The Many Advantages of Outsourcing
Outsourcing has become an integral part of almost every small business operating today. More and more companies prefer handing out particular work, rather than doing it in house in order to increase efficiency and bridge knowledge-gaps. Here is our in-depth guide:
As for the official definition of outsourcing, it is the practice of obtaining goods and services from an external supplier. It owes its existence to a number of key problems that businesses face on a daily basis. Although at first glance, outsourcing may seem like short term solution, the long-term benefits that accompany it make it worthy enough to give it a chance. Before you jump on the outsourcing bandwagon, let me familiarize you more with the subject and tell you what kind of things you can expect from externalising and delegating elements of your work.
In the following article you will find:
1. What is outsourcing and why does it exist?
What is outsourcing and why does it exist?
To explain why outsourcing exists, I will tell you a story about a guy named Jeff.
Jeff woke up one day and noticed he had an electricity problem. Being an average guy, he wasn’t much of an electrical savvy. Even so, he searched “How to” videos on YouTube and gave this challenging endeavour a shot. He spent the whole day trying to solve this problem and ended up creating an even bigger mess. The next day, he called his younger brother William to help him. Being an English teacher, William held a screwdriver only once in his life when he dressed up as a handyman for Halloween. The outcome was the same and the problem got much bigger. Jeff finally decided to call in a professional and he ended up paying much more than he would have if he had immediately outsourced this task. Through Jeff’s story, we can see that outsourcing has been around more than we think. Like our protagonist, business owners have used outsourcing to fix the issues they couldn’t on their own.
Why trouble yourself or anyone on your team with a difficult challenge that’s not a part of your skillset? Management guru, Tom Peters, famously said: “Do what you do best and outsource the rest”!
2. Who uses outsourcing?
Who uses outsourcing?
Small business case study:
For small businesses, outsourcing provides the opportunity to build the foundations with more convenient support. There are so many pains and problems that entrepreneurs need to overcome every single day. Instead of baring the costs of full-time employment, they see outsourcing as a much better solution. Payroll processing, accounting, developing, social media managing and distribution are the usual routinely handed out tasks. Just in 2019, the global outsourcing market amounted to 74 billion pounds sterling. This hefty figure gives you the idea of how much businesses believe in the practice that is outsourcing.
You can find several of our small business customer case studies here.
WhatsApp case study:
Major companies have been using it before everyone and it has brought them great success. In its early days, Whatsapp used to hand out a great deal of their work to developers based in Russia. Having a small team, the extra help and expertise helped them contribute to making the giant they are today.
Slack case study:
The same can be said for Searchable Log of All Conversation and Knowledge or Slack as it is more popularly known. They decided to outsource work to a company called MetaLab. The external team ended up redesigning Slack’s brand by changing its logo, website and application. Not long after that, Slack built a massive success out of their company and they have to give considerable credit to their outsourced employees.
Procter and Gamble case study:
Another great example is the contribution that outsourcing made to Procter and Gamble(P&G) who after decades of doing everything in-house decided to give externalisation a chance. By getting extra help for their research and development projects, they created 400 new products which generated revenue of more than 8 billion pounds sterling. Outsourcing made it possible for them to increase their productivity by a whopping 60%.
3. What are the advantages of outsourcing?
What are the advantages of outsourcing?
It’s a Time-Saving Machine
Money can be re-earned, employees can be replaced, but time, it can never be returned. That’s where outsourcing comes in handy. Let’s say “outsourcing your work more” was one of your New year’s resolutions for 2020. If you had decided to outsource just 2 hours of your tasks per working day, you would be saving exactly 506 hours of your time, just in 2020. That would be an equivalent of 21 days. You would have almost a month to use to your business’s advantage.
Watch my video tips on how to delegate more successfully here.
You can focus on Growing your Business
The smaller the business, the more hats the business owner has on their head. However, playing a one-person show is out of the question. A lot of us have tried it, time and time again. But, there comes a time when you realise that a single day has 24 hours and not a minute more. Working for 16 hours straight may portray you as a dedicated businessman, yet, you’ll soon realise that kind of lifestyle is detrimental to your business.
If you’re doing admin tasks, making social media content or proofreading your blog posts, you need to ask yourself one important question; who’s running this company?
Think about it, if you’re not in the driver’s seat, then your business won’t move an inch in its field. No matter how versatile you may be, your establishment needs you behind the wheel. Someone needs to make sure that every department is achieving its goals and that every client is getting what they bargained for. That someone is you of course. Stability is maintained when every team member does what they should. Imagine if the main piece of the team isn’t fulfilling their role. It’s a recipe for disaster.
