The Benefits of Outsourcing Maintenance
Michael Olsen – CEO Infraworks
Outsourcing non-core business functions is not a new concept. It is difficult for organisations to be experts in every aspect of running a successful company. Some countries adopt a similar approach at a macro level called comparative advantage. This is an economic term that refers to an economy’s ability to produce goods and services at a lower opportunity cost than that of trade partners. The same concept applies to companies. Stick to your knitting and focus on doing what you do best!
Non-core business functions may include payroll management, seasonal staffing, accounting, logistics, warehousing, customer care (call centres) engineering and maintenance. Outsourcing allows companies to focus on their core business functions and ultimately deliver better results to their clients.
Some companies are great at marketing products but not so good at manufacturing them. Some are great at operations but not so good at effectively maintaining their trucks or their production plant. There are strong business cases for outsourcing these functions because if you get it wrong then their entire business suffers and can fail!
Outsource problems & insource capability
Outsourcing non-core functions to a competent service provider can provide access to experts who bring in additional experience, competencies and skills that deliver additional business benefits. An experienced service partner will have lots of experience across many other industries and companies.
Outsource the function, not the person
If you desire sustainable results then you can’t just outsource the labour, you need to outsource the function. The most successful outsourcing arrangements are when the service partner can manage their own destiny. Don’t try to do that for them or you will both be disappointed. They know the plays and the players, so let them coach their team!
Managing outcomes and costs
You can have a performance-based contract with a partner that is not possible to replicate with an internal business unit. Subcontracting part of non-core functions has implications for the bottom line, therefore you need to create a contemporary contract and business relationship with your service partner that is aimed to be efficient and cost-effective.
Increased competitive edge
Strategic outsourcing contributes to the attainment of a competitive advantage. When a company uses a hybrid resource model than combines the expertise from internal and external teams it drives the delivery of lasting outcomes. The combination of expertise with efficient business processes and optimal utilisation of internal resources defines a winning formula that improves productivity, with a focus on each party’s core businesses and leads to building a sustainable competitive advantage.
Partners not adversaries
Create a partnership model, not a servant adversarial contract.
- Outsourcing is a change management activity
- Not everyone will support the process, allow for that
- Have an outcome-based contract
- Build a winning culture, outline the right behaviours
- Focus on the what and not the how
- What gets measured gets done
- Recognise performance and provide incentives
- Meet early and meet often, effective comms is critical
- Establish fair Goals that encourage the right behaviours.