One of the biggest concerns that entrepreneurs have while taking the call on whether to outsource or not is “loss of quality”. A combination of much publicized initial hitches and the inevitable occasional red herrings has ensured that quality is seen as a possible risk while outsourcing, especially in offshoring. However on the other hand, letting go of the kind of savings that outsourcing in India or China allows is also extremely difficult. So, what is an entrepreneur supposed to do? Surely a middle ground can be found where offshoring can be done more securely, without losing the quality. Well, there is, and it is a very achievable and practical solution. Given below are a set of steps that entrepreneurs need to follow while engaging outsourcing services, and a small list of “dos” and “don’ts”.
When should you outsource?
1. Cost- If you are finding it economically unviable to carry on with locally hired resources, then you should outsource. In the West, especially in the US, salaries are extremely high for skilled jobs. Often, smaller businesses are not able to afford such salaries. Even if they can, they are forced to sell their products/services at much higher prices to recover the high operating costs, putting them at competitive disadvantage.
2. Talent- If you are finding it difficult to source the right resources locally, then you should outsource. Often, a combination of your geographical location, limited economic clout (in terms of attracting talent) and lack of current brand value can limit your scope of finding the right talent. Such a scenario will hamper your product development and delay the launch of your product. It will also hamper the quality of your product or service.
3. Liability- If you have been at the receiving end of employee lawsuits recently and are not in a position to take another hit, you should outsource. Outsourcing allows you to escape liability and avoid employee lawsuits.
4. Overburdened- In case you are a single proprietorship or your business model does not allow you to hire too many employees and you are overburdened with tertiary or off-core activities, then you should think of outsourcing. Getting overburdened with activities like billing, administration etc can rob your organization of its most important resource- you.
When should you not outsource?
1. My competitor is doing it- Is it affecting you? Is your competitor able to get a better product out of outsourcing than yours? Is he successfully capturing a bigger share of the business or is he able to poach your customers? If none of these are true, why are you outsourcing?
2. I have the money, but want to spend even less- If you are outsourcing because you are trying to maximize your revenue potential, you cannot be faulted. However, if you are making a handsome profit already and are not looking to expand or are not fearful of getting adversely impacted, why would you want to fritter away the MADE IN USA or MADE IN UK tag away from your product? Ultimately, if all is well, you can leverage the tag to generate more sales! Remember, patriotic fervor is a big selling point.
What should I outsource?
Off core activities- Activities that do not directly impact your product/service and activities for which the professional/resource does not need to be onsite. So, if you produce Indian artifacts, you can easily outsource billing, bookkeeping etc.
What should I not outsource?
Core/Primary activities- Whatever defines your company, your core product or service, should never be outsourced unless you are unable to do it yourself for some reason. So if you are a design firm, do not outsource designing.
Off course, these aren’t exactly rules. They are broad guidelines to avoid a loss of quality by minimizing the role played by your outsourcing vendor in your primary activity and keeping you in control of the means of production. However, exceptions are always there. For instance, many cell phone majors outsource the actual manufacturing part to China. However, they keep the designing part in-house. Both Apple and Sony are known to do this. By doing so, they keep a control over their biggest value proposition- their fantastic designs. In a closely contested market, it matters.
So, not that we know when and what to and not to outsource, lets also look at the process. I have tried to simplify it for you as much as possible.
Identifying the right vendor- It is very important to identify the right vendor to whom you can outsource. So, the next question that will arise is, how does one go about doing it. This too has a few simple steps.
1. Get in touch with previous clients- Check out the company’s website, check out the reviews and Google the people who have reviewed the company. You can also get in touch with them through social media platforms like Facebook and LinkedIn and take an honest feedback. In case the company does not have any reviews on the website, either search for discussions regarding it on online forums or best avoid it.
2. Is the company GDPR compliant- While it might not be necessary for businesses outside the EU, I do think that GDPR compliance is an excellent way to keep your data safe. Data thefts are a major worry and any good vendor should be GDPR compliant.
3. Does the company have necessary certifications- A good way to ensure pedigree in your prospective vendor by putting a clause of minimum certification. Depending on your requirement, you can look for a CMMI L3 assessed company or an organization with the latest ISO certification.
4. Business Model- Understand the business model that suits your requirements the best. If you are outsourcing a project, then you might want to a project management vendor. However if you are simply looking for remote employees, then a remote staffing vendor will be more appropriate.
Securing your interests- Once you have identified the right vendor, the next step should be to secure your interests. For that you would need two things-
1. A non-disclosure agreement with the company and ensure that the company also has the same with the resources it hire’s at your behest.
2. A non-compete agreement that forbids your vendor from working with your competitor during your association and for a suitable cooling period after that. This is necessary to giving your competitor/s any advantage by working with the same vendor, whose resources you might have trained at your expense.
3. A non-compete clause with every resource you work with, depending on the requirement. Your resource might shift jobs and might work with another vendor who works for a competing company.
4. An agreement that insulates you as a client from any work place related mishaps to your resource/s.
Maintaining control- Once you have outsourced, you can either chose to remain involved and in control or let go of the control. However, since we are talking about quality, it is best to keep yourself tuned in to the project and in the work your resources are doing on a day to day basis. That gives you complete control over the process and you can ensure that nothing ever goes too off course.
So these are the steps that one needs to take while outsourcing to ensure that there is no loss of quality. Please remember that outsourcing and offshoring is a tool that can be extremely useful if used wisely. However at no stage should you give up complete control over what is essentially your work. Doing so is inviting trouble.