Outsourcing

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March 01, 2006
Point
Thomas J. Rump

© 2006 Hospitality Upgrade. No reproduction without written permission.

Outsourcing is here to stay! It requires investment, commitment and the ability to recognize and embrace change. There are compelling drivers and significant benefits. For example, I outsource my taxes to a CPA, who has the tools and tax expertise to be efficient and effective. Ultimately, I save time and money.


Outsourcing, which only entered Webster’s dictionary in 1980, has developed into an acknowledged and natural solution to many of our personal and business challenges. Car manufacturers concluded that the capital assets and risks required in manufacturing every production part could be shared and borne by suppliers. Large banking institutions concluded that they could rely on major computer manufacturers to both manage and seamlessly apply improving technology to their financial data centers, thereby reducing costs, the balance sheet and risk. Reservation centers in many industries, including hospitality, centralized call handling in order to leverage technology and to lower the cost of labor. In each of these instances business drivers and benefits were combined with great success.
 
Business drivers for outsourcing vary from industry to industry. Within the hospitality realm, where information technology intersects, there are many. In certain situations, the critical skills within an IT organization are focused on the new or latest initiatives within the overall business/IT strategy. Concentrating the key skills and efforts in areas such as superior service or guest relations can be a true differentiator for a brand. Freeing up key resources by moving the effort of more routine and repetitive activities to an outsourced solution is a powerful option.
 
Other business drivers in the IT resource domain can include the need to have flexible staffing to meet demands that may be project specific or cyclical. Resources may be needed to take on a project that is running in parallel to another key project, and the skill set on hand is unable to manage both simultaneously. An outsourced partner may have a specific skill set that is required, but not necessarily required on a full time basis. The costs of hiring, training and retaining can be prohibitive. Lastly, in the area of resource drivers, companies can rely on outsourcing partners to contain and manage the overall risk of employing technical resources. Transferring the management of employee turnover, appraisal processing and certification programs can be a compelling driver in today’s labor market.
 
In addition to skills and resources, improving stability and reliability of services provided can be accomplished with outside assistance. Working with a supplier, tapping into their area of expertise, and using service level agreements to validate performance is a solid alternative to internal restructuring. Where internal processes are perhaps outdated and not as effective as they had been, the inclusion of an external perspective, with the most current philosophies and experience, can become a valid choice. Lastly, although in many instances the most basic driver and the most desired benefit, is the ability to reduce cost.
 
The reduction of cost participates in outsourcing as both a driver and as a benefit. IT budgets are often stretched, and the ability to outright save money or to reduce the cost of a project in order to fund another equally critical effort is a basic initiative. The cost benefit of outsourcing is driven on the provider side, by specializing in areas that customers often do not. By moving work to individuals who are the most capable often results in this dual benefit.
 
Other benefits clearly flow as positively as cost savings, and can be specifically identified and measured. The manager who is freed up in order to concentrate on guest relations will fundamentally improve the brand's reputation and ultimately the company’s financial performance. The ability to utilize resources from an outsourced provider will reduce the cost of recruiting, hiring and management. The ability to provide specialized resources to a key project will improve the schedule of the project, allowing the assumptive project returns to flow as scheduled or sooner. Teaming with a partner to improve service processes, stability and reliability accelerate the effectiveness of the offerings from the customer’s perspective. These savings can be specifically measured using a return on investment (ROI) analysis. ROIs are regularly used to justify and approve outsourced initiatives.

Whether preparing tax returns or providing custom application development, outsourcing based on fundamental business drivers and matched with measurable benefits, has risen to become a key and necessary element of a business strategy. Using a partner as an extension of your organization, while employing best practices especially in the areas of project management and accountability, is the winning combination. Outsourcing will continue to grow in relevance as business drivers expand and the resultant benefits continue to validate the approach.
 
Outsourcing may be considered a dramatic change. As W. Edwards Deming said, “It is not necessary to change. Survival is not mandatory.”


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