What NOT to do to energize your business
March 27, 2014, by Alex Yuruts
You’ve heard the latest business tips that constantly tell you what to do: what strategies improve business, best ways to increase productivity, proven ways to engage your employees.
Are there tasks that you can afford NOT to do…and still improve your business?
The answer is: yes! There are many day-to-day tasks that can be easily left to other people and outsourced to experts, while you concentrate on what is core to your business – whether it is on improving services or talking to customers.
What business functions can be outsourced?
Ten, twenty years ago the answer was as simple as “outsource any routine task” – like coding, programming and call centers. Yet, the years have taught businesses that outsourcing is not as easy as it seems, and that though there are some risks, it does bring significant benefits (nicely summarized here with cats). Outsourcing services have expanded and serve many more purposes today than twenty years ago. Although businesses can outsource virtually any task – from product development and marketing to accounting and printing, most approach outsourcing carefully before considering giving up control over core parts of their business.
First, many companies will try outsourcing their ancillary functions, followed by their non-core activities, and only then will companies consider outsourcing some of their core functions. According to the 2008 Ernst & Young review of European outsourcing practices, the most commonly outsourced functions were maintenance (78%), distribution (73%), and IT (68%). Some of the least outsourced tasks were communications (29%) and product development (46%). Outsourced function numbers changed somewhat in 2012 when Deloitte conducted a similar survey, but this time they surveyed global companies. See the graph below for results.
Since companies first outsource non-core activities, Deloitte’s findings follow the same logic: communication with clients and procurement are some of the most integral parts of business and are outsourced less. On the other hand, developing new software,maintaining IT systems, or creating a distribution network, though important, does not require direct interaction with customers and can be manged through a third-party instead. (This will of course vary from business to business; for example, currently Amazon’s distribution capabilities might be closer to a core offering than many other companies.)
Outsourcing — no longer for routine tasks
Another thing to consider is that outsourcing is no longer just for routine tasks. According to IAOP’s 2013 State of the Industry Survey (which can be downloaded here), 47% of companies focused on outsourcing knowledge-based skills, while only 27% focused on outsourcing low-skills. This means that more and more companies are (1) consolidating their efforts on their core advantage, and (2) outsourcing a variety of things from product development to knowledge management to third parties. Why? Companies are likely to get a better product from a specialized company now, which can be done much faster and quicker through a third-party rather than waste time (and lose to competition) while trying to get it right themselves. In fact, according to the same report, 55% of companies plan on expanding their outsourcing practices.
Given the ability to outsource virtually anything, it is imperative for companies more than ever to understand what activities they can outsource and how they can benefit. That may be easier said than done, but that’s a topic for next week: How do you select which activities will be most beneficial for YOUR company to outsource?
Title photo via bizior photography – www.bizior.com
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