‘Outsourcing’ - did I just say a bad word?
Posted by ChipMeyers - Fri, May 14, 2010 at 09:49 AM
If you just mention the word 'outsource' in a conversation, chances are someone will look at you as if you just called their baby ugly. It conjures up images of factories in the US closing down and sweatshops in third world countires. In the business context people equate 'outsourcing' something with 'losing control' over it. I even avoid using the term because I don't want people thinking we are something that we aren't. OK, yes, there are certainly bad examples of outsourcing, but it is not a bad word or even a bad concept. In fact, most of us outsource things all the time and don't think twice about it.
Have you ever had someone cut your lawn for you? Well then you've outsourced. Have you hired a housekeeper, gone out to dinner, paid a neighbor's kid to walk your dog? Yes? Shame on you...you outsourcer. Conceptually, it is just about looking across all the things you have to do and saying "do I really want to do these things, or could my time be better spent focused on something else?" Sometimes maybe you really want to, but you just can't get around to it, or can't spend enough time on it to do it justice. And maybe there is someone out there who could do it better.
Businesses have been outsourcing non-core functions for years...payroll, mail room, landscaping, janitorial, cafeteria/ food service. I would argue that you actually have more control in those situations. You have a business realtionship with someone who is (or should be) working to meet your needs, and you are in charge. I heard Jim Tomkins from Tompkins Associates talk about the idea of core, non-core and strategic non-core business processes. His point is that we outsource these non-core processes easily beacause doing so is easy, and the method fo doing so is well defined. Outsourcing the 'strategic non-core' processes can be equally as beneficial for a business but to do so you have to be more disciplined so that you don't actually lose the control you want to keep.
There are some real thought leaders in this discipline putting out a lot of great information these days. I would recommend reading the Vested Outsourcing blog or the Logistics Viewpoint blog to understand how and why to do it well. Now, say it with me: "Outsourcing is not a dirty word".
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It is right that you can only recognize the competitive advantages of outsourcing if you understand what it can do to your business. Thanks Chip, this will somehow break confusions among business owners.
“Outsourcing is not a dirty word”! I indeed agree when you cite what you heard from Jim Tomkins that we outsource these non-core (payroll, mail room, landscaping, janitorial, cafeteria/ food service ) processes easily because doing so is easy, and the method for doing so is well defined. Frankly, that’s what I was doing. However, companies have been considering outsourcing these days simply because the wages are cheaper, outsource people are hardworking, and it gets the job done on time. Even if it conjures up images of factories in the US closing down, the US is so far different from other countries because they never run out of jobs.
Thanks for a good article. At least it solves the confusion a bit.
Great article! I recently blogged on this same issue, relating to long term care pharmacies. It is ironic that we both used the term ‘bad word’ in our title. Unfortunately, I think people tend to automatically associate outsourcing with job loss or off shoring. Thanks for your great article!!