Outsourcing 101: How to Determine When and What Services to Delegate

Essentially, outsourcing involves delegating certain tasks or services to external companies or individuals rather than keeping them in-house. This can provide numerous benefits such as cost savings and increased efficiency, but there are also risks involved. I’ll explain how to determine when and what services to delegate, along with tips for finding a reputable outsourcing company.

What is Outsourcing?

Outsourcing is the process of delegating certain tasks or services to external companies or individuals who specialize in those areas. Instead of hiring and training employees in-house, businesses can outsource work to outside providers on a case-by-case basis. This can include everything from administrative duties such as customer service or accounting to specialized functions like IT support or marketing.

When deciding whether to outsource a task, the level of complexity should be one of the factors you consider, but it should not be the only determining factor. Here are some additional factors to consider:

Core competency: 

Is the task a core competency of your business, or is it a non-core function that could be outsourced to free up time and resources for more strategic activities?

Cost: 

What is the cost of outsourcing the task compared to doing it in-house? Is it cost-effective to outsource, or would it be more expensive than doing it in-house?

Quality: 

Can the outsourcing provider deliver the level of quality that you need for the task? Will outsourcing improve the quality of the task compared to doing it in-house?

Risk: 

What are the risks associated with outsourcing the task, such as loss of control, data security, or quality issues? Are these risks acceptable and manageable?

Timeframe: 

How urgent is the task? Can it be completed more quickly or efficiently by outsourcing?

In general, simple tasks that are not core competencies of the business and can be easily defined and managed can be good candidates for outsourcing. However, more complex tasks can also be outsourced, provided that the outsourcing provider has the necessary expertise and resources to manage them effectively.

All in all, the decision to outsource a task should be based on careful consideration of all these factors to ensure that outsourcing will help achieve your business objectives.

The Different Types Of Outsourcing Services

Quite a few types of outsourcing services are available for businesses to choose from.

Deciding what services to outsource will depend on your business needs and budget. Here are some common services that are often outsourced:

1. Accounting and bookkeeping: Many small businesses outsource their financial tasks to experts who can manage their financial records, taxes, and compliance.
2. Human resources: Outsourcing HR tasks like payroll management, employee benefits, and talent acquisition can help streamline the process and reduce costs.
3. Customer support: Outsourcing customer support can help you manage your customer inquiries, complaints, and feedback efficiently.
4. IT services: IT support, software development, and other technical tasks can be outsourced to specialized companies that can provide the necessary expertise and resources.
5. Marketing and advertising: Outsourcing marketing and advertising tasks like content creation, SEO, and social media management can help businesses reach their target audience effectively.
6. Administrative tasks: Administrative tasks such as data entry, research, and scheduling can be outsourced to virtual assistants or administrative support services.

What Can You Outsource When You Run a Business From Home?

The tasks that you can outsource when you have a work-from-home business are similar but in a smaller scale. But the fundamental is the same - to help you focus on your core business activities. Here are some examples:

1. Administrative tasks: You can outsource administrative tasks such as data entry, bookkeeping, and customer support to a virtual assistant or remote freelancer.
2. Social media management: You can outsource your social media management to a freelancer or social media agency to manage your social media accounts, create content, and engage with your audience.
3. Content creation: You can outsource content creation such as blog writing, graphic design, and video editing to a freelancer or content agency.
4. Website development and maintenance: You can outsource website development and maintenance to a web development agency or a freelance web developer.
5. Marketing and advertising: You can outsource marketing and advertising tasks such as SEO, PPC, and email marketing to a marketing agency or a freelance marketer.
6. IT support: You can outsource IT support tasks such as software installation, system maintenance, and technical troubleshooting to an IT support agency or a freelance IT technician.

