How to decide what to outsource

Jun 10, 2015


Imagine a world where most of our jobs only revolved around our best skills. Being able to do tasks that excite us and delegate other tasks we’re not so inclined to someone else who loves doing those kinds of tasks.

While this might seem like a far out dream, the truth is that this could actually be a more realistic idea than you thought. With the help of outsourcing, you can focus on the things your core organisation excels at, and use resources more effectively by outsourcing general activities such as bookkeeping and other IT tasks. In this week’s post we share some tips and ideas on how to decide what to outsource for your organisation.


Why are you outsourcing?

First things first, in order to decide what to outsource, you need to understand why you want to outsource.

According to the Outsourcing Institute’s Outsourcing Index 2000, there are many reasons why companies outsource. Here are some of the top reasons:

  • Time Savings

For example, you can save precious time by outsourcing the bulk of your bookkeeping. Time spent entering invoices and interpreting account logs means time away from your core, revenue-producing business functions. Bookkeeping and accounting can become a drain on your schedule, especially if you make mistakes and have to unravel your work. In contrast, an outsourced bookkeeper has the expertise to get the job done quickly with minimal errors.

  • Added Expertise

Instead of relying on the knowledge of just one person, you benefit from the collective experience of a team professionals in that area. For example, outsourced IT companies usually require their IT staff to have proper industry training and certifications as well.

  • Cost Effectiveness

Outsourcing in many cases provides a financially compelling alternative to providing the services in-house. When you outsource, you eliminate the costs associated with hiring an employee, such as management oversight, training, health insurance, employment taxes etc. By outsourcing non-core business functions, you can spend your capital funds on items that are directly related to your product or your customers.

  • Human Resources Control

By outsourcing, you’ll be able to access to critical, specialised expertise where you may not need a full-time employee. Hoffmann (2014) says that with outsourcing, you can set and control the budget for the tasks you need completed. By contrast, with in-house employees, you have to account for overheads that go beyond their basic salaries. Outsourced staff members are also used to working on tight deadlines, so they’re more likely to work weekends or odd hours to get things done.


Non-core business services to outsource

Outsourcing is a big step and the question of which activity to outsource is one of the most important. Be careful not to give up your company’s competitive advantage. Retain control over aspects that make you unique or define your business. Rawson (2013) says if you’re already a leader in price or service levels in an area, don’t outsource it. While you need to have a good grasp on an element to be able to effectively manage it, it’s important not to change the parts of your company customers appreciate the most.
There is a vast amount of literature about in-house vs. outsource decision process.


In the book World Class Supply Management (2003) the authors simplify into a table the differences of the factors to choosing to “make or buy” / in-house or outsourcing service:

Making a part in-house Outsourcing
  • Cost considerations – less expensive to make the part/service
  • Desire to maintain the core competency in-house
  • Better control of lead time, transportation, and warehousing costs
  • Need to exert direct control over production and/or quality
  • Design secrecy required to protect proprietary technology/product/service
  • Unreliable suppliers & incompetent suppliers
  • Political, social or environmental reasons (union pressure)
  • Desire to focus on core competency and outsource other activities
  • Suppliers’ research and specialized know-how exceeds that of the buyer
  • Limited production facilities or insufficient capacity
  • Lack of expertise
  • Cost considerations (less expensive to buy the item/service)
  • Item not essential to the firm’s strategy
  • Access to wider pool of talent, especially in science and engineering


From this table, you are able to view any service that your organisation doesn’t necessarily specialise in and is not essential to the core unique selling point of your business to be something that can be outsourced.

Here are a few examples (Moses & Ahlstrom, 2009):

  • Website (creation, SEO)
  • IT (network management etc.)
  • Customer service (call centre)
  • Marketing (lead generation, appointment makers etc.)
  • Bookkeeping
  • Production (generic parts to save time)


Over to you, have you tried outsourcing a part of your business before? If not, would you consider it, why or why not?


By: Curran Daly + Associates


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