This pros and cons of outsourcing beginner’s guide detail everything you need to know about effectively outsourcing. Further, we discuss outsourcing benefits, disadvantages, challenges, and top strategies you can implement to dramatically help to grow your business.
However, before getting started allow me to calm your nervousness. Especially if you’re like most people who are scared to death of the term or action of outsourcing. Which in my opinion is totally understandable.
Pros and Cons of Outsourcing
The main reason business owners are hesitant to outsource is because of the threat of stolen intellectual property and trade secrets. To properly outsource business owners have to turn over their records, secrets, or sensitive data to domestic or offshore outsourcing staff.
Continue reading as we outline a few precautions.
Regrettably, I’m here to tell you the security threat is real. However, the more you know, the better you can protect yourself and your business.
Before diving in… let’s step back a minute since we are discussing the pros and cons of outsourcing, chiefly let us address one of the biggest cons, the elephant in the room, which is IP SECURITY.
The Biggest Outsourcing Con
That being said, unfortunately, we’ve all heard of the danger of outsourcing. Especially to third-world countries and how that can hurt our business.
Notably, many of the offshore countries lack top-notch secure MFA, Firewall, Antivirus, or IP security protection. These securities are readily available in the US. However, the pro, those same outsourcing companies have double-down on data security to keep their businesses afloat and our more data secure…
In fact, if you’ve ever used outsourcing services such as “Fivver”, or “Upwork” (formerly Odesk),? Then you’ll know their security protocol for in-house protection of their client’s sensitive data is taken very seriously. Firstly, you are forbidden to make any direct contact with the outsourcing staff. In no form or fashion.
Paywalls and Data Petitions in Place
Remarkedly, you can only communicate via their platform. Secondly, they have paywalls and data petitions in place to keep us the customer safer from cybercriminals. Needless to say, however, no security is 100% safe. But just to know they are trying diligently helps us to sleep better at night.
Correspondingly, I’m certain the last thing you want to do is build an income-generating business only to have someone steal it. All in all, security is a real threat with overseas outsourcing. However, there are stricter guidelines you can follow that will decrease your chances of a data breach.
In fact, I’ve used all of the above-mentioned services and presently work with a virtual assistant from the Philippines.
Fortunately, I’ve never had any issues. However, I was spoofed twice, which had nothing to do with the outsourcers. (P.Y.’s long story, you can read it here)
2018 Statista Stats Show IT Outsourcing Hit $62B in Sales
Next, we’ll talk about what is outsourcing and how it can make, break, or save your business. Since according to the small business administration 50% of all small businesses fail within the first 5 years. That being said, as solopreneurs we need all the spare hands we can get!
Hopefully after reading this section will help keep your name off the shortlist.
Are you ready for an interesting fact, in 2018 According to Statista, ITO (information technology outsourcing) alone hit $62 billion in sales? Unfortunately, whether we like it or not business trends are changing and outsourcing is trending up. For a fact, the only way we can win is by getting in the game. We can’t score from the sideline!
What is Outsourcing
Outsourcing has one meaning but different ways to articulate the meaning. With that in mind, one outsourcing meaning; to farm out all or portions of your systems or processes to a 3rd party vendor, either domestic or international. In any event, in today’s business climate the term outsourcing no longer sounds like a foreign language.
All in all, even small businesses, very small businesses, and independent contractors are outsourcing.
Favorably, outsourcing is an excellent resource for small business owners that lack monetary resources, time restraint, or the expertise to train employees. Nevertheless, a few of the most popular areas that are outsourced are customer service help, call centers, HR, IT, and accounting.
Added, small businesses no longer have to pay full or part-time employees for sporadic or seasonal work. Thankfully, this can be accomplished by an outsourcer pay-per-project.
Next, up for discussion, outsourcing benefits and examples of the most popular outsourcing services and departments.
For the purpose of outsourcing, you can either go with a Virtual Assistant (VA), Independent Outsourcer, or an Outsourcing Agency. However, that depends on your level of risk, income, or expertise. Although this may seem obvious to some, however, businesses feel more secure working with large companies.
Indeed larger companies have more to lose, better resources, and usually a larger volume of high-skilled workers. Lastly, outsourcing agencies also have short patience for delivering poor performance or products. Additionally, the agencies share security risks or any other issues that may arise.
Are you still a little fuzzy about the benefits of outsourcing? The first thing to remember, outscoring replaces the need to hire and train employees which is time-consuming and costly. As you are aware, more employees require additional space and facilities. On the positive side with a well-thought-out plan and proper precautions. With that being taken care of outsourcing may be a great option.
