Outsourcing is nothing new. Manufacturing, support, accounting, marketing, and more have all been outsourced for decades to save time and money (although modern outsourcing only really started with IBM).
After all, why bring on an accountant full time when you can outsource your taxes once a year?
Outsourced services have doubled in value since 2000, and with benefits like saving time and money.
Weighing the outsourcing pros and cons, however, shows that it isn’t some magic pill which will make difficult work disappear.
Not only that, but everyone has a different opinion of the types of outsourcing – how the hell do we weigh the pros and cons when nobody agrees on what it even is?
So, to make things easy, we here at Process Street have summed up the advantages and disadvantages of outsourcing vs insourcing, and (if the former) tips on some different kinds of outsourcing you can use.
It’s time to outsource the work you don’t need to do and focus on getting done what really matters.
Should you outsource your work?
The question of whether to insource or outsource a task is actually pretty simple – it comes down to 4 key questions.
- Do you have the required experience / resources?
- Do you have the time to do it?
- Do you have to do it?
- Is there a security risk?
None of these are deal breakers, but you need to consider each answer to know whether you should be outsourcing or not.
Do you have the required experience / resources?
One of the biggest advantages of business process outsourcing (and outsourcing in general) is being able to use knowledge and resources outside of your own workforce.
So, rather than having to hire a full-time team member or rent a facility to manufacture a product, you can just outsource the tasks as and when you need to.
If you’re faced with a task which your full-time team does not have the experience, knowledge, and/or resources to complete, then you need to ask how often the task will come up.
An important recurring task that you can’t do in-house might warrant bringing in a new team member or training an existing one. A one-off task is usually better to hand off.
Having said that, guess which is the quicker (and less expensive in the short-term) solution.
Do you have the time to do it?
If your team is already chock-a-block with tasks for the next three months, chances are that you won’t have time to complete yet another item on the pile.
However, the most important thing to remember when asking if you have time to do a task is that these can be tasks you’re already doing.
For example, if your team is struggling to juggle their workload, and there is one thing in particular which requires more time than thought, that’s your prime candidate to outsource.
This isn’t just about having time for new tasks, it’s about whether your time can be better spent doing other things. This leads us to the next question…
Do you have to do it?
Some of the best (and most common) tasks to outsource are ones which require little unique input from someone in your company/culture.
Need to generate your company’s invoices or handle your bookkeeping? Someone else can do that.
Manufacturing is also common to outsource due to the impersonal nature of the task, along with lower real estate and employee costs overseas.
There’s a reason we’re all familiar with cheap toys emblazoned with “Made in China”. It’s pure insanity to build your own factory line – the manufacturing is outsourced because you don’t need to do it.
As with the previous question, this should include tasks you enjoy doing. For example, you can love writing blog posts all day, but you could have someone else write your content
Is there a security risk?
The final factor when considering outsourcing pros and cons is the security risk attached to the task.
It’s not a deal breaker if the task contains sensitive information, but you should be aware of the risk and (if there is a risk) take appropriate measures when considering who to outsource to.
For example, payroll and tax preparation is commonly outsourced despite containing sensitive information – it’s far quicker to pay a professional to do it, and as long as the party you employ has a proven track record you can keep the risk to a minimum.
Most outsourcing companies know about the security risks that come with the territory, and so will also give their security policy on their website. Bench is a good example of this.
Non-disclosure agreements are also great to make doubly sure that all sensitive information will be treated as such.
Outsourcing pros and cons
So, you’ve identified whether or not a task can be outsourced, but that doesn’t mean it always should be.
Much like the initial question of insourcing or outsourcing, there are a couple of key factors which can make the decision for you. For example, if the talent or resources you need aren’t available locally or at a price you can afford to purchase, then, of course, you’re going to have to go further afield.
As for everything else, however, it all comes down to weighing up the following pros and cons.
There are eight main benefits to outsourcing:
- You draw from a larger talent pool
- Lower costs
- It forces business centralization
- Ready access to more specialized workers
- Lets you access better technology
- They work when you can’t
- It frees up your time
- Allows scaling through reduced in-house work
Having said that, not all of these will apply in every situation – for example, costs are lower for outsourcing one task, but a recurring or sensitive process may be better handled by someone in-house.
You draw from a larger talent pool
Outsourcing (and remote working in general) allows companies to draw from the largest pool of talent there is – the internet.
