Close the Loop If you're outsourcing projects right and left, make sure the information you need is rolling back to you.

The magic word for many entrepreneurs is"outsourcing." If you don't have the in-house talentto get something done, you outsource it. And today, you canoutsource just about anything.

Sending projects, even whole departments, outside the company isworking for Bibby Gignilliat, 43, and Shannan Bishop, 32, chefs andco-founders of Gourmet Gatherings, a San Francisco culinaryentertainment company specializing in private cooking parties andcorporate team-building dinners and events. They outsourceeverything but their recipes and menu. "We think of ourselvesas conducting a symphony of specialists," Gignilliat says."Outsourcing is key. It's the only way our company cangrow."

Companies outsource for cost savings, but too many companiesfall into an "outsource it, then forget about it"mind-set. Companies that have outsourced like crazy could wake updown the road to find they haven't kept track of projects anddepartments they've outsourced--or worse, they've losttouch with their core business strategy, now residing outside thecompany.

This danger is lurking on the horizon, says SridharBalasubramanian, a professor at the University of NorthCarolina's Kenan-Flagler Business School in Chapel Hill,North Carolina. "Companies think of outsourcing as anoperational task, when it's a strategic asset," he says."How do you feed [outsourced projects] back into yourstrategic planning? That's the problem."

The small- and midsized-outsourcing market is growing 12 percenta year, says Robert H. Brown, a principal analyst who followstrends in small-business outsourcing for research group Gartner Inc. inStamford, Connecticut. "Vendors are rushing in to grab a pieceof this fast-growing market," he says.

With so much work flowing outside company walls, think aboutmore than outsourcing; think about insourcing--in other words, howyou'll bring information that's generated by outsidedepartments and projects inside the company for strategic planning,Balasubramanian says. Welcome to knowledge management in the newmillennium. How do you do this?

Taking stock of the outsourcing firms you employ is a goodstart. How much face time are they giving you, and how much arethey telling you? Many outsourcing firms see their methods asproprietary, which can leave you with incomplete information forstrategizing. If you outsource your customer service department,for example, and you don't know everything about theinteractions customer service representatives are having withcustomers, you're missing valuable information that couldhelp--or hinder--company growth.

Find outsourcing firms that keep you posted not only on the workthey're doing, but also on how they do the work. Test howdeeply they understand your industry and company culture. Sit downto discuss roles and expectations and how they'll provideinformation that keeps your strategy on the cutting edge. You mayfind that certain functions are too mission critical to outsource."Outsourcing firms are very good at managing data and applyingtechniques across databases, but they don't know yourindustry," Balasubramanian says. "You want to make surethat they're implementing the process, but that you'redriving the process."

Gignilliat and Bishop drive the process through a Web site anddatabase. But they've also created templates to follow, likehaving contractors fill out questionnaires regularly to say howthings are going. A system for bringing information back inside thecompany helps Gignilliat and Bishop find new strategies that expandtheir business. "Provide a framework for what'sexpected," Gignilliat advises.

Technology helps, but it's never a substitute for hands-onmanagement. "The technology is the easiest part of the wholeoutsourcing arrangement," says Pamela S. Harper, a businessperformance expert and author of Preventing StrategicGridlock (Cameo Publications). "Ultimately, it's yourorganization that's going to make [outsourcing] work."

Is outsourcing creating knowledge gaps within your company?It's happening more often than you might think. For example:Say you outsource to a marketing firm to handle your couponspecials, but when customers show up with their coupons, they findemployees don't know anything about the coupons. Situationslike these reveal a failure by companies to make sure knowledgemaintained outside the company is used strategically by employeesinside the company. "Companies need to think about theconnection points that exist between an external service providerand their own staff," Brown says.

Balasubramanian sees outsourcing coming full circle in the nextfew years as companies do too much outsourcing, only to discoverthey're losing too much information: "Companies willbecome more sensitive about how to manage outsourcing so theydon't lose contact with data and the insights they draw fromit."