Should Your Company Outsource Work?

What if you could accomplish everything your business needs, at a fraction of the cost? Outsourcing promises cost cutting benefits, but what could be the trade-offs?

Hiring a contractor or outsourcing means that you’re hiring someone from outside of your company to perform work. Outsourcing can allow businesses to watch their budgets but also reap the benefits of accessing expertise, flexible staffing, increasing efficiency and in the end, generate more profit.

Every business has to determine whether they should perform a service in-house, or outsource that particular service to an outside vendor. Many companies are realising that outsourcing allows them to cut costs, save valuable time, increase messaging capacity and restore focus to core business operations. To outsource or not to outsource, that is the question…

Insourcing

If a service is provided in-house a company must:

• Locate a qualified employee
• Pay employee wages and benefits
• Provide required technology items such as computers, phones and internet access
• Train the employee
• Provide the employee a physical work-space

Outsourcing

Outsourcing is when you hire a consultant, service provide or agency to manage a portion of your business.

Companies are beginning to outsource everything from monitoring firewall devices to watching access control lists and handling email security.

Reasons to outsource work:

Specialised Skills

The task is highly specialised and requires expert skills or systems, such as graphic design, website development, payroll, PPC/SEO campaigns, human resource compliance, etc.

Specialised Equipment

The task requires a large facility, specialised equipment or operational efficiencies. Fulfillment operations are frequently outsourced because of the need to stock large amounts of inventory and manage it efficiently.

Seasonal Requirements

The task is seasonal or may need to scale up or down quickly. Customer service is frequently outsourced because those providers are better equipped to handle a high volume of calls on demand.

Limited Requirements

The cost of hiring in-house is prohibitive for the amount of work. This is usually because the tasks needed to fulfil are not full-time and you simply can not afford to hire a highly skilled person for a part time position.

Temporary Needs

The operation or task is temporary or short term. You may need the task done for the short term, such as seasonal fulfilment, tax preparation, a website redesign, or upgrading your infrastructure.

Benefits Of Outsourcing

You are able to bring in an expert for a defined period of time to perform a task without committing to them long term. You may save thousands of dollars by not committing to an annual salary and benefits. For long term needs, such as fulfilment, marketing activities, or customer services, you gain operational efficiencies and skills that are difficult to replicate in-house.

Disadvantage Of Outsourcing

You’ll need to find an affordable and high quality service provider, which can be time consuming. The cost of working with the right agency may be too high. Good service providers tend to be very busy.

Benefits Of In-sourcing

The biggest benefit of in-sourcing is building your own team for operational functions. You control the provider’s time, activity, and quality. Most companies try to maintain the core operations that they believe will differentiate their business in-house. A primary advantage of in-sourcing is increased control. Companies have more control over the time, resources, and results of the work. Companies can develop and execute their own plans in a specialised area. The company can integrate a new or growing specialisation into the organisational structure and develop reporting procedures, monitor progress and make adjustments as necessary.

Disadvantages Of In-sourcing

If your team doesn’t have the skill levels or expertise required it may end up costing more to get them up to speed. A primary disadvantage of in-sourcing is the lowest-cost factor. Developing nations with large population centres and growing business and industries are prime grounds for outsourcing. Such process include distribution and call centre support. Labour in these countries is often less expensive and can drastically cut costs for larger corporations that would have to hire hundreds of workers to operate warehouses or man phone lines. Another common disadvantage is that it takes a company’s focus away from core business activities.

IT companies that outsource infrastructure management and application services can expect to save 12% to 17% annually on average.

Top Tasks To Outsource

Bookkeeping

Bookkeeping is the number one task in small businesses that owners neglect and struggle with managing. By outsourcing the work, the bookkeeping can be done a lot faster and more accurately than the owner can, whilst still remaining affordable.

Payroll

By hiring an outsourcing company to do your payroll, there will be no issues when income tax season comes around.

Social Media Marketing

When these tasks are performed in house; it is often hard to retain the consistency of doing them.

Administrative Support

By utilising a virtual assistant, maintenance of scheduling, travel arrangements, mailings, email newsletter and more are done well and on time.

Research

There are talented professionals around the world who are willing to complete research tasks faster and for less money than hiring someone in house.

Marketing Efforts

Since marketing ties directly to a company’s sales results, outsourcing additional and specialised marketing tasks to consultants or public relations specialists should only boost sales and benefit the company.

In order to decide what tasks to keep in house and which to outsource, a company needs to examine it’s size and the abilities of their current work force before making any significant changes to their company structure. Most companies however will and do benefit from outsourcing one or more company tasks.