SUBJECT: Outsourcing Lesson #5 - When Not To Outsource

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Well, we have come to the final lesson in the Understanding
Outsourcing crash course. I sure hope you have enjoyed your
lessons and learned a lot about what outsourcing can do for your
business.

In this last lesson we are going to switch gears and talk about
when outsourcing is not a good idea for your business.

As we have been discussing over the last few lessons,
outsourcing can be very beneficial for a number of reasons. Some
of these benefits include reduced labor costs, larger
workforces, access to industry experts and increased flexibility.

However, despite the obvious advantages to outsourcing there are
a number of scenarios where outsourcing is not a viable business
option. In these situations it is best to keep the work in-house
rather than attempting to make an outsourcing situation work.

As we have learned one of the primary advantages of outsourcing
is cost reduction. In many cases outsourcing results in reduced
labor costs because costs such as social security, health care
and workers’ compensation are eliminated. Additionally, the
increased efficiency resulting when tasks are outsourced to
industry experts can also result in a cost reduction.

Despite the many opportunities for cost reductions, there are
some situations where outsourcing might be the more expensive
alternative and it may also lead to a financial loss instead of
a gain. This may include a situation where the cost of
outsourcing to a highly specialized expert exceeds the budget
for the project. Fees for individuals with highly specialized
degrees or areas of expertise are often quite expensive. Another
possible situation is one where finding an individual qualified
to complete specialized tasks would be too expensive of a
process.

Another scenario is when outsourcing causes you to lose control.
Even when tasks or projects are outsourced the company
responsible for the work likes to continue to manage the project
and keep close tabs on the progress of tasks.

It is important for your business to continue to manage the
project even after it has been outsourced because they are the
ones who are ultimately responsible for the successful
completion of the project.

Whenever an individual or business wants to deny the company
access to project files or documents, outsourcing is a bad idea.
The business who has the vested interest in the outcome of the
project should never be excluded from participating in making
decisions regarding the project.

Before outsourcing a task or project care should be taken to
establish criteria for the management of the project. Depending
on the length and complexity of the project it may also be wise
to schedule regular meetings to provide updates on the progress
of the project. During this time the contractor should provide
the employer (you) with all documentation necessary to evaluate
the progress of the project and verify it is still on track for
completion by the established deadline.

You will also find time when outsourcing is not permitted and it
is not a good idea simply because it is not permitted by
contract requirements. Some project contracts may have
stipulations stating the work cannot be outsourced to an
individual or to another company. Inserting such a clause into a
contract document is well within the rights of the clients.

When they hire a particular company to complete a project or
task, they expect all work related to the project or task to be
completed by members of that company unless they specified
otherwise when negotiating the contract. Violating the contract
documents in this situation is not a good idea. The company
could be penalized by the client. Penalties may include
withholding payment or refusing to award future projects or
tasks to the company.

Deciding whether or not to outsource particular tasks is one of
the many important decisions both large and small businesses
often have to make. It can be a difficult decision at times.

It is important to consider all of the tasks involved before you
make the final decision to outsource certain business projects.
Situations in which your in-house staff is not qualified for the
tasks, when your in- house staff is overburdened and when there
are specific client requirements and tasks must be completed by
individuals with specific qualifications are all valid reasons
to choose outsourcing as an option.

Before we finish up this last lesson I want to leave you with a
quick recap of three basic guidelines for outsourcing your own
projects:

- Select Qualified Candidates Carefully

One way to greatly simplify the process of outsourcing is to
give special consideration to selecting a qualified candidate to
complete the outsourced tasks. This is important because
outsourcing the project to an individual who is qualified to
complete the tasks and motivated to do a good job will make the
outsourcing endeavor more likely to be successful.

To find the right candidate for the job, place advertisements
outlining the project requirements and preferences and carefully
review each application which is submitted. Immediately
disregard applicants who are not qualified for the position.
Then review the applications of qualified candidates carefully
and select a small group of the most promising candidates. Next
interview each of these candidates and verify their references
and passed work experiences to learn more about these candidates
and their abilities and work ethics.

After interviewing these candidates it is time to make a
decision regarding hiring one of the final candidates. Do not be
discouraged if none of the final candidates seemed right for the
job because you are under no obligation to hire any of them. You
can continue your search for a qualified candidate by placing
your job advertisement again and soliciting new responses.

- Establish Definite Requirements

When outsourcing a project or tasks, it is important to clearly
define the project requirements. This is critical because it is
important for the contractor to fully understand the tasks which
are being outsourced to ensure he is fulfilling all of the
requirements and completing the task in a satisfactory manner.

Failure to establish definite project requirements and goals can
lead to a great deal of problems when outsourcing a project. The
contractor may feel as though he has completed the project as it
was outlined but the employer may disagree. When this happens
there can be harmful delays until the issues can be resolved
amicably. In the case that this is not possible it might be
necessary to employ the assistance of a mediator to evaluate the
contract documents and the work produced to determine if the
contract terms were met.

- Establish a Firm Deadline

Another important element of outsourcing is establishing a firm
deadline for the project. This is important to avoid
misunderstandings and to prevent late submissions of work.
Setting milestone goals is also important because it gives the
employer the ability to evaluate the progress of the contractor
during different stages of the project and to ensure it is
proceeding according to schedule.

Ideally the deadline should be established before the candidate
is chosen. This is important because this enables the employer
to verify that the contractor is available for the duration of
the project. Schedule should be discussed early in the process
of selecting a candidate to avoid selecting an ideal candidate
only to find out he is unavailable when his services are
required.

As we close this final lesson I would like to thank you again
for joining me and I sincerely hope that you have learned a lot
about whether or not outsourcing can help your business grow!

Even though we have come to the end of the short course please
feel free to contact me if you have any questions about how to
effectively outsource your own projects. I will be glad to
assist you in anyway that I can.

Best of luck to you in all of your outsourcing ventures.

To Your Success,
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