As any busy entrepreneur or business owner knows, there’s rarely enough time in the day to get everything done. And while it may have once made sense to do it all yourself, the value of hiring others with specific expertise to take on key tasks inevitably becomes clear.
But the fact is, not every task required for effective day-to-day operations needs to be done in-house by a full-time employee. Indeed, there are many essential capabilities that can be delivered better, faster, or less expensively by a third party. Outsourcing such work to external companies, services, or individuals can free up you and your employees to focus on the areas of most value. It can also help ensure that important aspects of these additional tasks aren’t overlooked, resulting in increased business risk.
What Is Outsourcing?
Let’s start with a clear outsourcing definition, as there can be some confusion about the topic. Outsourcing is a practice whereby a business hires a third party to provide services or fill certain job functions on a contractual basis. The term “outsourcing” got a bad rap for a period of time, as many people conflated the word with outsourcing jobs in manufacturing or IT, for example, to companies in other countries, leading to layoffs. But this type of outsourcing – offshoring – is just one subcategory of outsourcing.
There are many other types of outsourcing. Companies can outsource specific tasks to a virtual assistant. They can contract with freelance professionals to provide certain services on an as-needed basis. They may pursue IT outsourcing, partnering with large service providers to deliver application development services or digital transformation initiatives. Many companies outsource their payroll and accounting services or customer support to external business-process outsourcing providers. Due to many regulations and other complexities, HR outsourcing can also be popular among smaller firms that lack such expertise in-house. Other businesses may take advantage of executive-for-hire firms that provide part-time chief financial officers (CFOs) or chief information security officers (CISOs) to oversee finance or cybersecurity for them.
Benefits of Outsourcing
There are any number of reasons a business might choose to outsource a task, role, or function. It can be a strategic choice or a cost-cutting move. Outsourcing may be the only way to source specific capabilities a business is unable to hire for directly, or it could boost productivity or efficiency in a certain area.
Some of the most compelling benefits of outsourcing include:
- Lower costs. Outsourcing can often be less expensive than performing a task or function in-house, due to economies of scale or lower labor rates, for example. What’s more, outsourcing can eliminate costs of hiring, training, and retaining employees, as well affiliated with payroll taxes and employee benefits. Capital expenses may also be lower: companies that outsource IT or customer support, for example, will not have to invest in the infrastructure required to provide those services.
- Increased efficiency or effectiveness. Service firms can typically have highly efficient processes and the latest technology, which, along with their focus on a specific process or area of expertise, can enable them to perform tasks at greater speed or at higher quality than their clients can.
- Cutting-edge solutions and specialist resources. Large outsourcing companies can provide their clients with innovation, intellectual property, thought leadership, or expert talent they might otherwise not have access to.
- Variable capacity. For businesses with fluctuations in demand for certain services, outsourcing can offer a way to easily scale up or down in ways that could not be done with full-time employees. Increased flexibility can be invaluable for smaller businesses that need to keep up with changing business demands and commercial conditions.
- Increased ability to focus on core business activities. For many businesses, a primary motivation to outsource is that it frees owners, managers, and employees to spend their time on income-generating or market-differentiating activities.
- Expanded opportunities for growth. Businesses often desire to take advantage of growth opportunities, but a lack of resources may hold them back. Outsourcing non-core activities can create space (and free up cash) to explore growth options.
Outsourcing may be the only way to source specific capabilities a business is unable to hire for directly, or it could boost productivity or efficiency in a certain area.
Top Opportunities for Outsourcing
Clearly, there are potential advantages to outsourcing certain tasks or functions within a business. But where to begin with business process outsourcing? There are some tasks that are ripe for outsourcing within most businesses. These include:
1. Administrative tasks
Scheduling, travel arrangements, data entry, and other administrative tasks can often be offloaded to a virtual assistant or administrative service. While these tasks are crucial to the proper functioning of any business, they are not usually core business activities, and, therefore, are fair game for outsourcing.
Where to find help: There is no shortage of options when it comes to outsourcing administrative work. For example, there are some matchmaking options that assist companies in finding the best fit – Asistant Match, AssistU, and VA Networking can help businesses find screened administrative service providers, and they also offer directories of professionally trained virtual assistants.
