Note that information provided here for your convenience is taken at least partially from the eBook "Strategies I Learned Becoming a VP" which is copyright protected in the US Library of Congress, and is currently being published and sold by the author.
I suspect that many people, especially Americans, might believe I am going to say that all outsourcing is bad. Instead I will say that "it depends." Remember that you can also outsource to your own country.
WHY CONSIDER OUTSOURCING AT ALL?
WHAT SHOULD YOU NEVER OUTSOURCE?
Before outsourcing anything at all, one must first consider what makes your company great. What is it that makes your company desirable to people? Let me take the case of an eye doctor that I go to that got this perfectly correct. While I never originally discussed outsourcing with this eye doctor, I did observe things the doctor said and what his office does. What the doctor holds dear, and he is very correct, is that direct patient care with the doctor is extremely important. So then, he would never outsource doctors or care unless it was a specialty business that their office is not in. Also, the doctor's office seems to understand that having an attached glasses and contacts sales group gives their customers the best care and also immediate vision improvement. And so it is also clear to me that they do not and never would outsource their eye glasses and contacts group to someone else. Then they would lose control of that quality.
Now what is it they consider less important in their choice of professions? Medical billing, perhaps equipment calibration, perhaps office cleaning. The eye doctor even told me that he hates paper work, and instead wishes instead to have more direct time with his patients. And so the summary is that office may quickly outsource billing, other paperwork, equipment calibration and repair and the like. But that office would never outsource direct doctor care or eye glass or contact fitting unless some specific items were outside their expertise. They are wise.
If a company outsources what made them great and desirable, what would be the reason of anyone to buy from them again? Someone else, they do not control the quality of, is doing their main product or service. Never outsource what makes you great.
BE REAL WHEN MAKING THE DECISION
I have sadly watched two companies outsource important things without ever making a real cost comparison. Those two companies are now both very financially damaged. While their problems were of course more than bad outsourcing decisions, it is clear that bad outsourcing decisions did not save them.
The common issue is that someone on a board of a
company or in the company itself believes they can save money on labor
rates. And so some companies think no further than that and outsource.
But there may be negative costs in the other direction. And I have seen
few companies do a good job at adding those reverse new costs back in.
If the outsource location is far, then that distance adds travel cost
and time for anyone from your company that must vist. Also, there can be
added extra inventory carrying costs due to a delivery time and items in
transit before their sale, a problem you may not have now. And time to
market may now be slowed since instead of a group totally on your side
and in your control who moves rapidly, now one must convince a partner.
And if everything is not perfect, one might have to send a number of
engineers to the location and their costs will of course subtract from
gains to be had. When one puts this all together, outsourcing might
actually cost a company money or worse, market share, by now being too
slow to market. You might become non competitive on new features while
trying to be less expensive on costs. If no one is excited any more
because your products are not the latest and greatest due to added
outsourcing delivery times and added difficulties, then your lower cost
may not matter. While I cannot guess of the issue for each company to
consider, my advice is to consider ALL of the costs or savings both
directions, and to leave out nothing, before making the decision.