If someone can connect to the internet, they can be hired by a company halfway across the world to do that one task they are an expert at.
If you don’t hire remotely or outsource anything, you’re limiting yourself to local talent, which is a great way to shoot yourself in the foot. Not only are you reducing the expertise you can draw from, but you’ve locked your business into working with only one time zone.
Think about it – if you have a task like customer support it makes sense to have at least two technicians. Doing so (with, say, one in the US and one in the UK) lets you cover support duty 24 hours a day.
Depending on where you outsource to, you could save a lot of money by outsourcing to a company where the pay is lower. For example, a VA in the Philippines earns roughly a third of one in the US.
Not only that but you’re drastically reducing your real estate costs because, well, you don’t need an office.
Remember though that this shouldn’t be a priority – you get what you pay for. Still, if the going wage in India is $1k less for the same position for someone with the same qualifications, then why not save the grand?
It forces business centralization
Outsourcing comes with a fair few risks, such as quality assurance and a disconnect between you and the worker on how to carry out their tasks.
If, however, you’ve documented your processes and have a centralized culture, outsourcing becomes a breeze – anyone can view the necessary processes at any time, so there are far fewer road blocks to productivity. It’s a vital step to any kind of business process management.
Documenting your processes lets you easily track employee progress, encourage productivity and accuracy, and add accountability to their actions. If someone isn’t getting their work done you can see who it is and what they still need to complete at a moment’s glance.
Hell, documented and centralized processes also allow for greater business process automation. This saves your company time and money by eliminating the tasks that don’t require human input, letting you and your team (including any VAs) focus on doing the work that actually matters.
Ready access to more specialized workers
“I didn’t want to hire anybody to build me a website. I built or rather I
bought a predesigned WordPress theme. This was $80 or whatever it
was. Excellent. Stick it in the back. Thank you for playing.”
“I loaded up… and I go and then I start ruining the code. I spanked the hell out of
this site and it looked like a complete dog’s dinner when I was done
with it. Then I did what I should’ve done in the first place, and I went to
Elance and I found somebody to fix the mess that I created… It cost me $400.”
“Why the hell didn’t I just do it in the first place?”
Outsourcing is key to completing the tasks you have no idea how to do. If part of becoming a successful entrepreneur is learning how and when to delegate (it is), outsourcing is just as key to bringing in the talent you need for specific tasks.
Need an ebook created from your base text? Outsource it to a designer.
Making a podcast and want the sound to be top notch? Outsource it to someone who can edit audio.
This even goes for tasks that you think you know how to do – there’s always going to be someone more experienced than you in a specific field so why not take advantage of their expertise by outsourcing?
Again, there’s an argument for hiring someone full-time if the tasks you need to get done are recurring, but outsourcing is still great for taking care of the less common items which need greater expertise.
Lets you access better technology
This goes hand-in-hand with access to more specialized workers – if you outsource to a designer, you’ll probably also gain access to a graphics tablet, Photoshop, and more in the process.
They can work when you can’t
By outsourcing to an overseas party you can effectively cover several time zones without having to stay up into the ungodly hours of the morning.
This makes offshore outsourcing great for tasks like support duty, as you can respond to customers day or night (again, there’s a reason you hear about so many call centers being in India).
Plus, any negatives associated with various time differences can be mitigated or eliminated entirely by communicating clearly and regularly. If you expect a project to be done by a specific time, make sure they know about it (and be sure to include the time zone you’re talking about).
You still need to be vocal about how long you expect someone’s response time to be, but your centralized processes (as detailed above) also make certain that everyone is on the same page and has all of the information they need.
It frees up your time
Outsourcing tasks frees up time for you to spend on more important work, like the bigger picture of how your company should improve and grow.
Combine business process automation with outsourcing and you’re now able to focus on the tasks that actually matter and no-one else can do.
You don’t need to do your own bookkeeping, but you DO need to be constantly aware of what you are building towards and the next step in your plan.
Allows scaling through reduced in-house work
No matter how big your business is, there will come a point where your current team physically cannot handle any more tasks. This leaves you with two options if you want to keep on growing and scaling up.
First, you can hire someone new in-house. This hire will take time and money to train up, and may not prove even to be a suitable fit for your company culture.
