• The task isn\’t fundamental to generating income
• The task is done routinely and wastes resources
• The task is often overlooked or delegated because nobody wants to do it
• The task can be done by someone with less/different skills
• The task may be done inexpensively in-house, but burdens employees that are better used elsewhere
• The task requires a specific or rare skill which regular employees don’t have

The strategic benefit of outsourcing is that you can use your resources for more profitable tasks. But once you have decided on outsourcing, how should one go about it?

Determine the requirements

Firstly make sure that the task you want to outsource is essential and beneficial for your business. Ask other executives and businesspersons to commend reputable outsourcing firms. You can get out a lot of information on businesses in casual conversations or even do some research on the internet on the topic. Once you have a shortlist of companies, arrange to meet with them to explain your needs. It is also a good idea to request recommendations from their current clients.

Select a well-matched company

Decide on a company that understands you and your needs. Make sure that you understand their terms and that they can accommodate yours. Set up a contract to ensure both parties agree to the terms and conditions. Allow for some flexibility and growth here, as the current arrangements may need to be adjusted in the future.

Clarify the expectations

As an external entity will be managing a task or even an entire division, clarifying your expectations and standards is of utmost importance. Put these in writing or include them in the contract, so that both parties are informed. Remember to also update these as and when this become necessary.

Communication builds a good relationship. Schedule regular meetings, share the expected work ethics and discuss the problems encountered along the way. By being aware of the goings on, you can avert possible difficulties and improve your operation.

Alternative arrangements

For some crucial tasks, it may be necessary to ensure that some kind of backup plan is in place, should the outsourcing company be unable to perform their tasks. An accounting or IT company in the outsourcing business should regularly supply their clients with backup data and also store these in separate, fireproof locations. Make sure to carry out regular checks to verify that backups are usable and restorable.

We believe that outsourcing is the way forward and that the key to outsourcing is a good relationship between the parties involved.

In our previous blog post, we listed the advantages and disadvantages of outsourcing. So what are the actual reasons South African companies are turning to outsourcing as a solution? And is this really the best way forward?

Patrick Ashton, CEO of Cirrus commented: “Outsourcing of technical and administrative services allows customers to focus on their core business activities. In addition, customers can reduce their IT and business risk through implementation of strict SLAs with outsourced companies. For start-up or small companies the outsourced offerings are attractive. There is no heavy upfront capital commitments in order to get the business up and running quickly.”

Ms Tiny Modise, Sales Manager from Westech commented, “the main reason SA companies turn to outsourcing is to cut down the work load and to save money.”

And looking abroad, Chuck Cohn stated in a Forbes article that outsourcing can allow companies to do business more efficiently and effectively. \”One of the best ways to decide whether or not to outsource a task is to perform a cost/time calculation\”, says Cohn. He says while your business could perform these tasks in-house, the cost/time calculation will determine whether outsourcing is feasible.

A common thread without a doubt is that outsourcing of non-core functions is extremely beneficial. It enables companies to concentrate on their core competencies, which in turn offers the highest return on investment and hence delivers the most value to shareholders. Especially because the IT world is a continuously changing environment. Technology is evolving at a rapid rate every year and has become a major expense to most businesses.

We all need to tighten the belt and when it comes to saving, outsourcing is really the way to go.

One way of explaining or justifying outsourcing is that you should do what you do well and let another do everything else. In other words, you should rather focus on your company and growing your client base/products, and let someone else take care of the rest. This may sound as the ideal solution, but you need to take the pros as well as the cons into considerations. The fundamental key is to know your business and your goals. Then you can decide how outsourcing might help you achieve them.

The main advantages are:

Cost saving: The costs of an in-house employee is almost always higher than that of a service provider or freelancer, especially in terms of hours billed, leave, office space and equipment.

Quality and specialized skills: A service provider or contractor has the expertise and required experience, which means you are guaranteed of a job well done and access to special skills. They want a good rapport to ensure a successful relationship and more business.

Contractual responsibility and staffing: The accountability of a service provider is greater than that of an employee. When outsourcing a non-core role, one sidesteps training current staff as well as recruiting suitable staff.

Workforce flexibility: A previously non-core function may become more significant and require skills the business may lack. In such a situation, outsourcing is an excellent work around. A service provider often has a talent pool that is accessible to their clients.

Capacity: Sometimes additional staff is required to meet a certain deadline. Instead of employing people who would not really be required afterwards, freelancers or contractors can lend a hand as and when their help is necessary.

The main disadvantages are:

Protection of assets: Who is the owner of the data and database? What if the service provider steals your idea? Service providers and freelancers most often work remotely. The data and databases are then located at their premises, which could result in some loss of control. Well-structured contracts may circumvent difficulties here.

Company knowledge: An employee may have a better understanding of your business, especially if he/she has been working for you for a while. Detailed handovers can ensure that concerns and objectives are taken into account.

Service provider staff: Even though the service provider offers skilled staff with the necessary know-how, staff turnover and sudden demand for skills may leave you in the dark. Skilled staff is extremely sought-after, which brings about a high staff turnover.