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Is Outsourcing the Right Choice for You?


Have you been thinking of outsourcing but don’t know if it’s the right move for your business? Don’t worry! You have landed on the right page.


With the rise of freelancing and collaboration, small, mid-market, and large businesses are increasingly outsourcing most of their tasks. That’s because outsourcing allows them to focus on their core operations and achieve their goals.


But is it the right choice for you? What potential risk does it pose to your business? Find the answer to these questions and more in the article below.


What is Outsourcing?

Outsourcing, sometimes known as contracting out, involves the transfer of non-core business activities, tasks, or functions to third-party service providers. Examples of commonly outsourced functions include:

  • Delivery, logistics, and distribution services

  • IT services

  • Customer call center services

  • Finance and accounting services

  • Procurement services

  • Sales and marketing services

  • Human resource services and so on.

In the IT industry, most companies tend to outsource tasks, such as app and software development, software programming, technical help, and customer support, to freelancers or independent contractors.



Outsourcing can be classified into three categories:

Onshoring: Where businesses relocate their work or services to companies within their country

Nearshoring: Transferring work and services to independent contractors and freelancers in neighboring countries or regions within your time zone.

Offshoring: Allocation work or service to third-party providers in a more distant country.

Most companies pursue nearshore (local) and offshore (foreign) outsourcing because it helps them cut down operation costs. Besides, outsourcing also provides these enterprises an opportunity to allocate resources where they’re most effective.


Pros of Outsourcing


More Focus on Core Aspects of The Business

As a company grows and expands, so do its operations. It reaches a point where an organization realizes that it can’t handle everything. That’s where outsourcing comes in.

Businesses and companies can outsource important but mundane activities to third-party providers. This way, they can refocus their in-house capital, resources, and management attention on activities that make them profitable without sacrificing quality.

For instance, if your business secures a large contract, that will boost the volume of purchasing power within a short time. You can outsource purchasing tasks to partners with expertise in that field to free up your employees to focus more on the contract.


Reduce Cost

Perhaps one of the main reasons most companies outsource their non-core tasks is to maintain lower costs. It’s more cost-effective to outsource single tasks to independent contractors and freelancers than hiring more in-house staff or purchasing new equipment.


If your business growth and expansion increase the demand for more office space, outsourcing mundane operations like data entry and telemarketing might prove more efficient than relocating to a new location. It will cost you less money and you’ll enjoy quality services.


Promote Growth

Sometimes, IT companies have to deal with high overhead costs of some operations to satisfy clients, expand their business model and stay ahead of competitors. But an offshore development outsourcing company can handle those operations for them if they’re too expensive, would take an extended period to implement, or can create inefficiency in their business model.


For example, a small IT startup wishing to develop new software for their clients can work with software development outsourcing providers to reduce the cost of hiring new software developers, while increasing the benefits to their customers.


Access to A Larger Talent Pool

Hiring local employees gives you access to a small talent pool, meaning you have to compromise. But when you outsource, you enjoy access to talent from other parts of the country or world. If your business requires specialized assistance, it makes sense to look somewhere else.


Cons of Outsourcing

Although outsourcing presents businesses and companies with many benefits, it’s not free from drawbacks. Below, we’ve provided you with a list of potential downsides:


Lack of Control

While you can provide direction in regards to what you need the third-party provider to execute, you lose control of how the tasks get performed. One reason for this is the fact that you’re usually hiring a freelancer or independent contractor, not an employee. And because the hire works off-site, it’s hard to maintain the level of control you want.


There are Hidden Costs

Many businesses and companies find outsourcing cheaper. But if you’re not keen, you might get ripped off. Most times, outsourcing providers can ask you to sign lengthy contracts, which include plenty of fine print. If you don’t take the time to read the terms and conditions of the contract carefully, you might incur some unexpected costs later.


Communication Problems

Communication might prove a problem if:

  • You’re outsourcing your work to a freelancer or contractor who lives in a different time zone

  • If you and your third-party provider use different modes of communication,

  • If the freelancer lacks reliable access to a reliable internet connection,

  • Labor and Environment Standards Might Slip


Security Risks

We live in an age where data protection is a big concern. So, it’s essential to outsource to a company or contractor who understands the importance of protecting data. This is especially true if you’re outsourcing tasks that require personal data. Otherwise, you’re placing your customer and your business data at risk.