The Pros and Cons of Outsourcing

Pros

Here are the reasons outsourcing can offer benefits to businesses:

• Cost savings: By outsourcing non-core functions, businesses can reduce labor and infrastructure costs, as they don’t need to hire and train additional staff or invest in new equipment or facilities.
• Access to specialized expertise: Outsourcing allows businesses to access specialized expertise and resources that they may not have in-house. This can help improve the quality and efficiency of their operations, and allow them to focus on their core competencies.
• Scalability: Outsourcing allows businesses to scale their operations up or down more easily, as they can adjust the level of outsourcing services they require depending on their needs. This can help businesses respond more quickly to changing market conditions and customer demands.
• Increased focus on core competencies: Outsourcing non-core functions can free up time and resources for businesses to focus on their core competencies, such as product development, sales, and marketing.
• Improved efficiency: By outsourcing functions to specialized providers, businesses can benefit from their expertise, experience, and technologies, which can lead to improved efficiency and productivity.
• Risk reduction: Outsourcing can also help businesses mitigate risks associated with non-core functions, such as compliance, data security, and legal issues, as they can rely on the expertise of their outsourcing partners to manage these risks.

Outsourcing can be a strategic way for businesses to reduce costs, improve efficiency, and focus on their core competencies while accessing specialized expertise and resources to drive growth and innovation.

Cons

While outsourcing can offer many benefits, there are also several risks and challenges that businesses should be aware of. Here are some potential cons and risks of outsourcing:

1. Loss of control: Outsourcing non-core functions means giving up some control over the quality, delivery, and management of those functions. This can lead to reduced visibility and control over business operations.
2. Communication challenges: Outsourcing often involves working with providers in different time zones and cultures, which can lead to communication challenges and misunderstandings.
3. Data security risks: Outsourcing can create data security risks if sensitive data is shared with outsourcing providers who may not have adequate security measures in place.
4. Quality issues: If outsourcing providers do not deliver the expected quality of service, it can damage the reputation of the business and lead to customer dissatisfaction.
5. Hidden costs: The cost savings promised by outsourcing may not always be realized, as there may be hidden costs such as communication expenses, legal fees, or contract management fees.
6. Risk of job loss: Outsourcing can also lead to job loss for in-house employees who were previously responsible for the outsourced functions.

While these risks exist, they don't overshadow the benefits outsourcing brings if done correctly. To mitigate these risks, businesses should carefully evaluate potential outsourcing providers, establish clear communication channels and performance metrics, and establish clear contracts that define the scope of work, timelines, and quality standards. By doing so, businesses can reduce the risks and maximize the benefits of outsourcing.

7 Steps To Determine When And What To Outsource

Identifying the core competencies of your business is the first thing to do. These are the activities that directly contribute to your company's mission and aims. Because identifying these core competencies, you can easily determine which tasks should be kept in-house and which ones can be outsourced. Here are the steps to help you determine when and what to outsource:

1. Identify the tasks or activities that are not part of your core business. Make a list of the functions that are not directly related to your company's mission, but are necessary for your operations.
2. Evaluate the cost of performing the tasks in-house versus outsourcing them. Consider the cost of hiring and training employees, purchasing equipment, and maintaining infrastructure versus the cost of outsourcing the task.
3. Consider the level of expertise required for the task. If the task requires specialized skills or knowledge that your employees do not possess, outsourcing may be the best option.
4. Evaluate the risk associated with outsourcing. Consider the potential impact on quality, security, and confidentiality. This will help identify potential risks associated with outsourcing such as data breaches, intellectual property theft or legal violations.
5. Consider the potential benefits of outsourcing. Outsourcing can provide access to new technologies, expertise, and resources that may not be available in-house.
6. Evaluate the reputation and track record of potential outsourcing partners. Conduct due diligence to ensure that the outsourcing partner is reputable and has a track record of delivering quality work.
7. Develop a plan for managing the outsourcing relationship. Establish clear expectations and communication channels, and monitor the outsourcing partner's performance regularly.

