What is outsourcing?
This term is sometimes used to cover a number of different contractual arrangements.
In its original and perhaps most accurate form, it means passing an element of your company’s daily work out to another organisation. They will then deliver to you, the services once performed by your own personnel and organisation.
It can also mean needing a person or team of people to do a specific one-off job, on your premises or elsewhere. Instead of using your own resources, you can ask a team of external specialists to do the job for you.
The most familiar manifestations of outsourcing arise in the IT area, such as moving your IT operations to a third-party managed datacentre. However, it can apply to potentially any business discipline.
What are the benefits?
They’re potentially numerous, including:
- it keeps your permanent headcount down and their related costs;
- you can gain access to rare skills upon demand, without needing to train and on-develop your own personnel over time (often logistically impossible due to the very diverse nature of the skills required in the typical business today);
- it is a way of sharing accountability with an external provider;
- your personal management overhead is reduced;
- perhaps most importantly – it allows you and your key personnel to deploy your skills on your own business-critical activities, not off the critical-path peripheral ones.
As an example of that last point, let’s assume you are an engineering company. You probably have no doubt as to the importance of IT systems to your daily affairs but do you really wish to develop an IT department to provide your own services?
Some organisations might decide that they’re in the business of engineering not IT and want to focus exclusively on the former. If that’s so, they may decide to ask an external provider of Cloud services to deliver to them their basic IT services including things such as Payroll, Accounts Payable, General Ledger, Order Processing, Customer Relationship Management (CRM) and so on.
How can I control outsourced providers?
There is a myth that external service providers somehow wish to ‘lock in’ clients.
That is typically not so. As the client, you will retain 100% control of your services at the point of delivery into your establishment. However, it is important that you ensure your services are delivered within the context of a tightly defined contract and SLA (Service Level Agreement) that fully protects your interests. The contract can also be used to constrain future price increases to within defined margins.
What happens if I wish to move to another provider or bring the service back in-house?
This is not a problem. Most reputable outsourced service providers will very willingly agree to ‘future migration support’ conditions in the contract and/or ‘skills transfer’ clauses to help you bring your own personnel up-to-speed etc.
What is the difference between contract services and outsourced?
In some cases, there may be none. Sometimes ‘contracted’ may mean an individual or individuals that a company might employ on a temporary self-employed basis. In other instances, those resources might be provided by an external provider. There are no firm rules here. However, typically, a contractual arrangement that provides a service or something to be delivered, might be described as being ‘outsourced’. A company providing personnel for you to use as you require on a daily basis might call the arrangement ‘contracting’. It’s a moot point!
