Apple does it. Nike does it. Skype, Walmart, WhatsApp, Github, IBM, Basecamp, SeatGeek, and Google do it too. At one point or another, all of these companies have outsourced services to South America, Europe, Asia or even within their home countries.
As the gig economy grows, more and more businesses are working with freelancers and outside services to complete projects and tasks they previously might have done in-house. The market is ripe for organizations and contractors alike — in 2018, Statista reported that the global outsourcing market was worth $85.6 billion USD.
What exactly is this trend, and why are so many businesses tapping into it? Find out everything you need to know about outsourcing.
What is outsourcing?
Outsourcing involves hiring a third-party person or company to handle services that are usually performed by in-house employees. Typically, freelancers or providers will use their own resources to complete the projects or tasks at a location outside of the contracting business. However, in some cases, the business may offer some tools and/or allow usage of their facilities.
Location-wise, there are 3 models to consider: onshore, nearshore, and offshore outsourcing. Onshore means collaborating with providers in one’s own country. Nearshore means working with nearby providers — for example, if you’re based in the United States, you might outsource to South America. Offshore outsourcing entails contracting services in locations far away from the business, such as India or Ukraine for U.S.-based companies.
Why do businesses outsource?
There are many advantages to outsourcing. One of the main reasons companies choose this model is because it tends to be more cost-effective than performing the outsourced activities in-house. While international outsourcing is generally the most budget-friendly option — for example, outsourcing to South America or Asia — even an onshore contract can be budget-friendly.
You’re eliminating overhead costs and avoiding paying for full-time benefits and salaries, for starters. You can also hire providers on a project-by-project basis, meaning you don’t have to pay for the time you don’t need their help.
Another important reason is that businesses often have trouble finding the particular talent or expertise needed to complete a given project within the company. For example, if you’re creating a new app that needs kid-glove treatment, and your company is not generally in the business of launching technical products, you may need to look elsewhere for help.
But if the app is a one-off, you won’t need a full-time software developer to build it for you. Through outsourcing, you can find specialized workers who have the necessary and specific skill set to complete your project.
Contracting outside services can also save you time and be more efficient overall. Given that these providers will be focused on a particular function of your business, they’ll be able to give it their full attention and therefore have a faster turnaround time than you might. Meanwhile, if you wear multiple hats — and if you’re a business leader or founder, you certainly do — you’ll have one less task to oversee.
What types of services are commonly outsourced?
There are many functions and services a business might choose to outsource. A business might contract an outside provider for Information technology, for instance, who could assist with maintaining networks, facilitating technology updates, developing security systems, and general troubleshooting. Businesses might also hire software developers or software development companies to build apps for them.
Social media and marketing efforts are also frequently outsourced. Businesses might hire these services to manage their accounts and perform analytics and will ultimately benefit from the services of experts who know how to set up and evaluate campaigns.
Other commonly-outsourced services include but are not limited to:
• Customer service and support
• Web development
• Finance
• Human resources (HR)
• Virtual assistance
• Manufacturing
Outsourcing has plenty of benefits, but it’s also important to be cognizant of the drawbacks. It can be difficult to work with providers that aren’t from your country. For instance, if you outsource to South America, you’ll probably be dealing with individuals who speak English and have cultural similarities to you. However, there may be more language and cultural barriers if you outsource to, say, India.
You might also encounter pushback from full-time staff members who worry that their jobs could be in jeopardy, as well as find that you have less control over your project than you might like. In order to mitigate these and other concerns, you should define your goals and objectives for this partnership upfront and do a thorough job of selecting the best provider to help you meet them.
Once you do choose an outsourcing partner, stay in constant communication and continually review your objectives regularly. If you’re careful and meticulous about establishing and maintaining a strong partnership, you may well find the benefits outweigh the drawbacks.