Always have clear communication channels with your outsourcing provider. Set expectations early on regarding deliverables, timelines and quality standards. Regularly monitor their performance and provide feedback if necessary to ensure the successful completion of outsourced tasks while maintaining overall productivity levels within your organization.

How To Find A Reputable Outsourcing Company

Finding a reputable outsourcing company is crucial to ensuring that you receive high-quality services and minimize potential risks. Here’s how you can find a reputable outsourcing company:

Research potential outsourcing companies

Look for companies with a good reputation in your industry, and read reviews and testimonials from their clients. You can also check online directories and search engines to find potential outsourcing companies.

Check the company's credentials

Look for companies that have relevant certifications, memberships, and awards in their industry. This demonstrates their commitment to quality and professionalism.

• Check the company's website: Most companies list their certifications, awards, and memberships on their website. Look for logos or links to industry associations, regulatory bodies, or third-party auditors.
• Check industry associations: Many industries have associations that provide accreditation or certification programs. Check the websites of these associations to see if the company is a member or if it has any certifications or accreditations.
• Check regulatory bodies: Depending on the industry, there may be regulatory bodies that oversee the activities of companies. Check the websites of these bodies to see if the company is registered or if it has any licenses or permits.
• Check third-party auditors: Some companies hire third-party auditors to evaluate their compliance with industry standards and best practices. Check the websites of these auditors to see if the company has been audited and what the results were.
• Check online directories: Some online directories, such as the Better Business Bureau or Dun & Bradstreet, provide information about companies' credentials and reputations.
• Contact the company directly: If you cannot find information about the company's credentials online, you can contact the company directly and ask for information about its certifications, memberships, or other credentials.

Check the company's track record

Look for companies that have a proven track record of delivering high-quality services. You can check the company's portfolio, case studies, and client references to get an idea of its capabilities.

• Look for reviews and testimonials: Search online for reviews and testimonials from the company's past clients. These can give you an idea of the quality of their work, as well as their customer service and communication.
• Check the company's portfolio: Most companies have a portfolio of their past projects or case studies on their website. Look for projects that are similar to yours and evaluate the quality of their work.
• Check the company's references: Ask the company for references from past clients and contact them to ask about their experience working with the company.
• Check the company's reputation: Check online directories, such as the Better Business Bureau or Trustpilot, to see if the company has any complaints or negative reviews.
• Check the company's history: Check the company's history, including its founding date, leadership changes, and any legal or financial issues they may have had.
• Research the company's industry: Research the industry in which the company operates and see if they have won any awards or been recognized for their work.

Evaluate the company's expertise

Look for companies that have expertise in your industry or the specific service you require. This ensures that the outsourcing company has the necessary skills and knowledge to deliver the services you need.

• Check the company's team: Look at the company's team members' profiles to see if they have the necessary skills and experience to deliver your project successfully. Check their qualifications, certifications, and past experience.
• Ask for case studies: Ask the company for case studies or examples of past projects to see how they have tackled similar challenges to yours.
• Ask for references: Ask the company for references from past clients who had similar projects or services. Contact them to see if they were satisfied with the company's expertise and quality of work.
• Ask about their training and development: Ask the company about their training and development programs for their employees. This can give you an idea of how they keep up with the latest trends and technologies in their industry.

Assess the company's infrastructure

Look for companies that have modern infrastructure and technology to ensure that they can deliver services efficiently and securely.

• Visit the company's office: Schedule a visit to the company's office to see its infrastructure first-hand. Check their office space, equipment, and technology to see if they are up-to-date and well-maintained.
• Check their technology: Check the technology that the company uses to deliver their services. Check if they use the latest software and hardware and if they have security measures in place to protect their clients' data.
• Ask about their network and connectivity: Ask the company about their network and connectivity. Check if they have reliable internet connectivity and backup systems in case of an outage.
• Check their data management practices: Check the company's data management practices. Check if they have secure data storage and backup systems in place to protect their clients' data.
• Ask about their disaster recovery plan: Ask the company about their disaster recovery plan in case of an emergency or natural disaster. Check if they have a plan in place to ensure business continuity.
• Check their staffing: Check the company's staffing levels to ensure that they have enough personnel to handle their workload. Check if they have enough support staff to handle administrative tasks.

