OutsourceSurvival.com

I accidently skipped over this, so a quick rewind to define outsourcing. I decided to outsource this to Wikipedia, you can see their definition below:

“Outsourcing is subcontracting a process, such as product design or manufacturing, to a third-party company. The decision to outsource is often made in the interest of lowering firm or making better use of time and energy costs, redirecting or conserving energy directed at the competencies of a particular business, or to make more efficient use of land, labor, capital, (information) technology and resources. Outsourcing became part of the business lexicon during the 1980s. It is essentially a division of labour.” www.wikipedia.org

A little too convoluted to be useful for our purposes but a thorough definition I think you’ll agree… it would make a lovely quote in an MBA essay or if we were putting together a textbook…

This is part of the problem with understanding outsourcing for small business. A great deal of the popular media still describes it in terms of its government or corporate function. It’s all very 1990s It conjures images of 10 000 page service agreements, teams of lawyers negotiating the smallest details of who’s responsible for what, where, when and how much.

To be sure, government and big corporatations still invest in this convoluted method; the risks are higher, management teams are further from the outsourcer and the work being done, and often managing the risk of loss is more important than efficiency/savings. But thanks to entrepreneurs and the internet, it has evolved into an entirely different beast for small business and professionals.

Getting your car serviced by a mechanic or buying your groceries at a supermarket is common everyday outsourcing, but we don’t generally think of it in those terms. It works because someone else can do something faster/better/cheaper, so it just doesn’t make sense to do it yourself.

What I call ‘modern’ internet based outsourcing is lean, efficient, and simple; like buying shopping from the supermarket. First you identify what is needed, then you find the item with the price, quality, availability, and brand that best suits your needs. For example: You need a website; you get someone who can make websites. You need technical support, you hire a tech support guy. You want a logo, you get a designer. Services commoditised and bought off the shelf.

This introduces another interesting affect; you don’t need to be an expert in the field that you’re buying from. Coming back to the shopping example, it’s not necessary to know how the cheese is made to buy it off the shelf; what is important is knowing what price, style, and brand you need. You can’t take back that half-eaten block of cheese just because you changed your mind, so work out what you need first but that’s a topic for another article.

So to define outsourcing in simple terms:

Its about: hiring 1 or more individuals (or companies) external to your business, to complete a non-core task or perform a non-core service.  It will cost you less (time/money) than if you or your team do it yourselves; and it needs to be done in such a way as to be invisible to your customer or end user.

Done effectively, I see it as very similar to ‘white labelling’. Thanks again Wikipedia for a bland definition. This is a trend that has exploded in the web space, and will become more and more common to traditional small business.

Side rant…

My view on this is that as the marketplace becomes more saturated, the ability of each product or service to be truly unique is diminished. The web is a hyper- competitive marketplace, and has evolved more quickly than bricks and mortar. Smart businesses owners know that this leads the customer to place more value on their relationship with them. Ok… and now the de-fluffed version… what I’m mean is that a trend of ‘I don’t care who made it, I bought it from you, so I want you to be accountable’ is rapidly emerging. This change in sentiment makes outsourcing even more appealing. Stepping off the soapbox…

Coming back to my original point about defining outsourcing, it must be invisible to your customer. If it’s not, then all you’re effectively doing is sub-contracting. There is a subtle difference in my view. Sub-contracting often assumes that the person undertaking the work is directly responsible to your customer. It’s obvious or somewhat obvious to the customer that you’re not doing the work, somebody else is. This changes the relationship in ways such as it:

• can make you look like an unnecessary overhead,
• distances you from your customer,
• makes it more tempting to pass the buck if something goes wrong,
• introduces risk where you have less control over an external party,
• makes you more vulnerable to accidentally outsourcing a core business function (a big no-no this is something we’ll get to in a future post).

I’m not saying there aren’t good reasons to sub-contract, there are many, but it is different from outsourcing. Your freelance guy/girl/team should be considered employees of your business, they are accountable to you, they must be available to you when you need them to be, and they must be actively involved in the success of the business. If they interact with your customers, they interact under your banner, and comply with your standards. Just like you would expect from an employee.

To wrap up, next time you think about internet outsourcing, think of it in terms of shopping for your groceries.