Outsourcing Your Business

Outsourcing Survival Kit

Outsourcing Survival Kit

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Guide To Outsourcing Profits

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Guide To Outsourcing Profits Summary


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Contents: Ebook
Author: Richard Jablonski
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Outsourcing RD

Outsourcing is now an essential component of business strategy. Outsourcing can be simply defined as the provision of a service, resource or product from outside the organisation. At one time the use of outsourcing by R&D managers was tactical, used only when in house provision was stretched or not available, but is now an essential component of the business strategy in most companies B-8, B-9, B-10 . Why outsource Innovative companies need to support a vigorous new product pipeline but still want to maintain fixed costs, they cannot hire staff or expand facilities at will. There are three reasons for companies choosing to look at the outsourcing option. Businesses are under constant pressure to control costs, especially fixed costs, to do more work with fewer people. One answer is to stop any irrelevant support and to consider the outsourcing of non-core, but essential services. R&D has become increasingly technologically complex and multi-disciplinary. In drug research the advent of...

The Role and Breadth of RD

Good quality R&D work requires an excellent back up from what are called the support functions. These include analytical, information services and technology, intellectual property and regulatory affairs. The management of these functions, especially the laboratory based analytical service, requires many of the skills associated with core R&D and will therefore not be treated separately in any detail, except to point out their relationship and role within the organisation. Traditionally, the support functions were an integral part of a large company's R&D function but nowadays they are most likely to be outsourced under contract to external organisations specialising in a particular service, especially if these activities are not seen to offer a competitive advantage to the company. The organisation of outsourcing is not a simple matter and can often take up a significant amount of management time, especially if the contract is not negotiated in an effective manner. This will be...

Organising for an Innovative Environment

Organising the provision of the support services required by research staff is another key task for an R&D Manager. Crucially the decision needs to be made as to whether this support will be provided by an internal resource or contracted out to an outside agency, outsourcing, as it is known. Outsourcing of non-core activities is very common but, as with all activities, there are pros and cons and making the wrong decision in a particular area could lead to a competitive disadvantage. The most significant support areas to be considered in R&D for outsourcing are analytical services, intellectual property, covering patents, licensing, etc., information and library services, IT such as office technology, environmental services, toxicology and regulatory affairs. Drug development, even in major pharmaceutical companies now relies heavily on outsourcing to get a product through the regulatory hurdles.

Strategic Research Targets

Or transfer their technology to the larger companies or are in turn acquired so that the competency is then achieved by acquisition (see Section C, 3.4). An alternative approach is to outsource this type of work to research consultancy companies, universities and institutes. This is especially true when the work requires some fundamental understanding to be obtained before any significant progress can be made. These collaborative contracts are a special feature of the outsourcing ofR&D (see Section B, 1.4).

The Industry

Groups to be working on the same topic in China, India, Europe and the USA, enabled by rapid electronic communication systems that provide information on a 24 hourly basis. Management is most likely to be in a matrix, which operates across functional, cultural and time barriers and hence requiring a high level of coordination and different interpersonal skills from those used in a small, local R&D group. In other instances the Manager may be working in a company providing R&D to another company under an outsourcing contract, placing a different emphasis on certain of these interpersonal skills, such as negotiation. In this global environment the management of change is crucial.


Adoption of management styles to suit the environment and culture of the company requires an understanding of the different organisational structures. Functional, strategic business unit, R&D contractor or matrix, they all have a place. Corporate laboratories are reappearing, but with a new role. Being part of a business unit increases your influence on its strategy. New Business groups are there to handle high risk business opportunities. A matrix is most effective in the time management of cross-functional projects. Team Leaders play an important role in upholding the reputation of the function in the company. The globalisation of R&D means that an additional set of managerial competencies is required. Outsourcing is now an essential component of business strategy having implications for the management of R&D. A manager must ensure that the quality of any outsourced services is of the right standard and especially that scientists have access to the widest range of high quality...

The RD Contractor

Another way of overcoming some of the difficulties that can arise with the SBU organisational structure is for R&D to be outside the business tube, acting as a contractor to the business unit. This can be described as insourcing as opposed to outsourcing In this case, R&D retains its functional independence, contracting out its services to the business unit, paid for on an as needs basis. The work is carried out physically within R&D laboratories on behalf of the business unit. This is illustrated in Figure B5.


There is no doubt that companies can save fixed and capital costs and deliver projects faster by the intelligent use of outside agencies. However, there are some guidelines to successful outsourcing. Commodity services and non-core technologies. These are suitable for outsourcing. And there is a whole consulting industry to provide most, if not all, of those required by the chemical industry.

Analytical Services

The ability to analyse the compounds or materials coming out of a chemical laboratory or plant is an absolute essential. It is one of those disciplines that, when properly run and designed to specifically meet the needs of a particular research, development or manufacturing area, can offer a very competitive advantage to the company. Therefore, the wholesale outsourcing of such a facility needs to be thought through very carefully. Other essential, but non-core analytical services, for instance simple elemental analysis, can easily be outsourced, as they are hardly ever rate determining in R&D, and in addition a rapid turn around in testing is available from competent companies. Outsourcing does not necessarily mean that the work will be done off site. For instance, a visiting contractor can carry out routine environmental analysis of very small quantities of metals in the plant effluent, as is the case with other plant services. The R&D Manager must ensure that the cost for the...