What to Outsource and What to Keep In-House

Many small business owners understand the power of outsourcing—that is, subcontracting an operation or project to a third party. It’s a great way to save time and money. But how do you decide what to keep in-house and what to outsource?

Chris Runckel, president of Portland, Ore.-based Runckel & Associates, has been guiding small, mid-sized and family-owned businesses with outsourcing for 11 years. He suggests small business owners carefully weigh their options before choosing to outsource, whether they plan to outsource to another country or to a company within the United States.

“Outsourcing is not something that you should go into lightly,” Runckel says. “It’s something that takes a lot of thought and quite a bit of work.”

Jim Lanzalotto, principal at Scanlon.Louis, agrees. His Newton Square, Pa.-based business manages companies’ marketing and strategy functions, and he finds that businesses often make snap decisions about outsourcing, rather than including it in longer-term strategic plans.
Here are a few questions small business owners should ask themselves:

Is this one of your core competencies?
If your business is well known for quality customer service, don’t outsource your customer service department. In other words, says Lanzalotto, keep doing the things you’re good at and outsource those tasks or projects that cost too much time or money—or outsource tasks that require greater expertise.

How will outsourcing affect the entire operation?
When thinking about outsourcing, many small firms see the cost savings but disregard potential problems—namely loss of control and less predictability. “When [small businesses] find that the price is cheaper, they assume a savings. But there are a lot of things involved in outsourcing, and price is just one of the factors,” says Runckel.

How much control do you want?
If you still want a good deal of control over the project—for instance, if you want to see progress in person, or be able to speak with the person completing the project at any time—it’s best to outsource locally. If you’re confident that the project, task or product isn’t going to change directions often, and you trust the vendor you’re outsourcing to, you might consider outsourcing abroad.

Who is the best person to work with?
Do more than a Google search. Get a reference from another small business or hire a consultant. Make sure the person or firm you’re outsourcing to has the proper credentials and that they understand your brand and vision for the project.

Read more outsourcing tips