound scary at first, but:

  • if you're willing to overcome the need for direct control
  • if you choose wisely your Outsourcing Partner
  • if you quality check what you outsource

you'll find the benefits are much higher than you'd expect.

Category:

management

Time to Read:

5 min