Recently we’ve been working on two projects that involved outsourcing. One involved outsourcing of operational staff while the other involved outsourcing of IT services. Coincidence? Probably not. We all know how much the world has changed economically and that we will most likely never go back to the glorious boom times of pre-GFC. A lot of businesses are realising that they need to work smarter in order to remain competitive and viable both in the short term and the long term. In these rapidly evolving times, outsourcing is a potential solution for a range of business issues.
Outsourcing can be as simple as bringing in short term contract staff to fill an immediate need, such as completion of an internal project; or slightly more complex, such as engaging a supplier to manage an aspect of your business you aren’t keen to retain in-house, such as, Accounts Payable; or, as radical as off-shoring a part of your business that has become too costly to run locally.
The first of our current projects, “Project A”, involved a significant operational change, where jobs were moved offshore. The business had reached the point where they were experiencing “people bloat”.. When times were good, they’d been able to throw an extra person at a workflow problem rather than to address the issue. Everyone at the time was busy keeping the business going and making money, so stopping to potentially “navel-gaze” seemed counter-productive. Unfortunately, the business ended up over-staffed in key areas and became accustomed to using manual systems to fix issues.
This meant that the staff could easily inflate their roles to “cry busy” and justify the extra work, most of which simply wasn’t needed. They became used to a slow-paced, work-lite, working life and developed an impressive resistance to change, to the point where they ignored common, internal ERP systems (too transparent!) and instead, used individual, user-specific, Excel “systems”. The business had reached a crisis stage where staff were no longer positively adding to the businesses services or profitability. Their business unit was slowing dying as less work came in post-GFC but the administration cost base was still very high. It simply cost too much to keep the staff doing their current “lite” workload when their business unit wasn’t earning enough money to keep them all employed.
Outsourcing became the answer. The administration requirements were shifted overseas and a new team were created. It meant that the business could reduce part of its cost base, as well as using it as an opportunity to reset and clean up processes. As was expected, it was a very tricky situation to manage. Redundancy is always an emotional time and difficult for all impacted by it. However, if it hadn’t occurred, the issues in this part of the business had the potential to take down the whole of the company, meaning a lot more job losses would have been incurred. While there have been some teething problems, the outcome has been positive. The overseas team has been integrated into the business as a new business unit, while the old in-house staff have all moved on to new work. The biggest challenge to date has been communication – ensuring that the new staff are equipped with enough knowledge and training to meet customer needs, and overcoming business cultural differences between countries.
Project B involves outsourcing of a different kind. The business for Project B had managed their IT infrastructure internally for the last few years. However, they reached the point where their internal skillset was inadequate and they were wasting a lot of money on unscaled services. Business B needed an Infrastructure review, but knew that the review also had to encompass internal IT operations. Business B had accumulated some wide ranging skillsets in their IT department, however, not enough to manage all the different types of equipment and services they utilised.
While Business B recognised the need for internal IT up-skilling, they also knew they had to consider short and long term needs. While they had a list of immediate IT projects that required specialised assistance, the skillset required to deliver these wasn’t needed in the long-term. In fact, what they needed long-term was a really good support team, who could “keep the lights on” and assist their staff with issues. Business B realised that they were better off outsourcing the delivery and management of their infrastructure changes, rather than taking on specialised staff who would ultimately become bored when the projects ran out.
The idea of outsourcing often makes people uncomfortable, giving rise to thoughts such as: how could outsiders possibly know what’s best for my business? Or: what will stop them from dragging things out to make money out of us? The reality is that most contractors just want to deliver a project successfully so that their customer is happy!
In our changing economic climate, outsourced relationships are going to be increasingly important to business, as a means to extend services efficiently, reduce cost, or fill a short-term contracting need. Consider your potential contractor as you would when you hire your own staff – Do they fit culturally? Does their skillset fill a gap? Are they interested in your business and committed to the work? Then when you bring them on board, take the time to induct them into your business – they’ll understand your needs at a deeper level and ultimately provide a more successful outcome.
Outsourcing isn’t as scary as it seems. Approached in the right way, it can be a highly successful solution to a range of business requirements.
Do you need help implementing business change? Contact Business System Alchemy for more information by clicking here.
The Alchemist is Ruxana D’Vine and Michael Meryment, specialists in matching business needs to technology.