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Outsourcing Alternatives

by: SBC Staff

No doubt you've read periodically about the huge information technology outsourcing deals entered into by giant corporations with other giant corporations.  These deals are usually in the hundreds of millions to billions of dollars range.  You may have wished you could outsource your information technology, human resources, or supply chain functions, but know that no one would be interested in entering into such a deal with a small business.  For the most part, you are right.  Small businesses usually do not provide enough economy of scale to justify an outsourcing arrangement.  But that is changing rapidly.  Let's look at some of the options that are available for small businesses.

Application Service Providers (ASPs) - You've heard of them.  You're wary of them.  And you should be.  ASPs are cropping up all over the place.  Several large companies like Microsoft and Oracle are now providing ASP services to businesses of all sizes.  There are several questions you need to ask yourself before signing up with an ASP:

  1. Are they going to be around tomorrow?  ASP services are difficult to price.  The business plans of many of the providers have proven to be suspect as more of them fail every day.  If you turn over critical business functions to an ASP and they fail, severe damage could be done to your business.

  2. Is your information private?  If you are transferring critical business data to your ASP, that data is now out of your control.  The ASP is now responsible for security and data backups.  Are you comfortable transferring that much control over critical data?

  3. How do you access your data?  What technology is used to access your data over the Internet?  Will your connection be fast enough to keep your employees efficient?  What happens if your Internet connection goes down?  Can you live without access to your data until your connection is restored?

  4. What kind of service level does the ASP guarantee?  You need to know your data is available when you need it.  You'll need to negotiate a strong service level agreement and provide monetary penalties if service levels are not met.

  5. Will you save money by using an ASP?  You're giving up a lot of control over your data and critical business functions.  Unless you can save money and work more efficiently by entering into the ASP agreement, you should not be considering it.

Payroll Processing Services - These are among the oldest forms of outsourcing, and the most successful.  If you have more than 5 employees and less than 30, you should probably be using a payroll processing service like ADP.  If you have more than 30 and less than 100, you should still strongly consider it.  More than that, and you might be better off beefing up your internal human resource capabilities.  Using a payroll service is more about peace of mind that all your human resource functions are being properly administered than it is about saving cost, although you should save money as well.

Outsourcing off Premises - You can find companies that will perform business functions for you on a contract basis, such as accounting firms that will pick up your source data and compile financial statements for you and companies that will handle purchasing functions for you if you join their cooperative.  These services do provide you with cost savings but they are still a far cry from having someone maintain these functions on your premises.  You need to be able to integrate your accounting functions with operational functions which enables you to gain efficiency throughout your business.  By farming out your business functions on a piecemeal basis you lose the ability to capture information from various sources and analyze it from an enterprise standpoint.

Outsourcing on Your Premises - If you can find a company to provide your small business with outsourcing services on your premises, you are ahead of the game.  See if your local systems and networking provider can spare a staff member several days per week to maintain your IT infrastructure at your site.  It will save you the cost of hiring full time IT people.  Do the same with your accounting firm.  If they supply you with a staff accountant a day a week or so, you can cut back on internal staff required to manage your accounting system.  In this manner you keep your critical business functions in house.  If you can find a firm that will take responsibility for these functions completely, even better.  But such is hard to find!

I should mention that we are one of the only firms to offer full outsourcing services to small business clients.  We will purchase servers, workstations, software and everything else you need to complete your IT infrastructure, provide you with technical support personnel, people to run your supply chain, your order entry functions, your payroll functions and any other function you would like to outsource.  This service is not available in all areas of the nation at this time, but will be soon.  If you are interested, check with us to find out if this service is available in your area.  You can also use the Outsourcing for Small Businesses information request form to request a preliminary quote and additional information.

If you believe outsourcing could provide a benefit to your business, check out the options available to you using the list above.  If you need assistance locating companies that provide the services you need in your area, get in contact with us and we'll be happy to help you.  You can email us at or fill out the form on the Other Consultation page on this site.


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