Outsourcing is a recognized strategy practiced by most of the top brands and businesses who want to streamline their operations, cut overhead costs of hiring, and focus on core competencies. You might have come across many articles and blogs discussing services you should outsource. However, we thought discussing the services that should not be outsourced was equally important, and hence this blog.
But it is not as simple as that. You know your company better than anyone. There will always be things that you will understand better than an outsourcing partner. If you have an experienced talent in your in-house team for a particular role, you need to analyze your stance before outsourcing those services. These talents may be better equipped to handle your requirements.
Based on these probabilities, businesses should be able to determine which services are strategic and which should be handled by their in-house teams. The core services have a lot of integrity and represent your company. So, letting an external service provider handle it might not align with the reputation you have built.
This article will discuss the services you should not outsource and give genuine reasons for that. So, let’s dive right in.
Difference Between Core Services and Non-Core Services
Before making your outsourcing decision, you should have a fair idea of the core and non-core services.
Now, let’s discuss the types of services (both core and non-core) you should not outsource and let your in-house experts handle them.
What are the Key Services That Companies Should Not Outsource?
We have listed four key services you should consider not outsourcing (with reasons) to an external partner.
1. Customer Experience Management
One area that requires you to maintain direct control is customer experience management. Outsourcing this service will prevent you from interacting with your customers yourself, so knowing your customers and their pain points might not even happen in the first place.
A recent survey by HubSpot found that 90% of customers consider an immediate response (within 10 minutes) important when they have a customer service query. This level of responsiveness is challenging to achieve with an outsourced team that may not be as invested in your business’s branding as your in-house team, whom you have trained.
In-house teams are better equipped to handle complaints promptly, as they have direct access to the necessary resources and decision-makers. This allows them to resolve issues quickly and to the customer’s satisfaction, fostering loyalty and trust.
2. Product Development and Innovation
Both product development and innovation are considered key drivers of the business and its competitive strategy. Outsourcing these functions offers numerous benefits, but this approach needs to be cautious regarding issues related to IP protection.
A BCG report in 2023 revealed that organizations that had established innovation teams were 60% more likely to create new products for the market and offer higher satisfaction than those that outsourced the function.
Thus, communicating and collaboratively working with people and organizations outside the company leads to an even higher risk of IP loss, theft, or leakage, which can result in significant costs and cause the company to face strict legal action.
External teams might not be prompt or sensitive to the business’s objectives. Hence, they might design unexclusive products or invent products that do not respond to target customers’ needs.
3. Human Resources and Talent Management
Culture plays a major role in an organization’s success and should be cultivated. Your outsourcing partner might not know about your company culture and the environment you have created. Some HR functions include recruitment, onboarding, and general employee management and engagement; when third parties are hired, the bond between the employees and the organization may fade, and the morale and cohesion of the team may be at risk.
Companies create human resources departments to process sensitive papers and information, such as employee records and payroll information, among other private data. Sourcing these functions can increase the probability of sensitive HR information being disclosed to the wrong hands. Any unauthorized access or loss of this data could cause major legal repercussions, monetary loss, and a huge loss of business reputation.
4. Strategic Planning and Leadership
Strategic planning is a top-level function that should remain firmly within the organization. This process involves setting long-term goals, defining the company’s mission, and outlining the path to achieving business objectives. Outsourcing strategic planning can lead to misalignment between the company’s goals and the strategies implemented by external providers. Third-party vendors may not have the same level of commitment or understanding of the company’s vision, leading to decisions that don’t fully align with the company’s long-term goals.
Maintaining strategic planning in-house ensures that the company’s leadership is directly involved in shaping the future of the business. This approach allows for a more cohesive and unified vision, where all parts of the organization work toward the same objectives.
Leaders need to be in touch and tune with the business. To be more specific, leaders have to pay close attention to business activities and have a clear idea of the organizational culture and market environment in which the company operates. Outsourcing decision-making authority may cause executives to be removed from the operational environment, hence making decisions that are not quite right for the firm.
Key Takeaways
Regularly reviewing outsourcing strategies is crucial for businesses to stay agile and competitive. What works today might not be the best approach tomorrow, especially as market conditions and business needs evolve. Companies can optimize their resources while protecting their most valuable assets by continuously evaluating the effectiveness of in-house versus outsourced services.
Here are the important points you must remember when you analyze which services you need to outsource.
- To adapt to these changes, businesses should stay informed about the latest trends in outsourcing and technology.
- By doing so, they can make informed decisions about when to outsource and keep services in-house.
- They can also integrate new tools and strategies into their operations without compromising their core values and objectives.
On the other hand, you must keep an eye on the potential challenges that come with outsourcing. A business organization must identify the specific services that can be carried out in-house. A competitive approach to such a business environment can be developed by often reviewing the strategies and adapting them to the industry’s existing trends. If you are an agency and want to learn more about the nitty-gritty of outsourcing services, check out this ebook.
