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Small Business Outsourcing: An Introduction

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Outsourcing is the delegation of a business process to an external service provider. The service provider will then be responsible for the day-to-day running and maintenance of the delegated process.

Before outsourcing an IT function, look at your firm’s own goals and culture. Price might be a key consideration, but a valuable outsourcing firm is more a business partner than a service provider. Such a partner should lend a level of expertise to your small business that builds upon internal know-how. Only then can you rest assured that you have achieved an optimum blend of in-house and outsourced IT functions.

Step 1

Do you really need to outsource?

Before outsourcing an IT function, look at your firm’s own goals and culture. What business objectives are you trying to accomplish by outsourcing this particular function? How will sending this function to an outside party impact the workflow within the company? Clear answers to these questions can help guide a business owner toward the most appropriate vendor.

Consider the advantages and disadvantages of outsourcing before you make your decision.

Advantages

  • Allows a business to focus on core activities
  • Streamlines a business’ operations
  • Gives you access to professional capabilities
  • Shares the risk Piece of mind that the process is in good hands (reliability)
  • Do not have to worry about continually introducing new technologies
  • Improves service quality
  • Frees up human resources
  • Frees up cash flow
  • Increases the control of your business
  • Makes the business more flexible to change (i.e. demand)
  • Disadvantages

  • The fear of the service provider ceasing to trade (bankruptcy, etc)
  • You may lose control of the process
  • Creates potential redundancies
  • Other companies may also be using the service provider. Therefore in some cases, the best interests of the service provider may be diluted with other users
  • You may lose focus of the customer and concentrate on the product (the outsourced process)
  • The loss of talent generated internally
  • Employees may react badly to outsourcing and consequently their quality of work may suffer.
  • Step 2

    Buy the expertise:

    A valuable outsource partner will do more than lighten the load. Such a partner will lend expertise to ensure an optimum blend of in- house and outsourced functions. In the case of network management, for instance, an outsourcer should “provide a small business with an operational, tactical and strategic view of their network environment,

    This allows for quality recommendations to ensure network availability, reduction of total cost of ownership, optimization of network assets for meeting business needs, and support of future growth.

    Step 3

    Know who you are outsourcing to.

    The two most important factors in a successful outsourcing relationship are trust and security – without these the relationship is destined for failure. It is therefore important that you take the time and effort required to find the perfect partner.

    Make sure your service provider is keeping current. “IT is very dynamic, so it can be difficult to intelligently know what’s happening in IT,” said Jeremy F. Shapiro, professor emeritus of operations research and management at MIT. The best vendors can provide not just services, but also “state-of-the-art knowledge about IT needs and developments.”

    Does this vendor value its employees? What is the average length of employment of the staff? A company that retains its employees must treat them well and value them.

    Meet the team: Before signing anything, meet the people who will actually service your account. Good outsourcers will have a dedicated team servicing the customer, led by the controller who acts as the ‘go to’ person. Chain of command: Along these same lines, know who is talking to whom. The last thing that you can afford to have are layers of contacts, especially when time means money. Finding a provider or consultant that provides one point of contact and even better, one person, is any business’ best bet. The language barrier: Finally, it’s important to remember that even an outsourced IT function does not go away entirely. In most instances the small-business owner still will have to maintain some involvement. Look for an expert who can clearly explain answers in non-technical terms and can make tech-talk clear to even novice questioners.

    Step 4

    Know what you are buying

    As you get closer to making a decision, it is important to agree upon a set of service level expectations or objectives,” said Hoyer. “Measurement objectives can include streamlined operations, cost savings, and reporting with all activities pointing to an improved bottom line,” he added. What matters most is to agree in advance on the service to be delivered and especially on the measures that will be used to determine satisfactory performance.

    Many of the disadvantages of outsourcing can be avoided if you research the service provider and you do not regard outsourcing simply as a money saving scheme – this is not always the case. Consequently, you should be certain that you have a valid reason for outsourcing and that you intend to liaise regularly with the service provider to avoid loosing all control of the process.

    Learn more at http://www.my1stbusiness.com
    Ben Botes MSc. MBA, is an Entrepreneur, Speaker, Writer, Coach
    and academic. He is the founder of My1stBusiness.com, South
    African Business Hubs, Business support Hubs and incubators
    for the new breed of South African Entrepreneurs.

    Join the My1stbusiness.com Reseller Program and earn
    40% referral commission http://www.my1stbusiness.com/affiliate

    Read Ben’s Blog at http://www.my1stbusiness.com/weblog

    Small Business Outsourcing: An Introduction
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