In 1986 I joined one of the largest universities in South Africa. They had in-house departments that offered a variety of services including printing, fuel supplies for university vehicles and building repairs and maintenance.
- Not long after joining I needed to have brochures printed for a programme I had designed and would also be presenting. I asked the director of my department where the printing department was located assuming that there was one. He told me not to waste my time. But I ignored him as I felt that it was good to support in-house departments. On arrival at the printing department I stood waiting at a counter. One of the staff there did notice me but it took her a while to attend to me. I asked her how long it would be to get a proof of the brochure and she told me it would be five days. Persevering, I then asked how long after I had approved the proof it would take to print the brochure and was told it would be 10 days. At which stage I gave up. On returning to my office I called a printing company and asked them to collect the wording for the brochure. It was collected late that afternoon (this was in the pre-email days) and a proof was delivered the following afternoon. Three days later I had my brochures.
- My office opened on to a ground floor balcony in a large old house that had been converted into offices. I was not comfortable, from a security perspective, with my office door. It was a wooden door that had glass panels. I put in a request to have a solid wooden door fitted. A team arrived the next day. It took them TWO WHOLE DAYS to fit the door. My 69 year old father-in-law could have done it in a morning.
- Our department had a number of university vehicles. I needed to fill up before travelling to Rustenburg where I would be lecturing on a university programme for managers at a platinum mine. The system operated as follows. The petrol pumps were situated immediately outside of a university store. On arrival one would press a buzzer at the pumps (you could hear a bell ringing inside the store) and someone would amble out and fill up the vehicle. On this day I rang the bell and waited. And waited. I rang the bell again and waited. And waited. Then I went in to see what was wrong. There were four people sitting around a table having their tea. They studiously ignored me. So I left, went to a filling station and later got a refund from our department’s petty cash.Is it any wonder most of these departments were outsourced? In-house functions at universities need to realise that they are competing with outside companies. If they can’t compete they are costing their organisation too much and thereby contribute to the need for university fees to be increased.
Now to business.
Some years back a large commercial bank outsourced a major administrative function to an external service provider. It cost them more to do this. Then why do this? The core business of a bank is to lend money. Apart from service fees interest is there major source of income. So although it cost them more they no longer had to manage the staff with all that it entails these days. With a service agreement (SLA) they could just not renew the contract with the service provider if they were not happy with the service and find another service provider. This is a lot easier than managing their own staff.
I have also noted that sometimes smaller businesses try to do things internally that they shouldn’t. For example I have often been asked by small business owners to recommend an accounting package. When I ask them why they tell me they can’t afford to employ a bookkeeper. I then ask them if they value their time at less than that of a bookkeeper. Of course they don’t. I would say, “Don’t do it”. Their time could better spent seeing existing and potential customers. Just use a reputable firm of accountants to do your accounting. They will also look after your VAT and income tax returns (and other required returns such as UIF and Workmen’s Compensation) and leave you free to run your business – and sleep at night.
If a business can get any function done more cost effectively than it is done internally it should outsource it.
The move to outsourcing is a fact of business life. Individual employees also need to be aware of this. If the work you do costs your employer more than an outside service provider would charge you are at risk of losing your job.