"Outsourcing" is the practice of one company hiring another company to perform a specific function (or functions) that had previously been performed internally.

Companies may choose to outsource for both strategic and tactical reasons. Strategic reasons come into play when the company's management recognizes the need to focus more on the firm's core competencies instead of spending valuable time and resources on secondary functions. Tactical motivations for outsourcing include: (1) Financial - outside suppliers can perform services at a lower cost due to their greater economies of scale, (2) Technological - an outside supplier may have the necessary expertise to better perform a specific task by using a new technology, (3) and many others.

In addition to offering these benefits, however, outsourcing is a complex task with many potential pitfalls. Often, companies outsource for the wrong reasons, outsource their core competencies, lose valuable internal expertise, fail to appropriately manage their relationships with suppliers, or make other blunders that end up costing the firm a lot of money and, in some cases, forcing the company out of business.

At Norbridge, we help companies to develop and implement carefully structured, well thought out outsourcing initiatives that capitalize on outsourcing benefits while avoiding costly mistakes. Furthermore, we educate our clients on how to properly manage their supplier relationships throughout their life-cycle in order to secure long-term added value.

An excellent example of our commitment to client education is The Norbridge Guide to Outsourcing, a comprehensive primer on the outsourcing process based on our internal expertise and interviews with 20 Fortune 100 companies.



Business leaders foresee great opportunities to outsource in the future. While companies have already enlisted third parties to perform a variety of activities, there are many opportunities left to be mined. As companies engage in more outsourcing, it will become increasingly important that the managers charged with evaluating these initiatives make the right decisions concerning:

• Whether or not to outsource
• What activities to outsource
• What vendor to use
• How to structure the agreement
• How to make the relationship with the vendor the most productive

The objective of our Guide is to give you the road map that you need to conduct a successful outsourcing initiative. It includes the key steps involved, major decisions to be made, and helpful tips for reaching a successful outcome. Examples and tools are provided to illustrate the main points.

The Guide describes the six basic steps in the outsourcing process, from identifying and prioritizing opportunities, to managing the vendor on an ongoing basis. It can be used as a step-by-step guide or as a reference resource for specific topics. A checklist at the end of each chapter will help you be sure that you have completed the most important tasks.

This guidebook is only one source of advice on outsourcing. There are likely to be many knowledgeable staff specialists within your organization who can provide advice and should be kept informed about specific issues related to outsourcing. For example, outsourcing often requires that decisions be made regarding staff: Will they be employed by the company or the vendor? If they will be transferred to the vendor, what will be the terms of their employment? What training will be required of company and vendor staff to prepare them for the new ways of operating? The Human Resources department is a necessary partner in these decisions. Similarly, Labor Relations, Purchasing, Information Technology, Finance, and the Legal department may play important roles in the outsourcing process.