5 Reasons to Outsource Non-Core Activities

At a recent meeting a member asked the Board for some opinions about possibly "insourcing" his estimating needs.  He's presently using an external provider and paying enough that he could perhaps hire an internal resource to replace that function for about the same money.  A few members favored the idea, saying they'd rather have someone on their staff over which they would have more "control". A number of members challenged the idea that an internal resource would be better, and actually made a decent case for how it might be worse. Here are some of those viewpoints:

  1. Maintaining current know-how -- A person in the Estimating outsourcing business is eating, sleeping and reading about Estimating all the time. He's in a community of knowledge that keeps him current, and he has experience with multiple other clients to add to his knowledge base. An internal employee can quickly get cut off from that knowledge stream, finding his current technology awareness slowing considerably when he comes on your staff and is asked to do lots of things other than Estimating, (yes, that's likely to happen - see #3 below).
  2. Availability-- From an outside Estimating resource, you'd expect 24/7 availability - if not the person generally assigned to your account, an equally qualified person.   That way you're covered for holidays, vacations, sick days, and other times when your in-house person won't be available. Not to mention what happens if your in-house person quits (estimating professionals are not known for long-tenured employment).
  3. Cost -- There's a false economy in staffing your estimating support internally. In most cases, it's not a 40-hour work load. What happens during those other hours?   Tech mischief that costs you money. They think of seminars they need to attend or certifications they need (for you to pay for). They think of new software upgrades and spend months with Excel creating their better way than using what works.   Their slack time experimentation will cost you plenty of opportunities. You might be surprised at how your estimating budget will go up, not down, when you insource.
  4. Alternate utilization/opportunity cost -- Another member asked "What is your revenue per employee?"  Answer: "$300,000"   "So, if you're going to add someone to your staff, might it not better be someone with skills to drive or support another $300,000 in revenue? Why add headcount to do something you're successfully buying now from the outside?" This is a classic "alternative investment" question common in MBA courses.
  5. Distraction -- When you take on non-core activities, the core business gets less attention. You'll end up hiring and managing another person who's not a direct contributor to the core business.

The bottom line was delivered by a member who is a demolition contractor. He said, "We don't do anything in-house that's not our core business. If wrecking is not involved, we don't do it."

I'll remember that one for awhile !

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