MAKE
OR BUY
Have you
ever considered which are the direct and indirect costs of
‘in-sourcing’ ?
In-sourcing and assignment
of an administrative activity to an employee implies at least the following
risks :
- risks of unforeseeable absence
for sickness, accidents, maternity
- risks for internal time
inefficiencies, as employees are usually paid on a time base and not on a
variable compensation per service unit
- risk of social contribution and
Labour National Collective Agreement which are difficult to foresee
- risk of resignation and
training investment loss
- additional cost for benefits or
incentives to decrease turnover and increase average duration of
employment relationship
- legal difficulties to prove
employee responsibility and possible negligence
- legal difficulties and possible
high and uncertain cost in order to resolve employment contracts in case
of negligence, redundancy, end of service need
- replacing employees means
additional indirect cost for recruitment and selection
Out-sourcing on the contrary allows to avoid most
of the risks above and have in addition the following advantages
:
- agrants higher cost flexibility
(per service unit and negotiability)
- grants easier benchmarking research
for best market conditions re-egotiable from time to time
- grants
usually growing volume discounts
- grants
usually higher specialization skills
- allows
to turn all organization cost and responsibilities on the
supplier
- allows
to focus on results control.
The key
question is often therefore :
Hiring a new employee or searching for a
service agreement?
Work on contract
agreements can be customized with hundreds of clauses which can legally grant
the best protection to the customer, and as a general rule can rely on a higher
efficiency level if results and quality are compared. This is of course not true in 100% of
cases, but can be a relevant information to take decisions.
Quickly one example : international accounting needs.
Multinational companies, usually appreciated to be able to centralize
accounting control and expect to find software solutions allowing multicountry
management.
SAP, Navision, JD Edwards, Peoplesoft, Oracle are only some of the leading
software which are allowing this, but customizing, maintaining assistance,
managing the same is often requiring a high quantity of time and money.
Unfortunately very often it is not possible to avoid to produce local
bookkeeping documents in local language, needing therefore a local software,
which is often available at cheaper conditions, that those which would
be necessary to customize one of the International packages above.
Outsourcing in this case is allowing also to externalize responsibility
of checks, updates and is granting professional insurance coverage included
in the sale prices, mostly avoiding the risk of operators absences and
turnover.
An alternative to be considered might instead be to evaluate the possible
convenience of import and export of data between an International existing
system, and a local one, which might mean a higher set up effort but an
efficient performance and management cost thereafter.
HTLC can offer any solution tailored to each client needs, with 35 years
of experience working with multinational small and medium size companies.
