When to Outsource Technology Needs

If you’re running a business, do you keep a person on staff for janitorial duties? Or do you hire a company that sends out cleaners to do those jobs on a weekly or bi-weekly basis? While you might hear the word ‘outsource’ and think of call centers in India, a vendor doesn’t need to be overseas at all. Many companies outsource to local or national companies for a variety of tasks, including food service (as in an on-site cafeteria), copy centers, trucking, building maintenance, security, payroll, legal services, and of course I.T. and web design and maintenance. Has your business ever considered outsourcing these types of tasks? And how do you know if you should keep a task in house or outsource it to a third-party vendor?

Often, when we’re making a business critical decision, we use a SWOT analysis: Strengths, Weaknesses, Opportunities, Threats. Below, we’ve done a SWOT analysis of outsourcing.

Strengths Cost reduction via economies of scale Flexibility to adjust personnel quickly for activities that have a high degree of variance (one day 50 employees needed; the next day only 10 are needed) Frees your business up to focus on your core activities Reduces learning curve, as the third-party vendor already has the expertise needed Increased transparency, accuracy, and quality	Weaknesses Potential duplication of costs (since you may already be paying employees who could accomplish the same tasks) Reduction of your business’s control Potential confidentiality issues Lack of familiarity with your business’s processes or standards
Opportunities Exposure to cutting-edge solutions that your business might not otherwise come across Expansion of existing business relationships Internal productivity gains at your business Faster time to market for your products or services Possible tax benefits	Threats Other businesses competing for outsourced resources Vendors who over promise and under deliver Rising costs Potential corruption or piracy

Determining if Tasks are Eligible for Outsourcing

If a task is high in strategic importance to your business, but contributes little to your operational performance, it may be a candidate for outsourcing. Your business needs to retain control of such tasks to ensure they are completed according to your standards and that you are achieving the quality you require. At the same time, your business is not dependent on them to run smoothly, or they may not cost very much to outsource. With tasks like this, you can write them off as unworthy of full in-house focus. Instead, think about forming a strategic alliance, as with an advertising agency or a web design firm.

Meanwhile, if a task has a high strategic importance and a large impact on your overall operations, this is a task that can’t be outsourced. There are a few rare situations where outsourcing a core competency might be advisable, but these are rare indeed:

1. Your core competency is about to be or already has been turned into a commodity, and you are pivoting your business in a new direction. For example, a hardware company might find that its physical products are a commodity, and the software or tech support around it are what sets their business apart. They could theoretically outsource their hardware production and focus on their unique software offerings.
2. The capital and technical requirements of maintaining the core competency are becoming too great for your business to manage. In a case like this, the whole industry might be on the downswing.
3. If customers don’t want to pay much for your “core competency” but will pay a lot for something else. Sometimes companies who have offered a “bonus” product along with their core product have found that the bonus outperforms the core product.

 

I.T. Roadmap bills itself as “your in-house I.T. department, outsourced.” And for most small- and medium-sized businesses—particularly here in the Dallas area—it simply isn’t worthwhile to maintain a staff of I.T. professionals, much less web designers. Try a SWOT analysis that’s tailored to your particular businesss and its needs, and let us know if we can help.