Alternatively, you can ask the four questions from the beginning of this post and outsource what you can. That way your team can shrug off some of their unnecessary tasks and make time to take on more vital work to allow your company to scale.
Talking of company culture… to learn how Steli Efti, co-Founder of Close, a leading CRM platform, creates a company culture check out this episode of our podcast .
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Much like the pros, there are five main cons to outsourcing:
- Security risks
- Lack of complete control
- Lack of quality control
- It’s harder to build culture
- Language or accent barrier
Again, depending on the task you outsource these disadvantages may have more or less bearing on your final decision.
Of course, when outsourcing tasks there is going to be a degree of security risk. At the same time, however, the right precautions can take the bite out of this danger.
As stated earlier, the best way to do this is to draw up agreements (NDAs) or contracts before outsourcing to protect your information.
You can also limit the tasks you outsource to less sensitive information (such as designing an ebook over handling your customer data) – they can’t share what they don’t have access to.
Either way, it’s best to check the history of the people you consider outsourcing too. Yes, it sounds like a no-brainer, but it’s important to remember to check up on whoever you’re planning on working with (even if it’s for a single outsourced task).
You can do this by checking reviews and feedback from previous clients on whatever site you find the person/company on, or by checking their website’s “Security” page (most companies will have this).
Lack of complete control
This is both the best thing about outsourcing and the scariest concept for many to wrap their head around; the idea that you will no longer be fully in control.
This is an idea that you need to get rid of if you want your business to be scalable – you’re not superhuman, and you can’t handle everything by yourself (or even with your in-house team).
As such, even if you enjoy a certain task or believe that only you can do it right, you need to take a long hard look at your current workload and ditch or outsource what you shouldn’t be doing.
Lack of quality control
One of the biggest fears (which is sometimes warranted) with outsourcing is that you won’t get what you pay for.
Articles can be plagiarized, accounts botched, manufacturing corners cut, you name it, and it can happen. Unfortunately, when this happens your company will take a hit as a result.
There are a couple of ways to avoid the risk of bad results with outsourcing. The first is to look for testimonials from previous customers of the company or person you’re looking at.
However, a much easier (and hands-off) way of getting the quality control you need is to use Process Street.
Not only can you use it to document your processes so that everyone knows what to work on and how to get their tasks done, but you can check on the progress of any checklist run by your team in real time.
For example, you could run a content promotion checklist, assign the person you’re outsourcing to, and set a due date to make sure they know what time limit they have.
Then, if you want to check on their progress, you just have to re-open the checklist to see which tasks they have marked as complete.
Not only that, but you can see an overview of all of the checklists which have been run, including which are still in progress, who is assigned to them, and what steps are yet to be completed.
It’s harder to build culture
This outsourcing disadvantage goes two ways – it’s harder to create an all-inclusive culture, seeing as at least part of your “team” is not under your sole employment. This means that you may not be as tight-knit and/or supportive of one another as if you were all in-house.
Having said that, company culture doesn’t matter so much when concerning the company you’re outsourcing to. After all, they’re not part of your company, and so the relationship between you is always going to be more professional.
Language or accent barrier
This is a problem mainly with jobs which require written or (more importantly) spoken language skills – you may well find in these cases that outsourcing abroad is not the best idea.
For example, if you’re outsourcing a support helpline for an English or American company, you need to think about how important it is to have a native English speaker answering your phones.
If it’s not an issue in your mind, you could go further afield and outsource the helpline to India – it’s not likely that the employees will have as clear an accent as a US resident, but the cost and convenience may outweigh that.
The alternative, however, is to hire the required staff in-house (which isn’t always possible given a set budget).
Should you use productized outsourcing?
So, by now you should have a good idea of whether you want to outsource your tasks or not, and beyond that even whether you should be looking for local talent or offshore.
There is one kind of outsourcing which we need to show in a little more depth; productized outsourcing.
This is where you outsource a task to a company who provide both a piece of software and an employee to help you or use that software.
For example, Bench offers accounting software but also an accountant to use it for you. Essentially, you’re getting a task completed without needing the employee or even the software to be in-house.
By signing up to a digital service, you gain access to an employee who takes care of whatever you’re outsourcing, usually using their own company’s program or resources to do so.
In other words, it’s outsourcing, but with a SaaS model.
Let’s get to outsourcing!
