So you’ve done the maths and you think you’re going to save 20% by outsourcing a function. Now ask yourself can they really do it 40% more efficiently? Remember that they’re in the business of making a profit so if they’re going to charge you 20% less than it would cost you do do it in-house then to make a 20% profit they’ve got to be doing it on a budget 40% less than yours. Are your guys that grotesquely incompetent that someone else can do as good a job for 40% less? Further more your in-house guys do not profit by cutting corners; the fixed price that made outsourcing so attractive encourages the third party to cut corners.
Am I anti-outsourcing? I don’t believe I am, as long as it’s done for the right reasons.
Does the function in question play any part in the definition of your brand? If X contributes to the appearance, reputation or public perception of your product in any way then outsourcing X to a third party who may well be managing X for your opposition too is at best unwise. You are effectively outsourcing your identity/brand, the point of differentiation between you and the others and your ‘hook’ in the market.
Can the delivery of the function in question give you competitive edge? Think of a Formula Ford racing team. All vehicles have the same engine so maintenance is not unique to your car but would you be outsourcing your pit-crew? They may well service your opponent’s car and I’m sure that the fact that one of the mechanics is your arch-rival’s brother wont matter at all. I may be highlighting my ignorance of Formula Ford but you get the idea re: outsourcing.
If you have a function which is not a core business function for you, it does not contribute to your brand definition and the delivery of the said function does not contribute to your competitive edge then outsourcing is an option but when you compare costs remember that a staff member might be enticed to come and help one weekend for time off in lieu (at your convenience). The outsourced service provider will not set foot in your office out of hours unless you’ve agreed to pay them penalty rates. That is the ‘professional’ way.
Am I anti-outsourcing? No. For years clients have outsourced project management to me. I saw myself as an administration mercenary. I provided a particular service for which there was no internal alternative or expertise (or because nobody internally would take the job). All I ask is that if you’re going to outsource, do it for the right reasons and not because you don’t know how to manage a particular group because if you think you’re being screwed by a questionably competent manager now, then the professionals are going to do you like the prison bitch.