All journeys, no matter how long or difficult start with the first step, so it is with outsourcing. In my career in IT, I saw a lot of different ways that company and outsourcer relationships were started. Most were successful, but some only because of the tremendous advantages for both entities. Some failed. Some took a lot of effort to get it right. It really needn’t be hard. I am going to talk about a few different scenarios and share my perspective on how to get started.
Scenario 1 – Outsourcing work (body shop model): Many outsourcing companies start providing contract labor for others. They fulfill a needed service. I highly recommend not working with a ‘body shop’ as your needs grow however because what you may gain as a labor cost benefit can be eaten up by increased quality costs or delivery costs associated with a lack of practices supporting the delivery of the service you required. The structure that a well established outsourcing company provides helps assure that requirements are satisfied in an efficient, low cost, risk free manner. The structure prevents the chaos that others have experienced with outsourcing to ‘body shops’.
Scenario 2 – Outsourcing Projects: Another scenario for companies is to outsource part or all of a project. Projects have their own complexity beyond just the work that is done. Your partner should have demonstrated success stories. They should have a well-established project management system, with experienced project managers to oversee the effort. Good communication is critical. Ask for references to be sure that technical and project expertise are part of the package.
Scenario 3 – Outsourcing a percentage of the total workforce need: This is a more common scenario for larger organizations. Management decides that there is a strategic advantage associated with outsourcing a part of their engineering workload. This provides them with an ability to quickly ramp up when demand for resources jumps or ramp down without laying off full time employees. The company they are working with can absorb the demand fluctuations better because that is part of the work they do and they mitigate fluctuations by having many customers in diverse industries. On paper the data supports this move, but the reality of how it is implemented involves risks that must be addressed. I would highly recommend that you work with a well-established outsourcer, with onsite, nearshore and offshore resources. Outsourcers should have access to many engineers (hundreds are preferable). They should have a complete delivery model including an imbedded account manager to work with you to optimize the flow of work. Don’t immediately jump to the targeted percentage (often 10-25%). Start smaller, work out the bugs and grow into a well established working system. Outsourcing is a great way to reduce costs and risk, increase flexibility, grow faster and increase your technical capability. How you do it matters.
Scenario 4 – Outsourcing an Engineering Service: Businesses need to focus on their core competencies. Investing in their core strengths helps them to grow faster. I have seen many software development operations that were highly efficient with great technical talent. I have seen this great talent spending time on documentation, code maintenance, project coordination activities, and other things that took away from what they could be doing and frustrated them as well. In the electronics systems engineering world, drafting, converting drawings from one system to another, converting controllers from an older model to a newer one or to a different brand, documenting service and user manuals and a host of other needed services can most often be done by your outsourcing partner more efficiently. Freeing up your own resources will allow your company to grow faster and compete better.
Scenario 5 – Nearshoring and Offshoring: In the early years of outsourcing in the IT world, nearshoring we not an option. With the success of offshoring, countries with lower cost structures invested in education and the infrastructure to make nearshoring attractive to companies in an adjacent location. Nearshoring offers some unique advantages – more control over quality, delivery schedules, and intellectual property management, reduced travel times, similar operating hours for improved communication, advantages due to trade agreements between neighbors, etc. Adding nearshoring to the mix can enhance the outsourcing experience and improve bottom line results. Check with potential partners to see if they have offices and done work in adjacent locales. Ask them to explore the benefits with you.
Outsourcing is a tool that well-run companies use as a competitive weapon. Choose your outsourcing partner well. Having a well-honed and effective weapon helps you win. Your competition will!