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| The Outsourcing Challenge | |||
I am constantly mystified by the phenomenon of outsourcing. Your company does something for cost X. You outsource and some else does it for cost X plus their profit. There are some circumstance whereby outsourcing would allow a small operation to benefit from economies of scale that are usually only enjoyed by larger companies. This applies well to things such as fulfilment, delivery, etc. Putting contracts out for things like maintenance, landscaping, etc is also a good idea when you only require part-time or so few staff it is not viable. However some companies seem to get the outsourcing bug. How can you outsource the IT support function for a large company? How could you ever outsource HR? Why does outsourcing not work?
I am totally prepared to change my point of view if someone can demonstrate to me how outsourcing as a general principle can save any company money.
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| 13-AUG-03: Update | |||
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Yesterday I had a meeting where the topic of outsourcing came up. The cost of outsourcing was covered and it was agreed that costs should be broadly similar to performing the work in house, the profit for the supplier coming from their economies of scale in the service they are providing for you… However, the phrase 'allows us to concentrate on our core activities' was used. I've heard this before, but annoyingly neglected to mention it in the original version of this rant. The more and more I think about it, I am convinced that this must be beneficial for companies. Why should a company that makes widgets suddenly also need to become experts in internet technologies in order to sell online? So is Dave now converted? Somewhat. I would still argue that each and every case should be considered carefully, and that some things (e.g. looking after your internal and external customers) are always part of core activities and should never be outsourced.
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