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Time and again every business owner is advised to outsource certain parts of her business to benefit from cost saving, flexibility, increased focus etc. While the reasoning behind the recommendation is understood,
what remains ambiguous is what parts of the business should be outsourced. That’s precisely what we are trying to answer here.
Information Technology (IT)
Most businesses are comfortable outsourcing IT operations to external vendors for more than one reason. First of all, in many cases, IT isn’t the core part of your business. Also, IT services demand a technical expertise that is difficult to hire for. Some companies that are innovating in technology, such as a computer vision or a machine learning firm, will keep the unique parts of their technology in house while the non-core parts of the tech are outsourced.
Another common practice is to keep R&D operations in-house and look for somebody to take care of the actual manufacturing of the products. It helps the company maintain focus on product innovation instead of worrying about the execution of the manufacturing process. As long as the guidelines and testing procedures are proper, outsourcing manufacturing can help keep companies lean.
Human Resource (HR)
Human resource management is a standalone function and can thus be outsourced without disrupting other systems. Moreover, when you outsource HR processes (specially hiring) you are able to tap into the existing network of dedicated human resource companies.
At first thought, customer service might seem like a function that every business must keep in it’s own hands as the entire customer relation depends on it. But the truth is that a good and well trained customer service partner can do a great job. That said, if you are a company like Zappos, whose core differentiator is your customer service then you would prefer to have this part in house.
There are many more functions that you should consider outsourcing (like accounting, legal, design etc). Ultimately you are the best judge of what differentiates you in the market and must be kept under close control and what can be outsourced.