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Take It Outside

Should you outsource the business processes you can't handle to another country?
Magazine Contributor
2 min read

This story appears in the February 2003 issue of Entrepreneur. Subscribe »

Big companies do it all the time--outsource back-office processes offshore. According to IDC, the global IT outsourcing industry will grow from $56 billion in 2000 to an estimated $100 billion in 2005.

But can smaller companies take advantage of the benefits of offshore outsourcing? "They can and they are," says Howard Lackow, senior vice president and director of outsourcing services with the Outsourcing Institute in Jericho, New York. "But depending on where [small businesses] are in the lifecycle of their business, it might not be the best alternative." Lackow notes that even though a business might be saving money by outsourcing offshore, the outsourcing relationship still takes a lot of structure and management time.

Outsourcing can be good for manning call centers or developing new computer applications--offshore, you can typically hire more labor for the same amount of money. Generally, outsourcing doesn't work well for companies that are in high-growth mode (because they require faster turnaround) or that are closely managed-overseas outsourcing requires being more flexible and less hands-on, says Lackow.

And then there's the very real ethical question-should you transfer jobs overseas, thus taking them out of the U.S. job market? "Don't look for either/or answers," says Randy Pennington, president of Pennington Performance Group, a Dallas-based business leadership consulting and training firm. Instead, he suggests coming up with creative ways to satisfy your employees, customers and your business's needs. "You might say 'We're going to keep existing operations here but grow [our customer service center] through overseas outsourcing,'" says Pennington.

If you find yourself in an all-or-nothing situation--if outsourcing makes the difference between going bankrupt, or laying off 15 vs. 50 employees--the thought process is key. Ask yourself: If every business outsourced offshore, would that be OK? What would the person I most respect do in this situation? How would I feel if my family and friends read about my decision in the newspaper? When keeping business in the United States is right, and doing what's best for your company is also right, "what is more right? You have to decide," says Pennington. "Remember, not every ethical decision is a popular decision."

Consider your goals and objectives. "Determine if the economics of [offshore outsourcing] are worth it," says Lackow. "Just know that it's not for everybody, and proceed with caution."

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