Small Business Technology Outsourcing

small business technologyI’ve been thinking about approaches to small business technology initiatives and whether it makes sense for small business to outsource a good portion of their IT infrastructure and platforms.

Most of the things I’ve read on the topic of small business IT outsourcing has been fairly light in terms of advice for small business owners. Most articles are written with the vendor in mind but there are a few focused on the small business owner who’s looking to outsource.

One of the better articles was found on Small Business Computing in an article titled “Ten Points to Ponder before you Outsource“. The “ten points” offered in the above article are quite good but I felt like they could be expanded a bit to include some examples.  Below is a summary of the ten points plus some additional discussion and examples.

Outsourcing Small Business IT & Technology – Key points to consider

  • Look at the big picture. Do you need to be focused on keeping an email server or web server running or focus on marketing and business development?   Should you be focused on keeping your small business technology running or growing your small business?  If you want to be around next year, you’d better focus on growing your small business.
  • Look at value over price. As a small business, you need to save as much money as possible whenever and wherever you can…but….you also get what you pay for.  If you pay someone for email service, do you pick the cheapest vendor that will setup a few email accounts for you and then never answer your phone calls….or do you pick the mid-tier vendor who asks for a bit more money and then holds your hand throughout migration process and offers 24/7 support?
  • Pay for expertise. If you are going to spend your hard earned money for something, you should get as much value as possible from that outsourced service/product/person.   Part of the decision making process for outsourcing should include the amount of expertise you are paying for.  For example, if you outsource your payroll, you sure as heck better get an expert payroll provider.
  • Stay on the cutting edge When you outsource your IT functions, do you want to give your business to someone who’s using yesterday’s technology or tomorrow’s?  Let’s look at a web developer as an example.  You need to outsource your new website…do you hire someone still using Frontpage to design/build websites or do you hire someone who can build a website using a much more modern technology/platform?  Hint: go with modern on this one.
  • Does the vendor have similar values as you? Have you ever hired someone to do some work for you and then found out that they didn’t have the work ethic you had?  That would be a huge issue for a small business owner outsourcing IT functions.  When looking to outsource, take some time to get to know your vendor(s) (and they should want to get to know you too) to make sure your values are their values…or at least that their values don’t clash with yours.
  • Meet the Vendor’s team before signing the contract.  While many people meet with the sales person or perhaps the vendor’s leadership team, I strongly suggest that you reach out and try to meet with the team that would be working on your project.  Sometimes this is impossible to get to know the whole team but if possible, do it.
  • Know what you’re getting.  This is a no-brainer on the surface. Let’s say you want to outsource the design/build of a new website.  You hire a firm to design and build your website and you expect them to completely migrate content and/or create content. Content is part of the website correct?  They sell you a design/build project without clearly stating that content migration isn’t included.  When they finish, you have a website that looks pretty and works well but with no content!  Now you’ve got to spend more money to get content into the website.  Not a good situation to be in.
  • Understand Responsibilities. While the deliverables of the service/product should be clearly outlined in any contract, you’ve also got to fully understand the responsibilities of each side.   This should be clearly stated in a scope of work document when working with a good vendor…but you need to be absolutely certain you know who’s doing what before signing the contract.
  • Should you outsource to a big player or small business? This is a personal decision for each business.  You can outsource your email service to Google or you can find a local small business that can do something very similar for you.   You’ll sometimes pay more to the local business, but you’ll also receive more personalized service from a good vendor.
  • Find a vendor that can educate. Ever talked to an IT person and heard lots of acronyms and technical mumbo-jumbo and had no clue what they were talking about?  Would you hire them to do your IT? Maybe you would…but you’d have a hard time understanding what they are doing or want to do for you.  Find a vendor that can speak to you in terms you can understand.  Find someone that can educate you along the way. That’s the person you want to hire.

Outsourcing anything, whether email, payroll or brochure design, takes the same type of thought process for small business owners.   While price is a consideration for you, there are many other items to think about when outsourcing part of your business.

Stay tuned for more small business technology related posts…looking to make this a regular feature.

Innovation and Outsourcing – Do they go together?

According to a research report released by The Hackett Group, and reported by Financial Week, they don’t.

The Financial Week article, titled “Customers say innovation not part of outsourcers’ services“, describes The Hackett Group’s research.  A few excerpts:

In a new study, the Hackett Group, a consulting and advisory firm, found that businesses that have already begun to move their general and administrative functions offshore will likely pick up the pace over the next three years.

Indeed, by 2010, these companies will have outsourced or transferred off-shore an average of 16% of these back-office operations—an increase of more than 50% from the current level.

Not really much of a surprise…many companies have been outsourcing these functions for a while and the trend is to continue to do so.

The article continues:

Not surprisingly, cost savings drives most companies to shift back-office work overseas. Whether businesses outsource the work to specialist firms located in cheaper locations or set up their own captive offices abroad, the Hackett Group found that most companies save 25% to 50% on back-office work that’s shipped outside the United States.

The catch? Less than half the companies who had begun moving general and administrative work to offshore offices said they were satisfied with the new unit’s ability to innovate. In fact, only about one in six of the companies in the Hackett Group’s study were satisfied with so-called business process outsourcers’ innovation ability.

Emphasis mine.

After reading the article, I jumped over to The Hackett Group’s research report for more information.

The research report dives into more detail.  Specifically, a discussion around innovation, which says:

Only 17% of all responding companies using BPOs said they were satisfied truly satisfied with their BPO’s ability to innovate. While a much larger percentage – 46% — of all companies using captives made the same claim, this is clearly an area that both types of organizations can target for investment.

Emphasis mine.

Looks to me like an opportunity for BPO’s to improve their offerings…but also a hurdle for organizations who are considering outsourcing.

So…back to the original question at hand.  Do innovation and outsourcing go together?  I don’t think they do currently, but I think they can…at least in the realm of BPO or IT outsourcing. However, to make innovation and outsourcing go together, you’ve got to know what you want from the outsourcing company…and you will have to specifically ask for it.  And…you wil get exactly what you pay for and nothing else.

For me, the question that rises to the top of my brain is: Do you really expect an outsourcing companies to innovate for you?  I’m not talking about consulting companies who’s sole business is innovation, consulting, etc.  I’m talking about outsourcing companies who focus on processes.  Finance, HR, IT, etc.  Does anyone really expect these folks to come up with new and innovative ways to handle your business to save money, be more efficient or create more value for you (the outsourcer)?

I don’t. I’ve done some work for large IT outsourcing companies.  They can be quite innovative….but, for the most part, they use their innovative ideas to get more money from their clients.

I’d love to hear your ideas on innovation and outsourcing.

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