2. Lead generation and customer service
Although lead generation and customer service are two completely different types of tasks, both involve what can be tedious time spent on the phone. Sales calls, for instance, are often a numbers game – more calls can equal more sales and leads. If an outsourced lead generation provider is hired to do the initial outreach, closing the sale can be handled by the internal sales force. A talented salesperson’s skills are better utilized building relationships and closing sales than in making cold calls. Likewise, customer service outsourcing can be more efficient and effective than maintaining a qualified support staff or full-size call center, especially for small, product-based companies.
Where to find help: There are many business-process outsourcing providers that offer service in both of these categories. Global Response and The Connection are recognized customer service providers to many leading industries. Outsourcing Accelerator offers a list of the top lead generation outsourcing firms in the U.S.
3. Accounting and finance
Outsourced accounting firms or individual certified public accountants (CPAs) can help smaller businesses with services like bookkeeping, invoicing, and accounts payable and receivable, not to mention financial reporting, analysis, and planning. Outsourcing payroll processing alone can save considerable hours, headaches, and dollars. Many finance and accounting providers can bundle these tasks for even greater savings.
Where to find help: It’s particularly important to do your due diligence when outsourcing these highly regulated tasks. As such, it’s a good idea to check with certifying organizations, such as the American Institute of CPAs or American Institute of Professional Bookkeepers, when hiring individual contractors. There are also numerous established finance and accounting outsourcing firms from which to choose. Outsourcing research and analyst companies, such as Information Services Group and HFS Research, often rate these firms annually.
Effective marketing determines how brands and companies are perceived in the marketplace. A third-party marketing firm or consultant can often provide an outside perspective and broad experience that internal marketing staff cannot. Freelance marketers, copywriters, and content marketers can also develop high-quality, polished content to boost marketing efforts. Website design, brand development, press releases, and online marketing duties, such as social media, blogging, and search engine optimization, are other good candidates for outsourcing.
Where to find help: Guru and Upwork are two of the best-known sources of freelance contractors, although at times they may attract lower-cost (and less experienced) talent. MarketerHire offers pre-vetted talent and AI-powered matching technology. When looking for marketing partners, one of the best routes is to reach out to your professional network for recommendations.
5. Information technology (IT)
IT is an essential business function, but not necessarily a core capability, especially for small businesses. It can also be extremely expensive to handle IT in-house. What’s more, the average business has limited ability and knowledge to manage all of its IT needs, and the best tech professionals typically want to work for a technology-focused company. Thus, IT outsourcing can often be a good idea.
Where to find help: Toptal is an online marketplace for freelance IT pros used by some big-name companies. There is also a variety of IT services firms that may be a good fit. Each year, Everest Group ranks the top global IT service providers and provides additional lists of niche and smaller outsourcing firms.
6. Human resources
Human resources (HR) is both a highly complex and highly important function. And, for many small to midsize businesses, it’s one that makes sense to contract out to a specialist agency. Providers of HR outsourcing services have well-developed skills in various aspects of HR, from recruiting, screening, and hiring to benefits administration. And they stay up-to-date on the latest employment laws and standards to make sure you stay compliant.
Where to find help: Ceridian and Trinet are two examples of well-known HR service providers offering a wide range of resources, from recruitment to payroll to benefits administration. There is also a growing array of niche HR providers targeted specifically to small to midsize businesses, such as Bambee and Insperity.
When considering outsourcing for any of the above categories, the best way to locate high-quality outsourcing prospects is often by soliciting recommendations from your professional network. A referral from someone you know and trust is a much more reliable gauge of quality than a random listing, and one that is usually based on level of skill and not simply the cheapest cost. Professional groups or associations and social media can also be great resources.
The Bottom Line
Outsourcing is not without its challenges and risks. There is certainly the loss of full control over a function or task. There may be communication or cultural barriers or time zone differences to manage. There are relationship and partner management issues to consider. But, in many instances, the benefits of outsourcing outweigh the downsides. Taking a look at the most common opportunities for outsourcing may reveal opportunities to lower costs, improve quality, and increase focus on what matters most to your business.
A version of this article was originally published on April 03, 2012.
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