Whilst it’s not quite the magic pill that many have taken it to be since the release of the 4-Hour Workweek, by weighing the outsourcing pros and cons you can hand off all of the work you don’t ned to do and regain focus on what really matters.
I’d love to hear what tasks you outsource and the methods you use when doing so in the comments below. If you don’t outsource anything, what’s holding you back?
After all, you don’t know what you can achieve with that extra time until you try.
It’s indeed a great post Ben, I know how much ground work is needed to outsource a project. We need a proper strategy before doing that. So the points which you have mentioned are absolutely correct. I wrote a blog related to pros and cons of outsourcing https://www.31west.net/blog/the-pros-and-cons-of-outsourcing hope you like it.
There are a lot of addvantages to outsource your project:
Better revenue realization and enhanced returns on investment
Lower labor cost and increased realization of economics of scale
Tapping in to a knowledge base for better innovation
Frees management time, enabling companies to focus on core competencies while not being concerned about outsourced routine activities
Increases speed and the quality of delivery of outsourced activities
Reduces cash outflow and optimizes resource utilization
You can also read https://www.flatworldsolutions.com/articles/pros-cons-outsourcing.php and perhaps something like https://thunderrise.com/blog/how-to-outsource-app-development if you want an IT outsource.
Businesses are increasingly dependent on IT to support productivity and optimise processes to get a competitive edge. Without the right IT systems in place, your business runs the risk of low productivity and negatively affecting your bottom line. When your business outsources IT help from a consultant or managed service provider (MSP), they can handle a single project or take on the role of a virtual CIO and technology partner. You can also read this for some more info on IT outsourcing and its benefits https://www.leapconsulting.com.au/guide-it-outsourcing-or-in-house
Great work done on the outsourcing, Since it is a time consuming task involving a lot of surveys and research, outsourcing it would be a good option as the in-house team would get rid of the burden of intensive research. Instead, they can devote their time in other core activities of the business. Outsourcing product research helps in various stages ranging from developing new product, revitalizing a declining product, etc.
Really appreciate your work.
Outsourcing has been a long practice for most companies, but the onset of the Internet has allowed it to bloom and become bigger as the years go by. If you want to be on the advantage when it comes to your business, we recommend finding the right outsourcing company who can provide you with extra help.
http://www.suntecoss.com has been providing open source outsourcing solutions for web development related services.
Well written! Keep writing! Keep outsourcing!
Nice posting ! Thanks for sharing this information
very useful article.
This article is one of the most in depth I’ve read so far. I just want to add that payroll and employee benefits are also two of the things that you don’t need to worry about when you outsource, as the outsourcing company will handle this all for you.
Thanks for the interesting article!
this is a nice article.
Outsourcing your project to other organizations has many advantages. One can focus on their core product by outsourcing other services such as data entry services to other organization. This increases productivity as well as reduces the workload. Thanks for sharing this blog with us.
Nice article. Monitoring is required especially since these are customer facing jobs and the people represent the company. They become the voice of the company.
Nice posting ! Thanks for sharing this information!
Nice post, well explain pro & con about outsourcing.
I totally agreed with your content on outsourcing. It really helps to business and more provide more accuracy and appreciate your point which you highlighted here Excellent article and very helpful.
very useful article.
Great blog guys very informative and in addition to that. Each organization has its purpose behind doing this, with many pursuing lower work costs. You would prefer not to exchange quality for cost, however, redistributing regularly permits you to defeat the two universes. Via looking through a worldwide ability pool, it’s simpler to locate the correct ability at the correct cost.
Nice share ! thanks for the post in outsourcing.
Thank you so much for sharing this amazing article. Its really helpful for me.
Outsourcing indeed has been a very helpful process to businesses. It saves on human resource acquisition cost, the time and efforts that goes into interviewing the source and many more factors. I believe companies should certainly try outsourcing the admin tasks to an Offshore expert.
Outsourcing is a good method, but I prefer to develop my own team. Although I do not rule out the transfer of tasks to outsourcing
Beautifully written, as usual, I like the post. Thank you so much for nice sharing with us. Keep posting!
Outsourcing has made operating business smoothly with multiple other benefits also. I’ve been working with Sourceed for the past 2 years and found their services really amazing. I’ve hired them for outsourcing sales department and customer support department and they have never disappointing me.