Taking care of all businesses or outsourcing some businesses should be carefully considered by enterprises. This should depend on features of each business, expense, efficiency and information security in specific periods.
In the article “Outsourcing and Business Process”, I have mentioned 2 parallel processes in creating values of enterprise: Business Process and Support Process. And One thing has been confirmed: outsourcing is considered strategic orientation in Business process.
In this article, I will talk about the remaining process – Support Process.
Support process’s responsibility is to actively and quickly support the areas of human resources, finance, information, relationship and institution. Support process does not directly contribute to creating added value but it seriously affects business process. Without support process, enterprise cannot operate smoothly. If enterprise’s operation is divided into 2 parts including profits and expense, activities of support business are almost in expense part. However, in the vision of middle-term and long-term, there will be many businesses in this process being located in investment part. Therefore, in order to decide which business should be outsourced and which business should be carried out by the enterprise itself, businesses must be categorized.
In support process, businesses can be categorized into 2 types::
1st type: Substantial business: These businesses decide the future of enterprise. If there is any mistake, the consequence will be very serious. Because of their importance, they must be placed in investment part. They require the responsible people to be visionary, experienced and having special skills. Enterprise can select or hire these talents, or outsource to these talents. Otherwise, enterprise can outsource, simultaneously invite them to monitor quality and risk of businesses.
2nd type: Other businesses. This is the question of expense-efficiency which is related to some risks.
Businesses can be very important, rather important or little important. Their importance all depend on the industry, area, vision of each enterprise. However, such businesses as building strategy of management model development, evaluating staff capability to mandate and assign etc. are always considered very important in any enterprises.
Basis for decision making
Firstly, for extremely important businesses which can affect future of the enterprise, such as businesses demanding extreme information security. To succeed, people in charge must be visionary and talented. Success in using outsourcing services much depends on ability to select service provider (service providers have to meet 3 demands: goodwill, stature, and information security). If the enterprise has enough capacity to implement by itself, it has to properly invest in staffs, build a critic culture inside the organization to look at the issue from various points of view.
To these businesses, gained added value is shown in 3 periods: short-term, middle-term and long-term. If outsourcing is adopted, it is more difficult to measure its benefits than other normal products/services. Besides, enterprise and provider must try to quantify its by multiple methods.
The price of this outsourcing service depends on the factors: complex of specific situations, scale of the enterprise, the amount of money and attempts that provider had to invest to deal with all the issues, brand name, its prestige and especially the benefits that enterprise expects to get. Enterprise can pay by cash or shares, or both because the business nature must be going towards mutual benefits and long-term relationship.
Secondly, for the other businesses. The enterprise considers which businesses might face the risk of information leakage, and evaluate financial loss related to this leakage. After consideration, enterprise has to give out some decisions about the possibility of using outsourcing for a specific business, as well as decide to use outsourcing usually or temporarily.
In fact, the volume of work to be outsourced can change from time to time. Usually it increases. This leads to increasing value of the service. Nonetheless, when the volume of work increases, price for each single business will be decreased. The enterprise has to compare to make a choice.
Also, enterprise has to remember that: if the result of using outsourcing service does not meet the expectation, and if there is no other conditions, outsourcing service provider has to take care of all costs to make good the shortcomings. In case the task is implemented by staff of the enterprise, this might need additional
In order to avoid highly risky issues, enterprise should select the prestigious and well-known providers. To less important issues, enterprise can use outsourcing services of smaller companies to save costs.
In conclusion, it is possibly said that cost saving is always a useful solution for enterprise to raise profits. The important thing is, enterprise has to think what is expenditure, what is investment. Enterprise has to compare self-implementation and outsourcing in terms of quality, efficiency, costs, risks from both sides, from quick development of technology, information security level etc. to make the decision. Based on the self-assessment, enterprise can set the criteria to select the right outsourcing service provider.
Tom Downie – I’m working for a leading IT solutions provider. If you are interested in the IT sector and want to have some overview of this area …
Business process modelling