In an earlier posting I mentioned that I had been reading Joel On Software and that I might make the odd reference to it. Well, here we go…

For me, Chapter 35 (you can read the original posting here) has something very important to say:

If it’s a core business function — do it yourself, no matter what.

Actually, that’s a succinct way of putting it: the remainder of this post merely pollutes the eloquence of Spolsky’s quote (sorry!)

Spolsky suggests that we pick our core business competencies and goals, and do those in-house. Of course, this does suggest that you’re capable of identifying your core business competencies in the first place (although I’m sure that there are plenty of consultancies who will offer to help you identify them…for a fee and a retainer). What this means, in a nutshell, is this:

1. Keep all the good stuff that you do close to you, i.e. in-house

2. All the bad stuff that you have to do in order to do the good stuff, get somebody else who is good at it to do it, i.e. outsource it or find ways to do it better, faster, cheaper (more here)

Identifying the good stuff is simple: it’s the stuff that makes you money – it’s the stuff that’s on the invoices that you send to your clients. Invoices – that’s important too: don’t classify your invoicing process as part of the bad stuff. It’s a process that should be lean, agile, flexible and very efficient. The earlier your invoice goes out, the sooner you’ll get payment in (I know this is obvious, but I’ve read about some organisations who don’t understand this concept).

The bad stuff is anything that costs you money, and it’s something that you should optimise as much as possible. If you are able to reduce the cost of the bad stuff, it’ll make the profit margin on the good stuff even sweeter. This means that you’ll have to identify bottlenecks: any process that involves a single-point-of-failure (this might be a single person being responsible for dealing with too many requests, or it might be a process that involves double or triple handling of decisions/information) is a candidate for outsourcing or optimisation (faster, better, cheaper). It’s important to recognise that outsourcing the bad stuff might not be cost-effective, e.g. don’t outsource your IT function

However, it’s also important to recognise that some of the good stuff relies on the services and knowledge from secondary functions (these functions often produce a “value add service” that augments the client offering, sometimes to the extent that the good stuff can’t take place without the value add service). Once you’ve identified these secondard “good” functions, you may wish to start doing more of them (which should equate to either more profit or more client satisfaction: both are good, but there is a trade off – you need to get the balance right).

An example
If you are a hypothetical company that specialises in building industrial weighing equipment (perhaps for weighing a lorries and trucks), that’s your primary function. Your secondary function might be developing software that incorporates some intelligence into the weighing process, it might know about a lorry’s unladen weight for example. The secondary function might also extend into the client’s own management information system, perhaps feeding it with important information that can be used to verify the lorry owner’s credit worthiness, generate an automatic invoice (I told you they were important), post to ledgers, etc. You might think that it’s not part of your primary function, but the value add from being able to integrate with the client’s system is part of the good stuff – it’s something that should be nurtured and extended.

Spolsky’s closing paragraph presents a health warning that may have more truth in it that you believe:

The only exception to this rule, I suspect, is if your own people are more incompetent than everyone else, so whenever you try to do anything in house, it’s botched up. Yes, there are plenty of places like this. If you’re in one of them, I can’t help you.

If that rings a bell with you, then I too can’t help you. Sorry.