The term ‘outsourcing’ refers to a business practice where a company hires another business or individual to carry out tasks, run operations, or deliver services. These services are usually done by the employees of the company.
When looking at the practicalities of outsourcing, one needs to have five considerations in mind. These are who one should outsource to, what functions should one outsource, what geographical location should one outsource to, when should one outsource and why should one outsource. In this article, we will take a closer look at these ‘5Ws’ of outsourcing so that you can decide whether outsourcing is right for your business.
Why Outsource
As was stated previously in this article, strategic outsourcing lowers company’s operational costs, improve performance, grow sales and clear the schedule of employees so that they can focus on the core activities of the company.
Reasons why companies outsource, include:
- Flexibility
- Growth
- Innovation
- Access to talent, skills and new markets
The most tangible benefit of outsourcing is that additional infrastructural and resource costs can be avoided. For many years, outsourcing has been chiefly known as a tool to cut costs. According to statistics by Harvard Business Review, 97% of companies used outsourcing as a cost-reduction strategy. That has been changing. In 2013, an IAOP survey found that about 50% of companies outsource for cost-effectiveness — both long-term and short-term.
Who to Outsource
The first stage is to select who you are going to outsource work to. There are several freelancers who have specific niches, such as graphic design, bookkeeping, and web design. These freelancers may work on their own or in a team. The benefit of the latter scenario is that a team has increased capacity to meet your needs.
Develop a list of your top ten candidates and thoroughly research them. Here are several processes that may assist when you do your research.
- Review their websites Through this process, get to know and understand how much experience the outsourcer has in their field, the quality of the services that they offer and how responsive they are to customers.
The reputation of any outsourcer – be they an individual or a company – can give a good idea of what your experience with the entity will be. In our hyper-connected world, it is not that difficult to learn anything you need to know about a company. Social media platforms, website testimonials, and reviews can assist with this. - Find a specialty in your industry When reviewing a provider’s website, look for certifications. If an industry body has awarded them a certification, they are undoubtedly good at what they do. Try to choose a provider who is in the same area that you are, as this will make face-to-face meetings easier. Do not base your decisions solely on this, though. If they are not within driving distance, virtual meetings are an option.
- Check their work samples and contact their references Ask for references before any agreement is finalized, because these will tell you much about the quality of service, how timely deliveries are, and the nature of customer support services. By contacting the clients of your outsourcing partner, you can find out more about their abilities.
What to Outsource
Business is founded on a set of expertise – skills that are responsible for making the business money. There are also certain necessary functions that do not contribute to the bottom line and cost the business money. However, these are essential to the smooth operation of the company.
Thus, when choosing what to outsource, do an inventory of these functions. See how much this cost and if you will be able to reduce costs by outsourcing them. Outsourcing functions such as graphic design, marketing, and social media, human resource, logistics, IT, legal outsourcing services, etc., reduce any risks associated with these tasks, as the responsibilities are transferred to the outsourcing company.
Just because you outsource areas of your business does not mean that you should take a hands-off approach to the outsourcing providers. As they are not as well versed in your business as you are, they will have questions that you will need to answer. Keep lines of communication open so that they feel comfortable with coming to you.
When to Outsource
Any business which feels that it can reduce its infrastructure costs through strategic outsourcing should do it. To survive in financial crises, cutting operational costs can minimize damage to your organization.However, a survey conducted by Outsourcing Revolution discovered that the main reason for outsourcing has gone beyond only cost savings. Over 90% of firms surveyed claimed that outsourcing is vital to their growth strategies. In 2016 a survey conducted by CGS found that the top aims for outsourcing include better efficiency, additional current/effective IT, the capacity to focus on core capabilities, and increasing customer satisfaction.
Do not be in a hurry to begin. Start slowly, preferably with a trial project, and compare a few providers, then decide which is the best option.
Where to Outsource
Most freelancers work virtually. Some work from home and others from an office. They may not be in the same time zone as you.
India and China have the most technical skills in the world. The area is not that convenient, and the time difference is quite significant. Despite this, India and China are top of mind when it comes to programming outsourcing, and they charge affordable rates. Indian developers charge between $10 and $25 per hour. Chinese developers charge between $30 and $40 per hour.
| Outsourcing Factors | China | India |
| Business Languages Spoken | Mandarin | English / Hindi |
| Quality Standards | CMM Level 3 | CMM Level 5 |
| Global Outsourcing Reach | Limited outsourcing beyond China | UK, US, Eastern Europe, Latin America and China |
| Infrastructure & Technology | Better Infrastructure & technology, but less robust than India | Best IT Infrastructure |
| Business Skills | Ranked 3 among Eastern European regions | Ranked 1 in outsourcing IT and ITES among western countries |
| Popularity | Ranked 3 among Eastern European regions | Ranked 1 in outsourcing IT andITES among western countries |
| Average IT Salary for IT Resources | $10,095 | $9896 |
The downside is that the economic and political situations of these regions are not stable and could influence your business negatively. This shows that certain companies are interested in receiving services at the cheapest rates and are willing to take risks to get these.
Cities such as Argentina, Brazil, Egypt, the Philippines, Sri Lanka, and Vietnam are catching up quickly with India and China in terms of outsourcing. Latin America is the most attractive for US customers because of its proximity to North America. Eastern European businesses offer highly competent outsourcing developers. These people can cope with innovation well and are known for their high-quality education and a good command of English.
How to Outsource
Choosing the correct partners to outsource requires an understanding of several aspects such as the demands that the outsourcing will meet, how the partners go about performing those tasks, and deciding if those policies and procedures are in harmony with the corporate culture in your company.
- Deciding Which Tasks to Outsource Determine which tasks could be outsourced that would save the company money. Consider outsourcing those tasks which involve specialized skill set or equipment. The tasks you should outsource are those that require specialized equipment or skill sets that your company or your employees do not have.
- Don’t Outsource Fundamental Business Processes Outsource tasks that can be done well by someone outside of your organization.
- Outsource Small Tasks First Start with a fairly small task for your outsourcing partner. This will let you see the quality of their work without taking on too much risk.
Locating an Outsourcing Partner
Finding out an outsourcing partner is a taxing job. However, keeping stringent parameters while the selection procedure, the right partner can be found:
- Set the Qualifications Required Secure a partner who can perform the assigned tasks in a way that will benefit your business. Use an outsourcing agency for overseas placements.
- Interview Those Potential Outsourcers Contact each one individually and discuss your requirements.
- Send out a Request for a Proposal Requests for a Proposal will include items such as a request for a price estimate, a description of the services required, and examples of the outsorcerer’s previous work. Don’t only search for the lowest price. Choose the lowest bidder if their quality of work is equivalent to your own and in keeping with what you expect from your outsourcing partner
- Create a Contract This lays out the details of your business relationship. It will define the services that they will provide, when those services will be provided, and how those services will be paid for.
- Streamline Communication Establish effective communication with your outsourced partner so that you can communicate plans and performance objectives.
Assess Performance
Assess the quality and efficiency of your partner’s work. If they’ve done very well, you can choose to ramp up your involvement with them.
Outsourcing can provide a great opportunity for your business as it can assist with reducing costs as well as a myriad of other benefits. Follow the advice to determine whether this model of business is right for you. If you decide to outsource, contact back office outsourcing company to get assisted with your business requirements.
-Backoffice Pro