Outsourcing prevents this catastrophe. By handing out work, you can stay in your lane and do what the leader should do. In an article for entrepreneur.com, Laura Lee Sparks emphasises how important it is for the leader to stick to leading. Leaving her job as a law firm manager to start her own business, she knows how difficult it is to nurture your own company with limitations. Through her experience, she learned the importance of everybody filling their role. You can find the full article here:
Your in-house staff can do what they’re meant to do
Imagine sending the A-team to save a cat that’s stuck on a tree. That’s precisely what you’re doing when you tell your marketing manager to comment on pictures on Instagram or any other social media. Alternatively, outsourcing these simple tasks would let them channel their expertise towards the key tasks. As a result, they can do their real job and make sure that their department is fulfilling its purpose. With every piece doing what they’re supposed to, your business will maintain stability and will keep running smoothly.
Your staff can share the burden
Having over-worked employees is what you want to avoid, given that it’s one of the deadliest efficiency killers. There’s a reason why companies like Microsoft Japan are starting to experiment with the ‘working 4 days a week trend’’. They want to let their workers’ creative grey matter recuperate after a hectic week. Still, not all businesses are as big as Microsoft and therefore can’t afford this luxury. What they can do is add as many pairs of helping hands as they need. By outsourcing, you make your in-house employees’ workload management easier. Having happy and energetic employees will maintain team rapport, raise work efficiency and develop a rapid growth on your market.
Expertise is at your disposal
If your yearly revenue didn’t bring as much profit as you wanted it to, something needs to change. One thing you can do is raise your service fee. To justify your price increase, your service’s value needs to be raised as well. How can you charge more for your social media management package, if the results are the same? Your clients would notice there’s no change and once you lose their trust, there’s no going back. If you haven’t got a social media expert on your team, there’s no need to dwell on it. You can easily outsource your work to an experienced, dedicated and flexible social media manager.
By advertising your offer as a service backed by experts, you are far more likely to land clients and expand your audience. In addition, you would be decreasing your turnaround time. No longer will you have to wait for a fortnight for someone to get the job done. When an expert is on the job, tasks are finished in no time.
Take a look at our social media plans here.
The external expertise rubs off on your employees
If you surround your in-house workers with a number of experts, imagine what influence it will have on your long-term staff. Working on a team of experts will surely boost their skills. In a way, your amateurs will receive additional training that you don’t have to pay for. If your staff is being guided by skilful and experienced people, that means that you won’t have to monitor them as you normally do. As a result, you can have more space to work on your business strategy and other important managerial tasks.
Outsourcing gives you a creative edge
We all know that good content marketing is one of the key pillars that keeps a business stable. People don’t want to see just salesy and over the top ads. They want to hear the story behind the product or service. They want to be entertained. In order for you to spread the word about your service or product, it doesn’t just have to be good. It has to be unique.
No matter how much research your employees invest, making your content stand out has always been a huge endeavour. So, how can outsourcing save you this time? If you hire foreign writers, coming from a different culture, you will definitely get a fresh batch of new ideas. Given that content varies across different countries, this external breath of fresh creativity would give your marketing team the means to separate yourself from the competitors and show you in a vivid and unique light.
Read more about our Marketing and Social Media plans here.
Outsourcing provides an economical solution
One way to increase your profit is, of course, to pay your employees less. Of course, the majority of workers wouldn’t accept this and they would leave the building faster than you can say outsourcing. What you can do is replace them. With the outsourcing market at its peak, you can easily find a cost-cutting replacement for the majority of roles. There is a number of underdeveloped countries that offer a skilled workforce at a significantly cheaper price. The reason why their service is easier on your wallet is due to their country’s lower standard of living. This scenario usually applies when you are from a high standard country. The average salary in your country is significantly higher so you can pay much less for your abroad outsourcing than you would for your home country employees.
Another way outsourcing cuts costs is by reducing overhead. Think about it, salaries aren’t the only thing you have to pay for your staff to do what they know best.
Let’s use the example of web developers since every business needs them. Taking into account taxes, training, electronic equipment, service subscriptions, repairs and the thousands of litres of coffee drinks on a yearly basis, you can see that having an in-house developer is far more expensive than meets the eye. If you were to outsource your developer work, you would make most of those overhead costs magically disappear. How? You don’t have to buy new equipment every two years. You don’t have to pay for service subscriptions or repairs. The external employees have to fund and make their own coffee. All of this is their responsibility and expenditure. Not yours.
