Outsourcing

Somewhere along the line outsourcing has become a bad word. It is true that many jobs have been lost in the United States (and other major western economies) as low-cost production has moved to emerging economies with low-cost labor.

But, I would venture to guess, most outsourcing is done at home. No business has the resources or core competencies to do it all. Website designs are outsourced to specialist firms; legal matters to a law firm; marketing to an advertising firm.

Whenever a business has a need, it should carefully examine whether the need should be filled internally or externally. Which will be most cost effective? Which will provide least distraction to core business practices?Does the business have the expertise and equipment to do the job internally? What are the long-term implications of outsourcing or insourcing?

In my own little manufacturing operation we have been creating a wood lamp base with the total cost of material and labor amounting to about $30 for each piece. In examining the costs and in an effort to increase profitability, we requested and received quotes to have the piece made at larger shops with computer-controlled equipment. The cost for outsourcing will save about $18 for each piece! A no-brainer!

The fact is that from time-to-time all processes and costs should be re-examined to determine whether they can be reduced through internal process changes or from outsourcing (and the outsourcing can often be to a local business).

Will Limkemann
Siqua Group Limited

Innovation through outsourcing

Successful small businesses keep innovating products, processes, and services to keep competitive. They have an advantage over large corporations as they can adapt and change more more quickly than their bureaucratic cousins. Their disadvantage may be a small pool of internal resources that stymies innovation.

With just a few brains to tap new ideas are often hard to come by and the “old ways” are so ingrained that innovation is often neglected.

This is where outside help is frequently beneficial. A starting point may be as simple as briefly hiring an independent person to run a brainstorming session involving key people in an organization. The consultant can help stimulate ideas and focus action on the the good ones.

Sometimes a great idea for a product or service emerges, but the business does not have the resources or expertise to develope the idea. Effective outsourcing to an appropriate person or company may well turn the idea into a marketable commodity. But beware in outsource such research and development. Protect yourself with a contract that ensures confidentiality and assures that you will retain all intellectual property resulting from the work done by the contractor.

Will Limkemann