Running a business is becoming increasingly challenging. Cutting costs and staying competitive in the market can happen only if businesses get sufficient time to focus on their core competencies. This has given rise to outsourcing all non-revenue generating or back-end business processes to low cost solution providers in any geographic location. Outsourcing has significantly changed the way the world does business; it has been termed as one of the top business ideas of the last century by Harvard Business Review. But what is the different between out-tasking and outsourcing and which one is suitable for your business? This article throws light on the subject and helps you make the right outsourcing decision.
John and Tim are two new entrepreneurs. Both have started their own little firms. John designs high-end web portals, while Tim is into real estate business. Within a few days, business starts pouring in for both of them. This is what they do:
John decides to outsource portion of his backend database related coding work to a freelancer, so that he can concentrate on main designing work. Few days later he gets more caught up in work and again outsources coding of content management system to another low-cost freelancer. Now the business is really booming, and John has to manage more work in lesser time, so he resolves to outsource portal testing to a web development agency. Few months of being in business makes him feel that he must outsource accounts and bookkeeping function to a professional. He is unable to handle client calls, and so he must hire a receptionist too or outsource one. As he gets bigger clients, he struggles to make legal agreements and documents. All these tensions take up his productive working hours as he somehow manages to coordinate between ten different service providers.
John gets stressed-out and he is unable to work on what he likes doing the most. He misses deadlines and at the back of his mind he feels that things are falling apart and he is unable to manage his business.
Why did this happen?
What John was trying to do was out-task work instead of smart outsourcing. He chose different people to do different jobs and none of those people worked dedicatedly on his tasks. This made him to work even harder while coordinating. Out-tasking works best when theres a one-time project that has to be done: an open-and-shut case. In other cases where dedicated effort is required from the service providers on an ongoing and long-term basis, out-tasking hardly ever works, unless you are lucky. Moreover, out-tasking is difficult in case of larger projects as coordination becomes a nightmare.
Meanwhile, Tim was onto something else, heres what he did:
Tim knew that he understands the real estate business inside-out, but he also realized that he is no good when it comes to developing legal mortgage documents. He also understood that there are many other marketing activities, website development work, office administration-related activities that need to be done professionally so that he can manage his business in an efficient manner. Tim decided to look for a single service provider who would understand his business and align its services to meet his requirements. He found one reliable vendor to manage all these needs. He finalized a service level agreement (SLA) with this vendor and set-up a transparent process of management and reporting. He did a one month trial to analyze the deliverables.
For any requirement, all he needs to do now is to call that single-point-of-contact and oversee his work getting done on time as per the agreed SLA. At the end of each month, he gets one consolidated invoice for all the services. The service provider understands Tims business model and has developed a nice working relationship with Tim.
Why did this happen?
Instead of out-tasking, Tim chose to do real outsourcing. He selected a vendor who can handle all the work without the need for him to coordinate and meddle. This way he got all the time he needed to do what he does best.
If you are in a similar situation, pick out-tasking for small one-time projects and pick-outsourcing to grow your business.
Ideas in this article have been taken from Steve Mezaks book Software Without Borders.