Quality Issues

Some contractors or freelancers might be more interested in the profits instead of the work. That means they might deliver sub-standard work that might affect your business, especially if your customers are used to quality products and services.


To ensure you receive quality work, you need to set service targets. Also, it’s wise to organize regular meetings to discuss the state of the outsourced work.


Loss of Focus

Most outsourcing agencies deal with multiple clients at a given time. Therefore, the task or activity you outsource might not receive the focus it requires. Depending on the activity you’re sending, lack of focus might prove harmful to your business.


Best Outsourcing Practices

Clearly Define Your Outsourcing Objectives

Like with any project, outsourcing requires a well-defined and crafted plan from the start to the end. What are your project requirements? What do you aim to achieve after outsourcing the project? Answers to these questions will help the outsourcing agency understand your expectations. This way, they can come up with realistic prices and timelines for the task. Your plan needs to include:

  • Objectives of the project

  • Your budget

  • Deadlines

  • Required skills

Choose A Compatible Outsourcing Partner

We understand finding the right outsourcing partner can be a bit tricky. But these few tips can help you make an informed decision:


Technical Skills: Check if the outsourcing agency or freelancer has the necessary skills and technologies to execute your project and meet your business goals.


Support and maintenance: The partner of your choice should offer you support for a stipulated period after the project is completed.


References: Work with a vendor that can provide you with a list of previous projects they have worked on. Ask for companies and businesses that have worked with the vendor and contact them for more information.


Background Check: Whether you are planning to work with an independent contractor or freelancer, it’s wise to run a background check on them. This way, you can discover what tools and technologies they can use and if they can deliver quality work.


Choose The Ideal Outsourcing Engagement Model

There are three outsourcing engagement plans available: Dedicated Teams, Remote Developers, and Managed Project plan.


Dedicated Teams Model: If you’re searching for a software development outsourcing solution, the outsourcing provider will set up a team that will work on your project in your time zone. And you will have control over the dedicated team. This outsourcing engagement model is ideal for a long-term project.


Remote Developers Model: The outsourcing agency will provide you with a team of developers who will concentrate their efforts on your project and become a crucial part of an internal or distributed team.


Managed Project Model: The vendor of your choice will provide you with a team that will handle your task from the beginning to the end. You have the option of selecting the team yourself.


Pay Attention to Hidden Expenses

Sometimes the price mentioned on the agreed outsourcing contract might not be the accurate expenditure you’ll spend by the end of the project. That is why there’s a need to read the terms of the contract carefully before signing to identify the hidden expenses.

Important hidden costs associated with outsourcing include:

  • The cost of managing the outsourcing relationship

  • The cost of running a background check on an outsourcing vendor and selecting the right service provider

  • Benchmarking and analysis expenses linked with the choice of whether or not to outsource your business projects

  • Expenses involved when transitioning tasks, data, and knowledge to an outsourcing agency

Popular Companies You Didn’t Know Outsource

Outsourcing provides companies and businesses (whether small or big) with the opportunity to reduce cost, improve quality, access a pool of talents and skills, among other benefits. That’s why it makes sense that these popular companies outsource:

  • Google: The company outsources non-core functions like IT and admin work. It’s also known for outsourcing email support for its products, development work, and others.

  • Alibaba: Outsources its web development partners in the US

  • WhatsApp: Since 2012, the company has outsourced its development works to outsourcing agencies in Russia.

  • Apple: The company outsources its manufacturing and assembling works to partners in China.

  • Slack: Hire an outsourcing agency to polish their early website, logo, and mobile apps.

Conclusion

Outsourcing is not only about cutting down costs. In fact, research conducted by IBM showed that most companies outsource to better use their resources, increase efficiency, and experience growth. That said, outsourcing is a great tool for any company to optimize its business.


We hope this article has now answered your question. Thank you for stopping by!


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