Outsourcing decreases response time
In e-commerce, having quality customer support is one of the key parts of building a caring and responsible brand image. Let’s say your client has a problem with the product they purchased from you. The longer your response time is, the bigger their outrage will be. If it takes you a day to respond to their email, the tension that builds up in the air could be cut with a knife. Then you’ll have an unhappy customer and they probably won’t buy anything from you ever again. Let’s use a less severe example. A potential client is checking out your service and wishes to know more about it. They send an inquiry and get a response within the next 5 minutes. Imagine how delighted and pleasantly surprised they would feel. This would leave a good impression and it will definitely increase your chances of selling the product.
Whenever a person buys a product, they have to put trust in the company they are buying from. How can there be trust when you aren’t there when your clients need you? From the examples, we can definitely conclude which product’s repurchase rate will be higher.
Outsourcing provides a great opportunity to have your customers answered and assisted as soon as possible. Instead of having a full-time employee sit around all day and wait for problems to appear, you can easily hire an external worker that is available to respond within minutes and create a good first impression.
Take a look at our business support packages here.
Outsourcing is a business’s first aid kit
Imagine one day you get a call from your key employees with the news that they’re quitting their job to start their own business. To add insult to injury, they quit with immediate effect. Believe me, this scenario is so common that it’s every entrepreneur’s worst nightmare. If your business is still in its infancy, then it’s highly likely that you’re not prepared for this situation. The reason why it’s so detrimental is that it leaves a big hole within the company. It can lead to its demise if actions aren’t taken quickly. At this time, every hour that’s gone brings your company closer to its tragic end. However, what if I were to tell you that there’s a hero that comes to the rescue at this moment of distress. You guessed it, it’s outsourcing. All it takes is to find the right types employees you need, make a few phone calls and presto, you’ve got yourself a new workforce to save your company and keep your clients.
There is no need to recruit or retrain
The time, money and energy that’s necessary for staff recruitment can easily be avoided. Instead of interviewing countless applicants or waiting for the right prospect to apply, you can take matters into your own hands. Going through a credible outsourcing agency’s list of services, you can easily find the support you need. The investment of teaching your employees new skills can also be avoided by just hiring someone who already has them. We have to keep in mind that our employees can quit at any time. That’s the risk of investing in your worker’s skill set. You may not get the opportunity to see the fruit of your labour. You definitely avoid this risk by outsourcing your work to an experienced individual.
Outsourcing gives you space for family and leisure
To build a successful business, sacrifices need to be made. The biggest and hardest one is definitely giving less attention to family life in favour of the company. No matter how fulfilling it is to stay in the office and keep your business growing, knowing the fact that you might be missing your baby’s first steps or not being there to cheer for your son’s football match just can’t be ignored. What you can do is find someone you can delegate your tasks to. Outsourcing a few tasks can see you making it for all the important events and spending more quality time with your family. It can also give you a chance to pursue other passions and hobbies that you’ve been putting off to ensure your business succeeds.
What you do outside of work is what you bring to work. If you are unhappy in your personal life then you can’t expect to have a joyful atmosphere at work. That is why creating more space for fun will boost your businesses efficiency. Another important factor we need to consider is burnout. Handing off your work to an outsourcing provider can give you a chance to recharge your batteries and be ready for the next working day.
4. What are the risks of outsourcing?
What are the risks of outsourcing?
With its tremendous advantages, outsourcing carries a few risks that keep many a company from using this practice. Let’s look at what makes handing out work to an external workforce so risky in the eyes of a suspicious business owner.
Watch my video on mistakes to avoid when working with a virtual assistant here.
Loss of sensitive data
The fear of losing sensitive data or confidentiality is the main reason why business owners don’t give outsourcing a chance. However, the risk can be significantly mitigated if you develop a good system for data protection. It can include doing frequent check-ups and being cautious about giving access to key information. You don’t need to talk about your sales strategy to an outsourcing bookkeeper and you don’t need to speak to you external marketing manager about finance. Only give information that’s relevant to their job position. Also, you can choose to only work with credible outsourcing agencies that have plenty of testimonials and positive customer feedback. With that kind of partner, your data is safe and sound.
Being lost in translation
A well-known problem that arises when dealing with an off-shore employee is miscommunication due to cultural and language differences. If the worker isn’t a high-level speaker of English, task guidelines can be easily misunderstood. This means that you have to invest more time and patience into explaining the task requirements. More time means more money and we wouldn’t like that of course. Nevertheless, this issue can be easily avoided. Most prominent outsourcing companies hire only native level, English speakers. If you are still sceptical, you could check the worker’s language competency in a brief Zoom call. Alternatively, if you hiring a writer, you could ask for one of their articles and see for yourself if they have what it takes to become a part of your creative team.
