Keeping it in-house or outsourcing: a frequent dilemma

SMEs will frequently consider whether to outsource services or tasks that are not their core business; the issue is raised when the task or department in question is seen as taking too much time / human resources / space, i.e. when costs are in question. Or on another hand, this may also be considered when the company reaches a point where they need to develop in areas where they do not have the skills or expertise. This may for instance be for services such as: IT, digital marketing, accounting, mail management, call centre (customer service), payroll, data entry, printing, etc. Finally, the question can similarly arise when there is a specific project or unexpected workload to tackle, i.e. as a short-term solution.

Cost analysis

Whatever the service in question, the first step is to investigate what is really spent on it, i.e. to audit the service or cost category for which you are considering outsourcing. This includes, for instance in the case of printing, not just the cost of the printed material for marketing, but for every department, the cost of renting/buying the printing equipment, maintenance, consumables, workforce in charge, etc. And what are the strategic importance and competitive advantage of this service in relation to the company’s core activities? The data gathered may show potential savings opportunities – but needs to be compared with a benchmark showing competitors and market data to have a clearer, more comprehensive view, which may prove difficult to find for SMEs.

In-house

Contrarily to beliefs, this solution is not always cheaper; having resources in-house requires a costly investment in material, human resources, training and sometimes premises. In-house tasks enable if not a better, at least a closer control of both production and time. The investment may prove worth in the medium to long term but it requires a certain amount of resources. Pros of in-house: - The staff are dedicated to the specific needs of the company – there is no sharing of the timetable with other clients which can cause delays for instance in the case of outsourced freelance professionals such as webmasters, graphic designer, who have to manage their own portfolio of clients with their individual timelines. - The company controls the input and output (staff, time, activity, quality). This is especially important when the task in question helps to differentiate the company from the competitors. - In-house tasks guarantee that confidential data stays within the company.

Outsourcing

This solution can be chosen either for a short term project or a long term solution, and there is obviously no investment in staff or equipment – but the question is to choose the right provider for your needs, which means preparing detailed specifications for your tender and spending time on the selection. Outsourced services may bring better flexibility and variable capacity, whilst saving time and allowing staff to concentrate on core responsibilities. Services that are important from an operational point of view (logistics, call centres...) but can be outsourced for efficiency and flexibility allowing internal resources to focus on the core business. Pros of outsourcing: - Outsource suppliers have the right infrastructure, the right equipment and the adequately trained / specialised skills staff. - Outsource suppliers work for several clients and have far more capacity than a single business could have; therefore they can meet peaks in activity or long-term increase in demand far more easily and at much shorter notice. - Outsource suppliers are paid for what they deliver; in times of limited or temporary activity, there is no need to pay for space, renting of equipment or wages that are not used or not needed.

A bit of both

The previous audit of costs, showing a breakdown item per item, will enable to write a detailed specification sheet that will be the basis for the tender to outsource providers. Choosing the right one may however take some time and require some external help from specialists with knowledge of the market. Most companies choose a blend of in-house / outsourcing, which can present a flexible solution to improve the bottom line by generating cost savings and to improve efficiency. This enables businesses to have a far greater degree of flexibility and to meet short-term needs. For instance, businesses often outsource the development of their IT system and then recruit IT support staff once the system is up and running. This is obviously only interesting if there is, in this example, enough work to keep the IT staff busy.

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