Q. What are the benefits of outsourcing for a small business?
A.The primary benefit is cost, says Cathy Ryan, Director at Transformosys, a business consultancy that specialises in outsourcing. “It can cut operational costs as it is cheaper over the long-run than employing members of staff.” Ryan recommends that you only outsource back-office roles that are not client facing: “Repetitive, operational activities are ripe for outsourcing,” says Ryan. “It’s best to outsource process-orientated functions that require accuracy, as this will be easier to transfer, than, say, more creative functions.” IT maintenance, for example, ticks all of these boxes. Others outsource some legal work. For some, when they think of outsourcing they think of job losses, but it can be a positive experience for staff, says Kesh Sharma, Director of Magellan Consultancy Services: “It’s not a threat, it’s an opportunity, since business owners can outsource roles that aren’t crucial to their business and re-utilise their staff in more customer-facing, value-added roles.”
Q. If I decide to outsource some of the functions in my business, what should I think about?
A.The first thing to factor in, says Ryan, is the costs of transitioning to an outsourcing company. It’s widely acknowledged that for smaller companies there are fewer vendors available, especially offshore. Some of the smaller vendors will be less well-known so you need to manage the process even more closely.
Be demanding and ask for references from your vendor’s previous clients, says Ryan.
She recommends treating the whole thing like a project, and making sure that you have clear objectives from the start so that both you and the vendor know what to expect. “Sometimes vendors are hungry for business and they can over-promise what they can deliver,” says Ryan. To avoid this you need to probe the vendor’s knowledge about the specific functions you want them to do. The best way to do this is to meet the vendor and actually ask them practical questions or give them problems to solve. If you like what you are hearing then they probably have the right skill level for your business.
Q. What are the pitfalls of outsourcing and how can I avoid them?
A..One of the chief pitfalls is that the vendor pulls team members from working on your business when it gets another contract. This can be avoided, says Transformosys’s Ryan, if you have the right contract in place: “You need clauses in the contract to make sure there will always be enough staff working on your business at all times. It’s also worth stipulating minimum staff retention rates.”
Kesh Sharma, director at Magellan Consultancy Services, says that if negotiations become laborious process then re-think the whole thing: “If the contract is 70 pages long and is becoming increasingly complex, then maybe you shouldn’t be outsourcing that process.” Sharma’s advice to an outsourcing novice is to be patient: “Remember that there will be some teething pains at the start, but that is usually just in the short-term.”