Growth and expansion represent some of the objectives of businesses today. However, with it comes more engagements and activities which many companies are not fully prepared to handle. The result of this may lead to pressure on the company’s resources especially on its manpower capability.
In our last blog, we examined how to get the right team on board which typically consists of employees. This is the starting point for companies regardless of their size and structure. However, other factors such as capital requirement and staff strength and experience, as well as scope of project, could create room for considering other options for handling projects, for example outsourcing.
What is outsourcing?
Outsourcing is the practice of delegating corporate business functions, which may have otherwise been done internally, to external suppliers or companies for reasons ranging from cost optimisation to enhancing competition and corporate strategy.
In order to take advantage of economies of scales and to be able to compete globally in the increasing diversifying environment, new strategies emerged in the mid twentieth century. One of these, was for big companies to identify their processes and decide on those that could be outsourced while they focused on their core business activities. In the later part of the century, it was common for these companies to outsource support services such as human resources, finance, data processing, internal mail distribution, security and plant maintenance. Outsourcing was also considered a cost saving exercise.
When should a company outsource?
Projects have now become a core aspect of business operations for companies, regardless of their size and structure. While it might be quite challenging and risky to consider outsourcing, it is important to know when to actually take the step. Some factors to consider beforehand include:
Understanding company goals and objectives: having a clear understanding of your business and its strategic vision and plan, will provide insights to whether and what project to outsource.
Staff strength and capability: for small businesses, some projects may be overwhelming. In order to ensure staff/team members are focused on the core business activities, companies may need to outsource some projects. In some cases, in-house teams may not possess the required skills, experience and the time, to execute certain projects effectively and within the budget.
Cost effectiveness: analysing cost is an ongoing activity for businesses and it applies to capital used to fund projects. The cost of training in-house team members may be more expensive than outsourcing project functions to a project management company.
Fresh perspectives: having an outsourced project management team on board can inject new approaches to executing tasks effectively.
Advantages of outsourcing
Allows the business to focus on core activities.
Staffing flexibility
Acceleration of projects and quicker time to market
High calibre professionals that hit the ground running
Ability to tap into best practices
Knowledge transfer to permanent staff
Provide continuity and risk management
Cost-effective, predictable expenditures and within budget
Access to the flexibility and creativity of experienced problem solvers
Resource and core competency focus
Develop internal staff.
Disadvantages of outsourcing
Risk of security and confidentiality breach- this could be mitigated by signing a non-disclosure agreement (NDA).
Conflict between external and internal team- a good way to manage this is by using RACI matrix.
Loss of control in certain things- this could be mitigated by setting clearly defined goals, objectives, and responsibilities for each team member.
Issues with communication- conflict arising from communication or the lack of it could be managed by a number of ways which include: providing training on communication skills, setting up clear communication channels and encouraging feedback.
How to outsource
After making the decision to outsource projects, the next step is to consider how to go about the process. Here are some factors to consider:
Clearly define the project scope.
Culture and experience fit. This is especially important to avoid in-house conflict.
Set clearly defined milestones to measure quality of service.
The amount of value an outsourced project will add to the company.
Cost implication and budget allocated to the project.
Area of specialisation on the part of the outsourcing company.
Clearly written contract that outlines all that is expected during and after the project.
In summary, outsourcing projects has many advantages. However, companies need to weigh the pros and cons involved before deciding to embark on this journey.
If you are ready to optimise your business efficiency by outsourcing some of your business functions, our project management team is ready to work with you. Please email us at enquiries@ovacgroup.com for a free consultation.