Outsourcing decision matrix
Make it yourself, or outsource to someone else?
When considering outsourcing, many organizations get stuck on the same question: Which activities should be outsourced, and which tasks should be done in-house? This is a complicated question, and the answers will have huge effects on your organization’s short-term and long-term success.
In-house functions are typically those that are strategically important — by keeping these tasks internal, business managers can control the most vital processes directly. On the other hand, operations that are not important for overall strategy should be considered for external outsourcing. By outsourcing these often time-consuming work, an organization will free up time for managers and other employees to apply themselves to more important tasks.
The Outsourcing Decision Matrix helps you consider two important factors in outsourcing a task:
- How strategically important is the task to your business? Strategically important tasks are sources of competitive advantage.
- What is the task’s impact on your organization’s operational performance?
- Form a Strategic Alliance — Tasks in this quadrant are high in strategic importance, but almost don’t contribute to operational performance. Thus, these operations do not need to be done in-house and can be fulfilled via a strategic alliance that still allows control from a distance.
- Retain — Tasks in this quadrant are high in strategic importance and have a large impact on operational results. Operations in this quadrant should be kept in-house. Your company should maintain maximum control and should not outsource these operations.
- Eliminate — Tasks in this quadrant are not important to your organization’s overall strategy and nor do they make a significant contribution to its daily operational performance. Why should you keep them at all?
- Outsource — Tasks that are not strategically important but are important for successful performance of operations belong to this quadrant. They are not worth spending valuable in-house time for managing and should be outsourced to a reliable and cost-effective partner.
This matrix will give you a good idea about whether or not to outsource tasks in your business. Tasks that are strategically important to an organization should usually be kept in-house. This enables leaders to control the most important processes. Tasks that must be done for an organization to be operationally effective, but which aren’t important to overall strategy, can often be safely outsourced. After all of this is done, outsourcing is supposed to make your life easier while also making your business more competitive.