Evaluate the company's communication and project management

Look for companies that have clear communication channels and project management processes in place. This ensures that you can stay updated on the progress of your project and that the project is completed on time and within budget.

• Ask about their communication policies: Ask the company about their communication policies and how they keep clients informed throughout the project. Check if they provide regular updates and have a clear escalation process in case of any issues.
• Ask about their project management methodology: Ask the company about their project management methodology and how they ensure that the project is delivered on time and within budget. Check if they use agile, waterfall, or other project management methodologies.
• Check their team's communication skills: Evaluate the communication skills of the company's team members during your interactions with them. Check if they are responsive, professional, and able to communicate clearly.
• Ask about their tools and software: Ask the company about the tools and software they use for project management and communication. Check if they use industry-standard tools such as Trello, Asana, or Jira, and if they are proficient in using them.
  
• Check their track record: Check the company's track record in managing projects and delivering them on time and within budget. Look for examples of projects similar to yours and evaluate their performance.

Check the company's security measures

Look for companies that have robust security measures in place to ensure that your data and intellectual property are protected.

• Ask about their security policies: Ask the company about their security policies and procedures. Check if they have policies in place to protect against data breaches, cyber-attacks, and other security threats.
• Check their physical security: Check the company's physical security measures, such as access control, surveillance cameras, and alarm systems. This is especially eminent if the company handles sensitive data.
• Check their data encryption: Check if the company uses data encryption to protect their clients' data. This can include encryption of emails, data storage, and file transfers.
• Check their password policies: Check if the company has strong password policies, such as mandatory password changes and two-factor authentication.
• Check their compliance: Check if the company complies with industry-specific regulations, such as HIPAA for healthcare, PCI-DSS for payment processing, and GDPR for data protection.
• Ask about their training and awareness programs: Ask the company about their security training and awareness programs for their employees. Check if they have programs in place to educate their staff about security threats and best practices.

Consider the company's culture and values

Look for companies that share similar values and cultures as your organization. This ensures that the outsourcing company understands your business and can work collaboratively with your team.

• Ask about their diversity and inclusion initiatives: Ask the company about their diversity and inclusion initiatives. Check if they have policies in place to promote diversity and inclusion, such as hiring practices and employee training.
• Consider their social responsibility: Consider the company's social responsibility initiatives, such as corporate social responsibility programs or sustainability practices. Check if their values align with yours.
• Evaluate their communication and transparency: Evaluate the company's communication and transparency. Check if they are transparent about their business practices and if they have open and honest communication with their clients.

Take these factors into consideration and hopefully, you'll increase your chances of finding a reputable and reliable provider who can help take your business to new heights!

Outsourcing 101: How to Determine When and What Services to Delegate - Wrapping Up

Outsourcing has become an integral part of many businesses, both big and small. It offers a wide range of benefits such as cost reduction, improved efficiency, increased flexibility, and access to specialized skills and technology among others. However, outsourcing also comes with some risks which must be carefully considered before making any decision.

Determining when and what services to outsource requires careful analysis of your business needs, budgetary constraints and long-term objectives. You need to identify the tasks that are non-core or time-consuming so that you can delegate them without affecting the quality of service delivery.

There are different types of outsourcing services including IT outsourcing, customer service outsourcing, finance and accounting outsourcing among others each with its own unique advantages.

At least do a bit of research so that you can find a reputable provider who will deliver quality work within agreed timelines.

While there may be some challenges associated with outsourcing if done correctly it can offer significant benefits for your business in terms of productivity growth and profitability. With proper planning and implementation, you can leverage expertise outside your organization to achieve sustainable growth in today’s highly competitive market environment.