Why Outsource non-core business processes?
It is a common practice in many organizations, despite their size or industry where they operate, to engage with an external service provider to perform specific business tasks and functions.
This common exercise allows organizations to focus on their niche area and deliver better results to their clients.
IT and software-centric development companies are more open to outsourcing administrative, accounting, and staffing functions but might not be so open to joining with a third-party company to enhance their software development processes and other related operations like testing, maintenance, and support.
In our research and analysis of various growing global enterprises, there are five primary reasons to outsource non-core business functions.
1. Insufficient staff
Often global businesses do not have the in-house staff in place to manage non-core business operations. Companies may require project managers, process coordinators, recruitment specialists, and technologists, not to mention the resources themselves, who come from different backgrounds and hold different expertise than your current resources. It could easily become a sizeable team.
2. HR Operations
The current HR department of a company might not have the potential to help with all the resourcing exercises. They would have to do a lot of processes like recruit, hire, train, and manage, to name a few things. Also, it’s possible that you will require to recruit resources or build offices in new countries, which means having to comply with foreign labor laws, financial regulations, and hiring practices which could really get you into trouble if you don’t know them. So in such condition is always better to outsource HR staffing services to the experts of the same domain.
3. Insufficient infrastructure
If you need a call center to support, for example, all the regions in which you sell your product, it’s likely that your existing offices cannot provide the global coverage required for this new function. At the same time, the time and expense of securing new real estate might make senior management chaos.
4. Budget constraints
Your organization may not want to or capable enough to allocate sufficient funds to internally support additional cost centers. Also, budgeting is difficult: the costs are very hard to foresee if you don’t have experience building a department. Outsourcing the program might be less costly than setting it up in-house since experts can set up efficient programs quickly based on past experience. They can also suggest the best technology and team structure for your business needs. Finally, they may already have the global office network and a resource pool in place, eliminating those setup costs entirely.
5. Lack of knowledge of various in house processes
It could be that no one knows where to start to create or manage a department. And it’s not a realistic expectation: they have been hired to do other jobs. It could be the condition that the current employees do not have experience in deploying new processes and technology.
Craft a business relationship for sustainable competitive advantage.
1) Have an outcome-based contract
2) Focus on the what and not on “how the supplier brings the expertise”
3) Define success, manage and pay success
4) Model with incentives
5) Governance model built on insights
6) Goal alignment.
Outsource your shortcomings so you can concentrate on your strengths, but take the time to fully investigate the potential outsourcing partners so that you can select a company with the appropriate expertise that you can trust. They should build a comprehensive program that escalates with your business, continuously innovates to develop processes, and delivers against your expectations and requirements.
Keeping everything in the company enables you to remain in control and gives you high visibility into what’s happening. Whereas, outsourcing frees up your staff and other resources for what you’re actually good at.
If you can relate to one or more of these pointers for outsourcing peripheral business needs, investigating an outsourcing partnership may be well worth it.
The excellent combination of expertise with efficient business processes and optimal utilization of internal resources defines a triumphant formula that enhances productivity, with a focus on each core business and results in the competitive advantage.