Why Outsource?

By Trishan Arul    March 18, 2009

Full disclosure upfront, this is somewhat of a self-serving post since my company provides outsourced accounting services. However, having been on both sides of the coin, I do think I have a good perspective on the pro’s and con’s of outsourcing. Additionally, I think it is especially important for smaller companies to proactively consider how things get done – it’s too easy in the daily rush of things to end up with the wrong people doing the wrong tasks which can, over time, balloon into bigger problems.

Let’s start with the potential drawbacks:

• Loss of control: You have to rely on another person to accomplish tasks and in some cases they are remote so you can’t “see” them.
• Increased communication: The nature of the relationship requires that you spend more time defining projects up front. You’ll need to keep in contact on an ongoing basis, even if it’s just to check in.
• In-house talent: Using an outsourced provider means that your own staff isn’t developing the necessary skills to perform certain job functions.
• Cost: This is normally a benefit but hiring a good, experienced provider may cost more in the short term than having one of your staff take on more work

I would argue that many of the oft perceived drawbacks are actually beneficial in the long term. For example, losing some control and having to clearly define processes will often result in improved internal control & work flow. Even the cost issue is a misnomer. Many companies I’ve worked with made the mistake of having someone with no accounting experience fumbling around in Quickbooks. This results in many weeks of work to clean up months or years of errors. In those cases, doing it right the first time would have been much cheaper in the long run.

Let’s also take a look at the direct benefits:

• Expertise: An experienced professional will be able to offer specialized skills that would otherwise be unavailable to your business. They can stay up to date in their field (critical for fast moving areas like IT), will be able to oversee/mentor junior staff, are more efficient, and have probably seen & solved your current problems in the past.
• Cost: If you only need a part time person, an outsourced provider can provide that service at a comparable or cheaper cost because they have greater efficiencies of scale. And tying into the previous point, you can get an experienced person that you would otherwise have not been able to afford. Further, you can avoid one time capital costs such as buying software or servers.
• Scaling: Some businesses, especially project based, need to scale up & down rapidly to meet changing business conditions. Outsourcers can handle this variable level of work which eliminates the need to hire, train, or use temporary workers which could result in poor performance and potential layoffs.
• Focus: In my opinion, this is the most important reason to outsource. It allows your company to focus on the skills that set you apart in the market. A successful business does something far better than its competitors and whatever that is needs to be you team’s core focus. Let someone else handle the tertiary tasks involved in running a business while you keep a strategic view of the company and build on the key competencies that make your business unique & successful.

That’s a high-level rundown of the pro’s and con’s of outsourcing. At the end of the day, what really matters is that you spend time to choose the RIGHT outsourced provider which can make all the difference in your company’s success..

Look for a provider:

• with deep experience in their specialty
• who has worked with similar types & sizes of business
• with the infrastructure necessary to service your business
• whom you trust and have a good rapport with

For small business, it usually comes down to the person that you will be working with on a daily basis. Don’t be afraid to ask probing questions and speak with references. Make sure that person fits in to your company culture and shares your long term goals for the company. That will lay the groundwork for a successful outsourcing relationship.