I’ve heard people boil outsourcing decisions down to “we’re not in the business of X” and this is indeed a reasonable principal, whether you are talking IT operations, software development or even payroll and other HR functions. But how would you actually define what business you’re in?
I recently read a discussion in the Tyner Blain blog that helps put the decision into a more detailed context. In Outsourcing Debate – Two Guys Talk it Out Bill Miller clearly spells out two fundamental criteria:
- Is it a profit centre or a cost centre?
- Is it a core competency or a necessary chore?
Clearly if it’s something that is a speciality of your company, and you can make money out of it, then you are best off handling it in-house. If on the other hand you’ve just got to get it done, and pay for it on top, then you are likely to get a better, cheaper and more innovative service if you get someone else to do it – someone for whom it is a speciality, and whose business it is to make money in that way.
Although the article mainly talks about offshoring development, I think you’ll agree that these criteria can readily be applied to any aspect of your business operations.