Although outsourcing is all the rage in business today, it can also be a dangerous strategy if done for the wrong reasons. Following are some bad reasons for and associated dangers of shifting responsibility for some business processes or products to outside firms.

Wrong Reason #1 You just arent interested in doing it yourself.

Potential Danger If youre not interested in it theres a good chance you wont adequately think it through and communicate your needs to your supplier, greatly increasing the chances of them failing at it.

Wrong Reason #2 Youve struggled with it for some time, usually unsatisfactorily, and want some else to deal with the difficulties in the future.

Potential Danger The problems may very well be due to other interfacing or related processes in your organization, and separating them physically will only make response times for problems more difficult.

Wrong Reason #3 Your business is growing quickly and you need to reduce the workload on some of your key people.

Potential Danger You may take away some of the activities that people most enjoy, are really good at, or are key activities that support other business processes.

So what are some of the right reasons to outsource?

You have identified your organizations core competencies and want to find business partners who can supplement them with their own competitive strengths, making both firms stronger.

Someone has demonstrated the capability of doing some of what you do much more quickly, effectively, and/or at lower cost, and if you outsource these activities you will be able to better focus on other higher-value adding activities.

You need to add capacity but do not want to invest in additional capital, since the long-term view of the market is uncertain.

In effect, outsourcing often just shifts resources from carrying out the activities being outsourced to managing the interfaces with suppliers (e.g., knowledge transfer, work balancing, problem solving). So tread carefully, as the long term effects can be either negative or positive, and your organizations decision making processes related to outsourcing will largely influence which way it will turn out.

Copyright 2006 Duke Okes