The idea of outsourcing

"If there is something we cannot do more efficiently, cheaper and better than our competitors, it does not make any sense to still do it, we should hire someone who does it better to do this job"
- Henry Ford claimed.

What is outsourcing?

The name outsourcing comes from the English language and is an acronym for three words: outside-resource-using. It means the use of external sources. Outsourcing involves the transfer of tasks, functions, projects and processes to an external company.

Decision to collaborate with the selected provider should be very carefully made, based on thorough observation, if he can provide the highest level of services quality. Surely, such entity should be specialized in the implementation of tasks in the field that we want to entrust it to execute.

Depending on the knowledge, resources and priorities, an organization decides what potential areas and in what form can be "outsourced". You can choose full or selective outsourcing. In the first case, you sign a contract for full service handled by an external service provider, in the second - you select which areas should be covered in the contract. The possibility of selecting appropriate areas of activity allows for the maximum services adjustment to the needs of business and profitability is the result of such operation.

Long-term outsourcing delegations - to perform the main functions of supporting departments to a third party service provider - serve increasing the value that the company presents to shareholders. Such commissions allow the organization to focus on strategic objectives and implementation of the adopted mission. The basis for the selection of areas that we want and can outsource is to define the so-called business cores, which are essential functions and missions of the business and answer the question, what's the true value of the company? Keep in mind that the strongest cards - of the strategic importance - must remain in the company. They should not be cast on someone else's hands. You can, of course, outsource the supplementary functions that support the main strategy, namely: finance, human resources, customer service and engineering works. When entrusting a simple supplementary function - such as cleaning, security and catering - the decision to outsource them to an external company is easier to make.

Outsourcing has so many faces - from simple projects embarked to improve business processes, resulting in increasing the competitiveness of companies, reducing costs and simply making life easier, to complex enterprises that sometimes may lead to formation of "virtual organizations" or may turn into a permanent strategic alliances.

It should be noted that outsourcing should not be equated and confused with the mandate contract. Outsourcing service contracts are often long-term and create a completely new kind of relationship between the companies. This is not a supplier-customer relationship, but the partnership arrangement in which both sides have to win. Many activities - and sometimes entire projects in the fields of: marketing research, advertising, public relations, information technology, financial services and training - are today outsourced to specialized external service providers. Much more complex relationships and forms of cooperation are formed, than only simple mandate contracts.

The most popular areas of outsourcing are:

  • HR administration functions,
  • Training,
  • Administration systems,
  • Finance and Accounting,
  • Internal audit,
  • Taxes,
  • Asset management,
  • Supply,
  • Printing and document management,
  • Customer service.

What can you gain from outsourcing?

The basic advantage - that comes from getting rid of collateral and auxiliary functions, which is the main argument for outsourcing - is cost reduction. Traditionally, outsourcing is used when the available external resources are cheaper than internal. Increasingly important, however, also seem to be other factors, such as the pursuit of top-quality services, labor specialization and focus on business functions, access to areas of expert knowledge. Outsourcing allows the concentration of forces, resources and management processes in key business challenges. The organization achieves better results and increases its market value. The company also increases the flexibility of their actions, and - by saving time and human resources - the performance.

Outsourcing services provide access to knowledge and experience of market leaders and a worldwide databases. Expert directed to cooperate with the company uses all the knowledge accumulated in a consulting company, corporate databases and advices from other experts. Employment of external experts is associated with more efficient use of time - an expert works only when it is actually needed, not necessarily full time. Such a solution will not only reduce costs but also the risks associated with the search and hiring your own specialists.

Key benefits of outsourcing:

  • Focus on core business objectives;
  • Keeping a much lower level of employment, while providing qualified staff for basic tasks;
  • Providing the highest quality of services based on the experience and expertise of companies supplying them;
  • Reducing investments in maintaining the technical and organizational base of assigned activities;
  • Relieving the various departments, such as procurement, recruitment, etc.

By co-operating on an outsourced basis, you can gain a lot, but you can also lose a lot. Outsourcing has, of course, also a negative side. They appear both within the organization that renders some of its tasks in someone else's hands and in the external company. Such possible pitfall may be too large cost reduction. Reducing spendings is the primary benefit of outsourcing, but too much emphasis on their cutback may lead contractor to operate at break-even limit, which will surely reduce the quality of the project in general. It can also lead to choose an outsourcing company based on the far-from-essence relationship. Execution of long-term projects cannot assume too frequent changes of suppliers, unless they present performance does not meet the set requirements. This shows, however, a bad initial choice and the fault lies here on the side of the client.

One of the traps, which you can easily fall into, is too much responsibility delegation. "We outsourced it and we don't care about it"-type-of-attitude is wrong. You can delegate many tasks to perform, but you cannot delegate responsibility for their completion.

The negative side of outsourcing is also rooted in the companies offering their services. It happens that these are companies without adequate preparation, not having properly qualified staff or practical experience in carrying out projects they would like to handle. It is therefore important to choose the appropriate outsourcing company.

Outsourcing has its pros and cons. Make use of this service, but very responsibly and in accordance with certain assumptions. The decision to cooperate on such principles may not belong to easy-ones. Accurately made, it can be profitable and may result in strengthening the company's position. Mistakenly taken, it will expose us to increased costs and reduced value of the organization.