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Effective Outsourcing
Follow these guidelines to determine when you should develop in house and when you should subcontract.
by Adam Kolawa, Ph.D.

September 15, 2004

Deciding whether to outsource a project is a task in and of itself, involving research, analysis, and strategy. Ultimately, you need to consider the consequences and benefits that outsourcing will bring to your company.

If you approach and implement outsourcing incorrectly, the effects aren't pretty—not only can you jeopardize your position, but you can also put the jobs of your coworkers in peril. Those are extreme consequences. However, when outsourced projects fail, people within your company end up doing the work that the outsourcer failed to do correctly—or even failed to do at all.

Other consequences of a failed outsourcing project include an increase in cost and production time—exactly what you do not want. A failed outsourcing project creates unnecessary havoc and offers no benefits to your company. To launch a successful outsourcing project, you should implement these key elements into your outsourcing plan:

  • Determine your company's focal point.
  • Focus on increases in quality and production.
  • Concentrate your efforts and your team's efforts on your company's focal point. You can outsource anything immaterial to that focal point.
  • Establish and maintain long-term relationships with vendors who specialize.
  • Increase productivity and reduce costs through error prevention.

The first action you should take is to determine your company's main focus. What exactly is the core of the business? Figure that out by answering these questions:

  • What is the company's competitive advantage?
  • What is the company's true business?
  • What is the company trying to accomplish?

You want to focus your energy and your team's energy on any projects that are related and contribute in any way to that main focus. The only projects you should think about outsourcing are the ones that have nothing to do with your company's main focus.

The next step is to evaluate and analyze the production of any projects you are thinking about outsourcing. You want to determine whether outsourcing is the most viable option. Answer these questions:

  • Do I really need to build the part myself?
  • Can I get somebody else to build it for me more efficiently?

With your company's focal point in mind, you can begin to concentrate the efforts of your team—and you should. It allows for your team members to focus their time on improving the specialty of the business. Doing so increases the value of your team and its contribution to the business's primary intellectual property.

Any projects irrelevant to your company's focal point can potentially reduce costs and increase production. It would be wise to let someone who specializes in that area concentrate his or her efforts there for you. You end up with a higher-quality part than you could have produced on your own, in a shorter amount of time. And, because your team members don't need to spend time building the company's secondary intellectual property, the primary intellectual property increases.

At this point, you should center your efforts fully on increasing quality and increasing productivity. Cost savings is something you can explore later. Saving money is actually a benefit derived from increasing quality and productivity—not the other way around. Unfortunately, most outsourcing projects occur merely because of the price tag, without further analysis.

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