When it comes to determining which activities should be outsourced within a business it can be hard to draw the line between what works better in house and what duties are more cost effective when performed out of house. The reason for this is simple, because while outsourcing may in the long be cheaper when it comes to many of an organization's activities, the effect that outsourcing can have on multiple departments can turn a cost effective solution into something that will cost your business more in the long run once all divisions are evaluated. Given this factor, there are some departments that lend themselves better to outsourcing than others.

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Core activities vs. non-core activities

There is an extensive amount of debate between professionals over if an organization should outsource their core activities or their non-core activities. One side of the argument states that one should keep all core business practices within the organization as they are best performed by the organization themselves due to the fact that outsourcing can disrupt product flow, distribution, financial profits, and customer service. Following this argument, only non-core activities should be outsourced because this frees up more time to work with the core focus of your business.

On the other hand, there is also a significant argument for outsourcing complex core activities since many times an organization can outsource these sensitive matters to industry professionals who can offer their expertise and cutting edge technology. Thus, a business benefits from outsourcing due to the fact that they hand tasks over to a much higher trained staff. Of course, the negative side of this is that the heart of an organization now lays in vendors hands instead of the business which raises the risk of the investment.

Potential activities that should not be outsourced

Among the many activities that should not be outsourced is supplier management. This is due to the fact that outsourcing management functions does not allow a business to forgo its managerial needs, instead it reassigns the tasks of a manager forcing an organization to manage the outsourcers who manager their assets. Due to the fact this creates a larger managerial circle it is far from a cost effective or logical solution. Keeping asset management in house is usually the better choice for any company.

Another prime area that should be kept in house is customer relationship or customer services management. Keeping in touch with a customer base is the most vital part of an organization's eventual progress since this allows the business to tap into their needs, wants, and overall feddback so that it can be used to increase the value of a product or service. By assigning this responsibility to an outsourcing vendor the company will not be able to maintain a clear picture of what consumers want from their company which results in poor business decisions and poor product choices.

Activities that do warrant consideration for outsourcing for SMEs

Smaller and medium sized businesses have different needs than larger organizations, which is why there are different outsourcing options for these businesses. Among the items that can be outsourced is basic website development. A website requires constant updating and constant refurbishment given the fact that it is the storefront for a business in the virtual world. Oftentimes hiring a website developer can be an expensive cost if kept in-house, but there are plenty of professional teams to outsource the task to at a smaller price.

Two other areas that can be considered by SMEs are book-keeping and PC support. Interestingly enough, these are not areas that should be outsourced in the case of a large business. This is because a small business will have a minimal amount of book-keeping records and only a small number of PCs that actually need support. In this case remote desktop management is an option. However, in a larger company the amount of sensitive records is immense making it risky and impractical to outsource. At the same time, the amount of PCs that need managed is also larger and the amount of problems that occur on a daily basis makes desktop remote management an impractical solution.

Activities that can also be outsourced

Noting the above, there are some areas and processes that can almost always be outsourced with positive results. One of these areas is health and safety departments due to the fact that most of these tasks involve compliance tasks. There are many consultants that can be brought in on a contractually basis as needed that can make sure all health and safety risks are met which creates a very cost effective solution.

Other areas that can be outsourced include payroll, recruitment, and secretarial services. Outsourcing allows you to receive expert help in these matters as needed, but allows you to trim the costs of extra employees out of your budget when there is no need. For example, an organization that only hires once or twice a year does not need a full HR team to handle recruitment and would benefit from a long standing contract to bring in a hiring team as needed.

Final thoughts on outsourcing decisions

The above recommendations are an overview of the activities and processes that can and cannot be outsourced. However, they are far from a definite guide. Every business has different needs, a different focus, and different core competencies which makes creating an exact framework for outsourcing impossible. At the same time, so long as the cost impact and business impact is properly evaluated before any outsourcing decisions are made the risk of contracting responsibilities outside of a company can be reduced.