A framework for outsourcing options
What can be outsourced?
Where are the new business opportunities for entrepreneurs?

My previous article on offshoring (or outsourcing or whatever term we use without getting bogged down in the details) generated a lot of interest among business leaders: both those that want to outsource some of their business and others that think that they can create new business opportunity for themselves by helping their customers win. The manner in which outsourcing has become a key foundation of maintaining or enhancing competitiveness is starting to become obvious to all. There are strong reasons why every business, whether large or small, needs to do a diagnostic of all of their business processes today, identify what is core and what can be outsourced.  (Related link:  Use benchmarks for assessing your competitiveness)

There were two common questions that I received:

• So how do we figure out what can be outsourced?

• How can I turn this into a business opportunity?

First of all, let me say that you have to right away forget what your core business is. Secondly, you might also want to work with the hypothesis that you will be able to convince your potential customers as well what is core to their business and what is not by doing a thorough analysis of their business.  If a company has made widget " A" for 50 years and is the best in the industry, there is no guarantee that it will maintain its competitiveness forever. We have seen this in so many cases. If you start with that frame of mind, then you will be able to look at each process in your company as well as at within other companies with objectivity. I would also strongly suggest that you should get some outside expert involved in this exercise. Let someone who has no stake in either business come and challenge you.

So how do we figure out what can be outsourced?

I have developed a simple framework that you can use for first-stage, high-level analysis. It makes the process simple and quantitative so that there is less ambiguity and a more or less consistent approach when several individuals do it in parallel.

As you will see, this framework is very customer-oriented. And in the second part of the analysis, I am also asking you to look at yourself. What makes you think that you can do it better you're your customer? How will you create value?  To use the framework above to determine what can be outsourced, take a look at the helpful hints below:

Once you narrow down the list of options by using this screening process. But remember that this is only a screening exercise. You will still need to do a deeper drill down, particularly of the economics of the business before you should develop a business plan. And as I always say, never forget to speak to your customers. They are your best sounding board for any new business ideas. (Related link:  Businesses exist because of their customers)

How can I turn this into a business opportunity?

This was a common question from the entrepreneurs.  As we all know, outsourcing has been going on in America as long as businesses have been around and entrepreneurs have always created new business opportunities by convincing established businesses that they could do something that they did better, cheaper, and faster. In fact, if you recall, there was a time that American automakers owned rubber plantations so that they could get uninterrupted supply of rubber. Now they basically assemble the automobiles and the day may not be far they will embrace the Nike model: design and market.

The new business opportunities today are being created because it is easier to take advantage of communication technologies to locate your employees in an offshore location where the resources are less expensive. The questions that you have to ask are:

• How can I do it better than my customer so that she has no incentive to do it herself

• Can I provide economies of scale?

• Do I understand the culture/business environment of an offshore location better than my customers?

If the answers to some of these questions are encouraging, you may have discovered a new business opportunity for you.

Recommended articles:  

Best practices in call center outsourcing      How to market outsourcing solutions to mid-sized businesses?

How to develop an India strategy?      Innovation and globalization are linked    Outsourcing in mid sized companies

How to screen an outsourcing opportunity