Outsourcing is now a common phenomena among businesses. Essentially, you contract out a business process to a third party, both foreign and domestic contracting – at times relocating a business function to another country. Traditionally speaking, companies having financial difficulties didn’t have much choice but to restructure, lay-off employees or incur additional debt to cover short term obligations. Outsourcing of redundant business processes came as a sigh of relief for many, especially large corporations with humongous overheads. The incentive to outsource may be greater for U.S. companies due to unusually high corporate taxes and mandated benefits such as Social Security, Medicare, and Occupational Safety and Health Administration (OSHA) regulations.
Now that you have successfully outsourced and established a cordial relationship with your vendor, industry trends may change that require you to focus more on certain business segments. Insourcing has been identified as a means to ensure control, compliance and to gain competitive differentiation through vertical integration or the development of shared services (commonly called a ‘center of excellence’).
But wait a minute! It seems like you require both in order to attain a lean and optimal cost effectiveness business model.
For the last decade or so, e-Discovery industry has experienced tremendous growth in terms of outsourcing mainly due to escalating costs. The result – growing number of captive centers all over the world, especially with abundant labor resources such as India, Pakistan, and Philippines. The biggest cost driver in e-Discovery is document review – over 60 percent of total costs, one of the main reasons of influx of captive offshore centers or outsourcing. Recently, however, law school graduates in the US, for instance, have been accepting employment at all time low wages – making it increasingly competitive for e-Discovery vendors.
What’s an optimal solution?
According to Balanced Score Card Institute, “The balanced scorecard is a strategic planning and management system that is used extensively in business and industry, government, and nonprofit organizations worldwide to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organization performance against strategic goals” Using this tool helps an organization to identify, understand, and evaluate core business processes, resulting in best practices of utilizing outsourcing and insourcing strategies.