The business of Outsourcing

Many renowned companies outsource basic tasks to remain competitive. You might have noticed that for years, agents with noticeable accents have answered you. You can infer that the company you buy your services from has outsourced its call center services outside the country.

 

Outsourcing has been defined as the practice of appointing another company to perform certain tasks. These can range from customer service to the production of mini components for machines (in the case of hardware companies). Meanwhile, the main company focuses on its core operations.

Although the concept conjures images of call centers in countries like India, it can also involve hiring individual contractors for temporary work or seeking third-party providers like FedEx to handle logistic services.

Some of the most common processes businesses outsource are payroll, accounting, customer support, manufacturing, IT management, marketing, sales, shipping, and logistics.

There are three types of outsourcing, and depending on the type of business, some might be more convenient than others:

·       Onshoring: relocating work or services to lower-cost locations inside the same country.

·       Offshoring: relocating work or services to providers outside the country.

·       Nearshoring: relocating work or services to companies nearby or bordering countries.

 

Sometimes third-party providers can execute certain tasks quicker. Focusing on critical work and delegating the rest has proven to be a cost-effective measure. Even small businesses are outsourcing workloads like the development of apps, technical support, or website maintenance. Others are delegating IT maintenance or payroll processes, and some even have their entire HR teams outside the country.

Some smaller businesses outsource so they can focus their resources on their core competencies during their growth process. Others do it because they are too small and can’t hire in-house, full-time employees just yet.

Overhead expenses like equipment and office space become the responsibility of a third party.

If the company were to determine that the security risks or investments are not worth the hassle and decides to create an in-house team for that task, that practice would be called Insourcing.

 

You must see the process as a partnership between multiple companies, a relationship that is being established.

You need to consider that the non-proficiency of the English language might be an issue for some of your customers. It has been the cause of complaints at many companies.

Some of the disadvantages experienced include delays caused by a lack of communication or time zone barriers when scheduling meetings.

You need to pay attention to local laws regarding data safety, especially if your line of business handles sensitive data, like banking, for example.

What types of processes do you need to outsource? Do you need freelancers on a job-to-job basis? Or do you require a long-term partnership?

Make sure the contracts and the ongoing relationships are properly managed to ensure they maintain control over aspects like quality measures, sensitive data protection, and the proper devotion of resources.

 

Outsourcing has been recognized as a business practice since 1989. Since then, it has been a matter of controversy since many see it as a cause of the decline in domestic jobs. Others see it as businesses delegating assets effectively.

Some companies see the reduction of the local labor force as an incentive because the wages paid to employees outside are usually lower, which has an impact on workers because they see it as a threat to their job security. This has been a contentious subject between labor leaders and politicians.

As a decision-maker, you’ll have to contend with the fact that not only could it bring bad PR to your company, but you could also be doing away with thousands of jobs and negatively impacting local economies.

 

As I mentioned before, business decisions must take both profitability and ethics into account since you will be impacting many lives, both inside and outside the country. Another service that is becoming more frequently outsourced is that of a virtual assistant (VA). A VA is an independent contractor that offers business support remotely. Internet marketing, making phone calls, bookkeeping, etc. are some of the many services that can be delegated to them. How you can choose the best VA is covered in our module, "How to Hire Your Rock Star VA". This module will teach you how to attract the best ones by tailoring specific job descriptions and how to delegate the right tasks to maximize your investment. You can click here to learn more and stop missing out on other profit-maximizing processes.

 

Kenton, W. (n.d.). What is a virtual assistant, and what does one do?. Investopedia. https://www.investopedia.com/terms/v/virtual-assistant.asp

 

Lutkevich, B. (2023, January 31). What is outsourcing and how does it work?. CIO. https://www.techtarget.com/searchcio/definition/outsourcing

 

Twin, A. (n.d.). Outsourcing: How it works in business, with examples. Investopedia. https://www.investopedia.com/terms/o/outsourcing.asp

 What is outsourcing? definition of outsourcing, outsourcing meaning. The Economic Times. (n.d.). https://economictimes.indiatimes.com/definition/Outsourcing