Decision Making 101: Outsourcing or Not?

In the current economic landscape, outsourcing sure seems to be trending!  Indeed, businesses often rely on third parties (in the United States or abroad) to provide them with items they cannot, do not want to or cannot afford to produce themselves. These collaborations usually lend to fruitful partnerships, but also imply a certain level of supplier bargaining power… which leads us to our question of the day: Outsource or Not?

In his Huffington Post article, Tom Grasty, Co-Founder of Stroome, attempts to answer the question… by asking three other questions:

1-    How dependent are you on proprietary technology?

Is the item/ platform/service you are offering a bundle of several pieces, or is it a single piece? If it is a bundle, you may be okay outsourcing a few components. If it is a single piece or item that may fit into someone else’s value chain, you may be better off developing the technology on your own, because is that case proprietary technology will insulate you from competition (at least for a while)

2- How important is your time-to-market?

If time is the deciding factor of your success, you may not have the latitude to develop the technology on your own, and may have to outsource it to win a precious amount of time.

3-    How many resources do you have available?

It is okay to outsource minor tasks, if your team could be better used elsewhere. It is also okay to outsource something you just do not have any competence in. However, it is always best not to outsource the “killer” part of your technology (read: what makes it special), and it may be beneficial to start performing some tasks in-house as the venture grows and more people are hired (if it makes business sense).

4-    Retain ownership of outsourced work

If you decide to outsource, you have to make sure that everything designed for you falls under a work-for-hire agreement. You should also try to license technologies in perpetuity, and make sure you have the legal right to re-sell the technology you are licensing.

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Have a great day, and Stay WISE!


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