The Outsourcing Dilemma: Some Considerations

23 Jan 2013 10:33 AM | Anonymous

Doug Savage, TG Senior Regional Account Executive

In many organizations, when the topic of hiring an external service provider comes up, there are usually two schools of thought. From one perspective, getting help from the outside is perceived as less than ideal; decision makers may cite cost, expertise limitations, and a lack of understanding of organizational culture as factors that discourage outsourcing. On the other hand, outsourcing may provide many advantages, including relief for overtaxed staff, reduced training and maintenance needs, and a resource to augment internal expertise.

The following steps help to determine where to head when making this decision.

1.     Define the need

The most important factor in making the decision to outsource is the business objective. What specific need is trying to be met? Surprisingly, many organizations make outsourcing decisions without clearly defining their objective. This results in frustration, as those in the office will have differing perspectives on the challenge that needs to be addressed leading to different solutions. Once the objective has been clearly defined, it becomes easier to address.

2.     Quantify the risk

Next, determine the risk that will be faced if the objective is not met. This is a consideration that is often disregarded.  Is the objective attempting to address an issue that is critical in nature? Will financial loss, revocation of licenses or privileges, or experience a loss of business opportunities be incurred if the business objective is not met? What is the impact? Determine this in advance; this will provide an understanding of the importance of an effective solution. It may open other opportunities that are less costly or labor-intensive options.

3.     Identify needs versus wants

After determining the business objective and identifying the risks involved in not meeting the objective, the next step is to outline all of the functions, features, and expectations for the solution. Once these have been identified, categorize them as “essential” versus “nice to have,” and rank them within these specific categories.  The completed list should prioritize all elements.

4.     Evaluate existing capabilities

Once the business need has been defined, the business risk evaluated, and the needs versus the wants identified, examine existing resources to determine feasibility in addressing the business challenge internally. Some issues to consider include:

  • Is support available from the highest levels of management to support addressing the business objective with existing resources?
  • Are existing staff able to address the objective and do they have the necessary expertise and time?
  • If not, is it possible to hire staff and provide a budget for them to address the need?
  • Will workflow need to be adjusted? Is there capability to adjust them with existing personnel?
  • If the function or activity has not been performed before, have best practices been outlined or can they be acquired?
  • Is the organization able to assume the risk associated with performing the function or activity, if there are errors or failures? This may include financial, market share, and reputation loss incurred due to errors or failures.
  • Has demand growth for this function, product, or service been projected?  Has preparation been made to address growth?
5.     Determine the approach

After taking each of the steps above, it should be asked whether enough information is available to make a decision. Determine what will be needed to address challenges using existing resources or when considering outsourcing. Even if the “wrong” decision is made, going through these steps will provide a way to identify where failures might have occurred. Ultimately, if the decision is made to hire a service provider, the answers to many of the above questions can help evaluate options in the marketplace helping to meet business objectives.


Doug Savage is a senior regional account executive with TG serving schools in TASFAA. You can reach Doug at (800) 252-9743, ext. 6711, or by email at doug.savage@tgslc.org. Additional information about TG can be found online at www.TG.org.

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