When Should You Outsource? HBO Gives a Example.

Outsourcing is far from a new topic in business and there are many depths to which a company can leverage outsourcing to optimize its business. The Wall Street Journal had a recent article around HBO titled “HBO to Use MLB Advanced Media for Stand-Alone Streaming Product” that I found to be a great example of a company understanding their core competencies and deciding to outsource accordingly.

HBO is the leader of premium TV/cable networks. The invented the segment when they introduced original programming to cable and have recently made waves with their plan to create their own streaming service. They opted for this strategy because HBO operates as a premium service that is only available to cable and satellite users and they saw a risk to their model with the growing trend of people ditching these services for streaming only options like Netflix and Amazon Prime. From the article we learn that the orginal intent was to build out their technical capabilities to support this streaming model by ramping up their tech teams by an estimated 200 people. They’ve recently opted out of this strategy and decided instead to partner with MLB Advanced Media for this work.

There are details we don’t know but it sounds as if there was some disagreements about whether the streaming operations where important enough to be in-house. Granted we don’t understand the costs or details but I’d still contend this is an excellent example of a business understanding when a project/task falls outside their strengths and to outsource it. Technology is amazing, I’m in it and I love it, I’d want to build this platform and own it but that doesn’t mean a business should hold all things shiny and new.

At my current company we leverage outsourcing in areas that are far from our core competencies such as: data center support, video creation, and copy writing. There are some areas where I don’t think we should leverage outsourcing and that deals with defining plans and key internal processes. That is one area where I think a business must spend the time to understand how it currently operates and how it should operate to achieve business goals, at least at a high-level. Once that is done the outsourcing of nitty-gritty can be much more effective because you still own and understand the overall vision.

One example from my past of when to not outsource, at least on the basis core competencies and doing what you do well, is the advice an entrepreneurial friend gave me when I was running my software consulting business years ago. I was knee deep in a busy cycle and trying to juggle existing clients, projects, and trying to find time to bid on projects. Time was in short supply, I was stressed and he suggested I outsource everything to offshore teams.This technique had been applied by my friend as he started building his wealth years earlier and I respected his advice but knew it wasn’t for me.

Up to that point I had outsourced a few, very specific and extremely detailed bits of work to offshore teams but never had I gone as far as he was suggesting.  For me to outsource all of these tasks would leave me to focus on the management of all the projects with offshore teams which isn’t something that brings me joy (I could of course outsourced that as well). Additionally, the rest of my focus would be on landing new clients to be able to leverage this new ability to scale but selling is something I’m able to do but that doesn’t mean its a core competency of mine.

So in short I’d be trading what I did really well at that time in my career for areas that either don’t bring the satisfaction or weren’t areas of strength. In my case the outsourcing didn’t work and I’m glad I didn’t pursue, even at the potential cost of my current net worth.

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