Insights From Advisors

I'm constantly meeting people that are smarter and more experienced than me - and that talk more better too.  Stuart has 27 years experience advising companies on financial strategy and has a terrific grasp of movements in outsourcing below.

Outsourcing ...  Outsourcing (Adapted from Stuart Lipkin's Blog)

by Stuart Lipkin
Published Nov. 25th, 2009 - via B2B CFO
 

Business as usual? I don't think so - that cliché is just no longer an option. Companies of all sizes have to rethink the way that they do business in order to survive. Through the recessions of 2001 and 2008 and the globalization of the marketplace, countries like India and China are viable resources for more and more goods and services and every company struggles to find ways to reduce costs and continue to maintain market share. As companies demanded reduced pricing from their suppliers gross margins deflate for vendors and pressure increases on operating results. The domino effect is a swift reduction in employees which as we have seen sends the unemployment rates skyrocketing.

So what’s the future?

The future requires many businesses to utilize outside consultants in a more proactive way. It will be a number of months (if not years) before consumer confidence responds and CEO’s will be motivated to add employees (if ever). They will need the services of individuals and firms to perform necessary functions on an outsourced basis, also known as business process outsourcing. Outsourcing will embrace everything from sales professionals (either directly selling or managing the sales force), financial professionals assisting the Company to strategically navigate through difficult times, HR, IT services, Marketing, Operations and more. In fact, it has been widely published that many of the unemployed executives today will be unable to obtain suitable employment and will begin their own businesses, most likely consulting in their field of expertise. The day of having a staff of full-time employees responsible for each of the company’s functions is in the past.

Some of the benefits of outsourcing are:

• Reduction in payroll costs and related employee benefits and payroll taxes
• Reduction in R&D costs
• Increased efficiency through specialized resources that will meet the immediate needs of the business
• Ability to implement projects quickly
• Reduced capital costs (cash investments) by renting/leasing equipment of outsourced firms
• Allows strategic growth of the business even with limited internal resources

Steps to take!

The proactive CEO will recognize this shift in the way business is transacted and will begin to build his/her own “power team” of outsourced professionals. This selection process is as important as if they were hiring full-time employees.  It needs to address the technical skills, related costs and fees of such services versus in house solutions and costs as well as establish a level of trust and confidence necessary to be aligned with corporate strategic goals.

The initiatives that need to be implemented are:

• Identify which facets of your business may require strategic assistance 
• Honestly identify detailed strengths, weaknesses and costs of internal solutions including FTE and expertise strengths, weakness, costs and risks
• Begin to interview several individuals/firms that you feel will be a good compliment to your business needs (take your time and invest in relationships over feature lists)
• Work with your resource as a strategic resource - you should always have the flexibility to utilize or not utilize the consultant to support the ebbs and flows of your business
• As with any full-time employee, you must be able to evaluate, manage and measure the value of the consultant to your business

Prior to the recent string of economic recessions, business owners and CEO’s only had to understand their business and industry in order to be successful. In today’s new world, that alone is not enough. They will need the ability to tap into the expertise of other professionals, in a way that rewards them with cost effective solutions and the ability to be competitive in an aggressive marketplace. Properly utilizing the skill sets and specialized resources of consultants to match the business strategies is the new focus.