Outsourcing can be advantageous to the growth of a business. Still, outsourcing is a concept that some might not be comfortable with because of an exaggerated concept of the risks involved. In this post, we’ll talk about outsourcing, how to do it, and the pros and cons for you and your business.
What Is Outsourcing?
Outsourcing is the process of obtaining or “sourcing” goods or services from a third-party provider. That means hiring someone who is not affiliated with or is “outside” the company. The person you delegate work to does not, therefore, “belong to” the company.
How Does It Work?
If a company cannot accomplish a certain task within its walls, outsourcing is a method to hand over that task to another company and pay them for their service.
Business process outsourcing (BPO) refers to outsourcing front and back-office business processes to a different company. This is a time-saving and cost-effective practice that also allows business to direct their attention to other aspects of business operations. Production and manufacturing are perhaps the most well-known outsourced areas of business. Outsourcing has expanded, however, to include many other services for business operations.
Where Can You Outsource From?
One of the best things and probably also one of the most intimidating things about outsourcing is that you can outsource from basically anywhere in the world. The availability of the specific service you require will vary depending on if you prefer to source from local companies or if you want to look internationally.
Some of the most popular places with the biggest talent pools to outsource from include Brazil, India, China, and the Philippines. You may have to weigh your options and see which countries have the specific talents (and the stable internet) for the tasks you need accomplished.
At Outsource School, we prefer outsourcing to freelancers and virtual assistants in the Philippines.
Examples of Outsourcing
Outsourcing comes in all shapes, sizes, and categories. Below are some of the most commonly outsourced services.
Virtual Assistants and Freelancers
Most online business owners use outsourcing to hire virtual assistants and freelancers to support the growth of their online business.
The roles vary from Exec Assistants to Marketing roles, Operations roles, Sales roles, and many Design roles.
Knowledge process outsourcing (KPO)
This is essentially the outsourcing of specialized professionals to help with core business activities. These services require a high technical skill level. This is a rather broad category of outsourcing and depends on the specialized needs of the business. These functions can involve data management, market research, accounting, and other financial services, design, engineering, content creation, or even healthcare.
Information technology outsourcing (ITO)
Some businesses may not have in-house IT specialists or call center services, and so instead will hire outside help for their tech support and telecom needs. This may include hiring that company to build your software or application for you.
Recruitment process outsourcing (RPO)
Companies that don’t have the time to scout for new talent may outsource to another company to take on the responsibility of recruitment. These recruiting services locate, vet, and interview individuals to determine if they are suitable for the positions you require filling. This reduces turnover because they have the expertise.
Human resource outsourcing (HRO)
HR roles can also be outsourced. You can hire an individual or a team to perform functions such as employee benefits and compensation administartion, payroll management, administering any changes to company policies, recruitment and hiring, and even training.
Legal process outsourcing (LPO)
Need some legal advice or other legal services? Well, companies that don’t have an in-house lawyer or legal team can outsource this service. Now, it’s worth noting that the scope of work that these types of legal teams can do is limited.
Engineering process outsourcing (EPO)
Engineering process outsourcing is where a company enlists another company to take care of engineering services. It is a cost-effective way for companies to be able to market products faster without compromising the quality. Some of the most outsourced EPO categories include automotive, electronics, utilities, and construction.
Pros of Outsourcing
By outsourcing, time, money, and human resources can be saved or repurposed elsewhere. Below are some of the areas where outsourcing can be advantageous to your business.
Reduced labor costs
Sometimes keeping on full-time employees to perform certain tasks is less cost-effective than outsourcing those tasks. Outsourcing typically comes with lower labor costs when you factor in the benefits one must pay to employees and the costs of renting office space for them to work in. Not only that, but you can also outsource to countries whose labor costs are far less than your own country or region. A company can also cut costs by hiring virtual assistants or freelancers because these individuals pay for their own utilities, typically work from home, and do not receive the same benefits as a full-time employee.
Additionally, companies can be more flexible in their hiring practices. If the company is in indeed of more workers during times of the year when demand is high, they can simply outsource the necessary help for a limited time. This is helpful for businesses that may not be able to afford a high volume of employees year-round.
Sometimes, a business will have employees performing a broad range of tasks requiring an arsenal of different skills. This is especially true for smaller businesses. However, some tasks may be too technical or require a professional in the field in order to accomplish the job. Outsourcing specialists can be more cost-effective than taking the time and money to train your employees to perform the task. Because you are taking employees away from their other duties, this would be less efficient and would not meet the same quality standards that a seasoned expert would bring to the table.
Focus on core competencies
Some companies will outsource tasks that take their time or workforce away from business processes that require more attention. When these tasks are more valuable to the growth of the business, taking them away can harm the business. Outsourcing also allows companies to temporarily expand their capabilities to effectively deal with scenarios like fulfilling a large project or order in a short amount of time.
Cons of Outsourcing
While there are quite a few advantages to outsourcing, there are also several risks to take into account. Below are a few reasons why you need to be very careful when choosing your outsourcing partner.
Data and security risk
Be careful with the information you share and make sure that if you need to share sensitive information, it should be with a company that you trust. There are also preemptive legal measures to take, such as contracts that provide you additional protections.
When you outsource, you have less control over how certain operations are done or the quality of the outcome. Throughout the chain of processes, you have less of an ability to check the finer details. This is why it’s important to partner with companies that have a good reputation and produce results that meet the standards of your business.
You also need to establish communication channels and regular updates with your outsourced team. Otherwise, you will end up with misunderstandings and results far from what you originally expected.
Outsourcing may come with additional costs that you are not prepared for. This is especially true when you are new to the process. Hiring a freelancer or workers connected to an agency is different from hiring your own employees. For example, an existing contract with the previously agreed contract fee will not always cover changes in your project scope. The change is not as simple as shifting around workload or task types. Unless you are paying hourly and agreeable to increasing working hours or hourly rates, as the case may be, you may need to renegotiate the contract.
The fine print of project contracts with agencies and individuals may also contain hidden fees. Be very careful to review the conditions before you sign any contracts. On that note, contractual agreements themselves take time and money to put together. You may need to hire legal counsel to review the documents. You will definitely need to allot time for negotiations and document processing.
How Do I Get Started Outsourcing?
To get started outsourcing, we suggest first understanding what tasks you want to outsource and take off your plate.
Spend 30 minutes writing down all of the most repetitive and mundane tasks that you and your team still handle.
These are the best tasks to start outsourcing as it will be easiest to find someone who can handle them for you without needing a ton of technical expertise about your business or niche.
Once you’re ready, go to the sites listed above like Upwork, Fiverr, FreeUp, and OnlineJobs.ph and post your job to start getting applicants. Interview, test them, and then hire the best one for the job.
Also, the best way to get started outsourcing is before you feel overwhelmed. This will give you more time to figure out what you really need to delegate. If you wait until you’re already stressed out, you will probably not have the patience or energy to get everything set up properly. If you get off on the wrong foot, you’ll probably not have a great experience.
By joining Outsource School, you’ll learn all of our tested and proven tactics for outsourcing and hiring virtual assistants and freelancers from all over the world.
Outsourcing can be a daunting and unfamiliar territory to venture into for those newer to the scene. You will encounter one or more of the risks involved with outsourcing. You will also need to make an investment into mitigating these risks. This involves researching the best companies and individual talent to partner with. It also means making contractual deals and maintaining clear channels of communication.
However, when partnered with the right company, outsourcing carries with it a number of benefits. These advantages can certainly save businesses a lot of time and money in certain areas. Weigh the pros and cons of investing in outsourcing. This will help you to see if your business would be better off delegating some of the workload to an outside source.