Why You Should Outsource: A Case Study

“Why in the world would I want to outsource tasks to someone outside of the company? Isn’t that why I hire employees?” A look into the benefits, and even the pitfalls, of outsourcing.

A Story

When I worked for a prominent commodity company in the late 90’s, I was serving as a business analyst in the IT department. I was one of the project leads on a massive project of converting over 250 PCs from Windows 98 to Windows NT. At the time, we were using a Banyan Vines network that connected all of our machines together for email communication. This network also served as connection to our AS400 mainframe. It worked for the company as a whole, but the IT department was pushing to move toward a true client/server setup.

Here is how the proposal went to the CEO (as best as I can remember it).

IT Department: We are really needing to move towards a more efficient solution for sharing information and networking. We can reduce downtime and improve employee efficiency if we move toward a client/server set up.

CEO: How much will this cost? (As expected!)

IT Department: We have run the numbers, and if we do all the work it will cost approximately $1.2M.

CEO: How long would it take? (Very logical second question.)

IT Department: Rollout would take 18 months. Then we would want to run in parallel for 6 months. We will probably need some manpower to help us with the rollout and testing.

CEO: How can we reduce both those numbers? (Oh! This guy is good.)

IT Department: Well, there are some things that really are not our strength. We could outsource those tasks to others. None of us in the department (there were 5 at the time) really want to pull new Cat5 cabling through the buildings to get ready for this. It also seems silly to hire a full time person to help cover the workload when it will all be over in 18 months…or less *grin*. We propose outsourcing all the cabling and network infrastructure building to someone else. We also propose hiring a firm to provide technical support for the duration of the project.

CEO: How much will this save me?

IT Department: The savings can happen in a few ways. First, we won’t be paying these new employees benefits and have to worry about training them. Second, the internal IT department can be working on the part of the project that fits our strengths, namely client/server setup and rollout and system conversion of existing applications. These tasks can be done in parallel while the outsourced work is being done. We feel we can shorten the timeline. We should see some increased productivity in a much shorter time.

CEO: Make it happen!

Pros & Cons

Outsourcing can provide an advantage to most companies in several areas. Here are just a few advantages:

• Free up your resources. You are not a computer expert. You are best at your core business. This is where your time should be spent. Passing off technology issues to experts can enable you to spend your time growing your company and bottom line, not to mention reducing stress.
• Reduce costs. You won’t have to pay for training, recruiting, sick days, etc. That falls on the shoulders of the consultancy.
• Access to wide base of knowledge. A consultancy like ArrowQuick has more than one person available to devote time to your company. This means you have access to specialized areas of expertise. One person may have a strong database background while another is a network expert. You can tap into all of this without paying for training.

Of course, I should point out that there are disadvantages to outsourcing as well.

• Loss of control. There is some control that is given up from a management point of view. The outsourcing consultancy may not have the same vision as your organization, or not mesh well with your culture. This can cause tension and frustration.
• Tied to another organization’s finances. Outsourcing means you now are dependent on the solvency of the consultancy. If the consultancy shuts its doors you can be left hanging.
• Loss of jobs. Of course, one of the major issues with outsourcing is you may have to let some people go or reduce hiring. This is a decision that management has to wrestle with.

So, how do you overcome the disadvantages? Do your homework! Check on references. Any consultancy worth its salt will provide you a list of references. Some extra leg work here can be useful. You can search the web for information on the consultancy as well.

You can start small and build up. Hire the consultancy for a small job. You can learn a lot with a small job. Are they timely? Are they efficient? Give the consultancy a test drive.

Return on Investment

So, what was the outcome of outsourcing the server project at the commodity company? The program finished in 12 months, six months ahead of schedule! The final cost, including hiring consultants for the wiring and support for the final phase, was $750,000. We even had the consultants back from time to time for other projects.

Building a great, long-term relationship with a consultancy can be a great enhancement to  your company. Outsourcing your IT tasks can work for you.

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