As the implications of globalization have come into IT business, the idea of what a company should be has changed. Not long ago they were institutions—buildings and factories with workers who drove to work in the morning and punched out at night.

Business models have become much more customer oriented since those days. It’s not about your company or your staff, or even your product—your business is about your customers and what they want. This shift in focus has led to many companies experimenting with different structures in order to discover how to meet their customer’s needs at the lowest cost and for the highest profit.

One of the most effective ways of doing so is outsourcing. Companies define their core competencies and then look to outside contractors to meet their other needs. System development, coding, call centre, printing, human resources—for every business function, there are other businesses that specialize in providing it. Microsoft now employs between 4,000 and 5,750 temporary and contract workers.

Benefits of Outsourcing
Outsourcing allows businesses to focus on their distinctive core competencies, the specialties that the business is based on and that help it achieve competitive advantage.

Because they are working within their specialties, companies that provide outsourced services can often work on a project in a faster, more efficient and more sustained way than an in house team could.

Outsourcing allows businesses to better asses future costs because the company providing the outsourced services must clearly estimate and propose costs.

Drawbacks of Outsourcing
Managers have much less control over products and services once they have been outsourced—you are placing trust in another company to meet your businesses needs.

Communication between your company and the contractor can be difficult. By transferring a function to a contractor you lose the ability to directly communicate your company’s goals and values.

Outsourcing can result in the loss of in-house and local jobs due to its ability to lower costs and improve efficiencies. This can, in turn, make your company dependant on contractors to survive.

How to Outsource Effectively
Make sure that you have a contact person with your contractor that you can easily communicate with and who will be accountable to you.

Have the service or product you want outsourced as clearly defined as possible before you hand it over to contractors.

Make certain that you can draw from a pool of qualified contractors so that if you have problems with one you can find others to provide the services you need.