Project Design: To outsource, or not to outsource...
I was recently asked by a CEDIA group of integrators for my input on their topic of the month: outsourcing. The interest in the topic sparked my curiosity and I decided to put together a dedicated series exploring the topic. Initially, to give some insight, I want to outline the main questions put to me and my advice.
The first question on outsourcing has to be “what exactly can you outsource?”
If you currently have an accountant, web-designer, or even just a cleaner you are already outsourcing. In this day and age you can pretty much outsource every element of your business. In fact I know of a number of companies in the US who only deal with clients and sales in house, everything else is outsourced, including: System design and proposals, design documentation, procurement and warehousing, project management, all phases of installation, rack building, all testing & commissioning, programming and last but not least, servicing.
The next question is “what are the things you should not outsource?”
It’s important to keep your core business competencies that differentiate you in house, things like client liaison & sales, for example. You should also avoid outsourcing things such as legal compliance and health & safety policy.
Now that we have established what you can and can’t outsource the next question has to be “why outsource?”
Well, the obvious reason is lower costs, assuming that outsourcers can do the work for less that you can do in house. There are also corporate tax benefits to be had when working with outsourcers.
But the bigger benefit is the time that you free up, which you can invest in better customer experiences. This leads to higher customer retention and a greater number of referrals because you are more client focused.
Outsourcing can furthermore improve your scalability, as there is no need to add staff and therefore costs to grow. The reverse is also true if you need to shrink to fit external economic forces.
Finally, there is the benefit of fixed costs. Most companies providing outsourced services will work on a fixed contract price, which makes it much easier to know your bottom line.
Having looked at why you should, we must also consider why you might prefer to avoid outsourcing:
It’s possible that your employees could feel less secure with lots of outsourcers invading their workplace. Outsourcers also tend not to have the same ultimate responsibility to the company as your employees do. It’s always good to know who you are working with: I have heard of cases where initially you speak to the business owner of the outsourcer only to end up working with one of the newest members of their team.
Finally, you may find that ownership of deadlines can be a hard thing to pass on to outsourcers.
Next we should consider what the costs of outsourcing are?
Here is how one of my clients explained how he approaches the costs involved in outsourcing and the decisions on what to outsource:
Firstly you need to calculate how much an hour of your time is worth.
If you have a business and don’t know this, it’s very easy to work out. Take the money you make per annum and divide it by the number of hours you work a year. Then ask yourself, is what I need doing within my skillset, if it isn’t you are probably better off outsourcing it. If the task in question does fall within your skill set, try to work out the time that you need to complete it and then multiply this by your hourly rate. If the total for you to do it is cheaper than someone else doing it then there is no reason to outsource. If on the other hand it works out more expensive for you to do the job, then consider outsourcing it.
This client went on to tell me that they actually pre-qualify their customers by whether they outsource or not. For example, if a potential customer doesn’t have a gardener, cleaner and someone who does their laundry they are probably not a good fit for them.
So, that’s my introduction to the outsourcing column – next I’m going to look at some of the new innovative ways of modern outsourcing, some of which you probably didn’t even realise are outsourcing services. Stay tuned!
Keith Jones studied Product Design at Central St. Martins where he graduated in 1996. Since then Keith worked in numerous high end audio outlets, culminating in owning and running his own AV installation company from 2001-2008. After a career break he started Jones designs in August 2009 which morphed into a Ltd. company called designflow, in 2015. Designflow aims to increase awareness of design in AV and help installers win jobs and create proper documentation for them.