If there are any significant cultural differences, you can request this information from the outsourcing provider and in most of the times, they are more than happy to share this information with you. By being aware of all noticeable differences, you can build great team rapport and ensure consistent productivity. In addition, choosing a provider with experience of working with companies from your country will surely erase this obstacle.
Handing over too much power
There is a handful of businesses who take outsourcing to an extreme extent. The usual tasks include back-office work but some companies go beyond that limit. Imagine outsourcing the production of one of your company’s most valuable products. That’s what Microsoft did with Xbox.
They outsourced the entirety of their treasured console’s production to Flextronics. Microsoft was aware of both its strengths and its weaknesses. They were at the top of software engineering but lacked the skills to build hardware that could keep up with their product’s operating system.
They made a wise decision to delegate their work to a third party that is competent in the production industry. Having sold more than half a million copies worldwide within the first 10 days after the launch, Microsoft proved that putting trust into outsourcing can certainly pay off. By choosing a competent and trustworthy provider, one can give all the responsibility they want, without having to worry. To read the full story about Microsoft’s outsourcing, click here.
Hidden costs
Another risk business owners are afraid of. Yet, dealing with unforeseen expenditures is an issue that arises in all fields of service. It doesn’t just appear in outsourcing, it shows up in any kind of business area. Nonetheless, there are measures that can be taken to avoid hidden costs. Carefully negotiating and defining expectations is the recipe for building any kind of good partnership.
Different time zones can disrupt workflow
If your off-shore employees have different working schedules, that could create a number of limitations cooperation wise. That could mean that your in-house employees can’t expect prompt responses from them or that your customers receive late night inquiry replies gives off an unprofessional vibe about your customer service. You definitely want to paint a good picture of your company so hiring a worker from the other side of the globe is out of the question for tasks that require a quick response time. Alternatively, you could choose providers whose time zone is not marginally different. Secondly, a long distanced worker could be of convenience for you if there is no need for the employee to work on a fixed time schedule. Tasks such as blog writing or research have the privilege of not being bound by the limits of a fixed schedule. Given that there’s not much need to communicate about those tasks, the outsourcing provider can do it while you’re sleeping.
5. Tips on choosing the best outsourcing provider
Tips on choosing the best provider
What are the skills my business lacks?
If you’ve got ten web developers backing you up then there’s no need to add another one. Analyze your team and see what key areas are unfilled. If you’ve got a young and bold marketing team but not a leader to guide them, then you know what to do.
Do my employees require assistance?
If someone on your team is putting in their blood, sweat and tears into the project and still can’t finish it, then you need to back them up. Even though you’ve got the expertise, your workers aren’t machines. Give them the help they need to keep your business stable and growing. Additionally, as a business owner, you might be the one who needs help or more time. Again, this is a good argument for you to bring in support.
What do I need to achieve my company goals?
It may be that you have everything you need, but you want to expand to other markets. Or, you might want to increase sales, profits and your repurchase rate. Whatever positive change you want to make, you have to know one thing. In order to create change, something needs to change. An additional pair of helping hands is the alteration that could speed up the pace or increase content creation that can help you build a larger business.
What are the task requirements that the vacancy includes?
Answering this question will narrow down your choice by a great deal. If the tasks can be done only within a specific time frame, then you can’t choose an outsourcing provider which time zone significantly differs. If you want to hire a writer, a language requirement needs to be taken into consideration. Doing a deep analysis on this matter will prevent future unforeseen errors.
Can I trust this specific provider?
When you’ve found your potential outsourcing partner, you need to check if they can meet your expectations. Asking them for references is the best way to go. If they received positive feedback from others, there’s a good chance they will from you. You can also look up what kind of projects they did in the past. If you can’t find them, you can simply ask them to forward a few of them. You could ask for a free trial. This way, you can test out the service before committing to anything.
Well, congratulations for making it through this long article. I hope you now know more about the benefits that outsourcing can bring. Even if there are a number of risks, the advantages leave them in the dust. By asking yourself the right questions, you will lower the risks by a large margin.
You can jump into this practice with full confidence and clarity. If you would like a free consultation on how we can help your small business grow by outsourcing, then please get in touch.
Author: Thomas Smallwood is an outsourcing specialist. Having worked in companies around Europe, from the support desk to the boardroom, he founded bizee.co to help small businesses grow through efficient delegation to skilled virtual assistants. He is an award-winning blogger and a passionate advocate for mental health awareness.
Connect with Tom on LinkedIn.