More completing benefits, outsourcing staff normally have specialized knowledge within particular departments or processes. Above all, outsourcing can aid businesses to laser-focus on their core functions. Also, this gives a lead to the manager and ownership to only perform preferred tasks. Indeed, this makes everyone happier.
Outsourcing Benefits in-Housing Staff
Moreover, in-house staff end up during what they love and are good at. Finally, the business owner is completing only tasks that they truly enjoy, which is why they started their company in the first place.
Significantly, one of the hidden secrets to outsourcing is OPK (other people’s knowledge) I talk of my personal experience; you can check here-PYTalkBiz.
Realistically outsourcers inadvertently can’t help but use the skill sets or efficiencies learned from other companies to drive business. This is called experience. Just think, if you performed the exact same task every day for 10, 20, or 100 different companies, how much more efficient would you be? OPK is immeasurable, you’ll be surprised by the incidental benefits you’ll gain that are priceless!
Listed are a few descriptions of departments or processes that are more likely to be outsourced.
Outsource IT (Information Technology and IT Development
Tech Support Help, IT Support, Database Admin, and Website Manager, Software Development Web, App, Game & Software Developers
Sales and Marketing
Human Resources/ Staffing, Data Entry, and Processing
Outsource Bookkeeping and Payroll
Accountants, Bookkeepers, Loan Processors, Paraplanners, and Payroll Support
Technical Support, Trade & E-Commerce, CSR, Sales Consultant, Account Manager
legal process outsourcing
Paralegal Legal, Legal Transcriptionist, Secretary, Lawyer (Corporate, CPA, General Practitioner), Legal Assistant, Liaison Officer
Education & Training
Virtual Conferencing, Online Training, Teachers, E-learning Content Developers
Disadvantages of Outsourcing
1 Subpar Quality
Freelancers and outsourcing contractors may get the job completed faster, however, with speed may come more errors. The potential risk is the unacceptable standard of work. Next customer dissatisfaction.
2 Share Legal and/or Financial Risks
Once you sign on with an outsourcing company, you are signing your name to a contract. Win or lose your butt is on the line. Try negotiating your contract to mitigate your contractual financial liabilities in clear, easy-to-understand verbiage.
3. Language Barriers
Many outsourcing service providers have a high percentage of English-speaking remote workers. However, nevertheless, some words and meanings can be confusing. This is where virtual video conferencing, videos, or PowerPoint presentations can improve clarity.
4. Unreliable Timelines
The disadvantage to outsourcing to the Philippines or other offshore companies could delay the arrival due date. Synchronizing schedules can become challenging at the least.
5. You Can Lose Your Focus
As small business owners, we have to pay close attention to details. To make sure details aren’t getting lost in the speed of completion. This small oversight can destroy your business.
6. Language Translation Issues
Even with email amongst English-speaking teams, things can get missing or misunderstood. All languages don’t have the same words or meanings. Unfortunately, this can produce, slow down productivity, incur higher costs, and time loss.
7. Security risks
Security risks are running rampage here within the USA, we can only imagine what’s the gamut of risk in foreign countries is like. The last issue you want to face is a data breach or intellectual property stolen?
On the surface regarding keeping your data safe from honest eyes, security protocol guidelines should be established. Including NDA’s (Non-disclosure agreement) clearly documented signed, seal, and delivered.
Unfortunately, IP Security or data breaches are the most common and most talked about threats to outsourcing. In short, we all want to increase our bottom lines, but also we want to be as safe as humanly or AI as possible. Notably, we can’t sugar coat outsourcing security threats, they are real.
However, we can try like heck… below are a few outsourcing guidelines to follow.
- Minimized as much sensitive data as possible
- At all costs never expose trade secrets.
- Consult with your company’s legal team to write up outsourcing terms and agreements
- Hire your most knowledgeable personnel to police the outsourcer’s day-day workflow.
- Inspect what you expect, and course-correct immediately.
The sole purpose of outsourcing isn’t about cutting labor costs. One of my favorite mentors explained to me how time is more valuable than money. You can always make more money but time is finite.
That being said, Here’s a BIG BUTT, in our new economy, we can buy time… It’s Spelled; OUTSOURCING. ..Quick question…would you rather have 100% of one person’s time or 10% of 100 persons’ time?
On another note, remember that everything starts with a strategy or detailed plan. And the strategy to organize your outsourcing efforts can pay huge dividends in the end. Listed are a few strategies to get you started.
- Start with the end in mind. Get a crystal-clear vision of what services you acquire from your outsourcing company.
- Stay ahead of trends. Your short-cuts and highly effective processes undoubtedly will spill over into your outsourcing team.
- Set your price point and pricing structure. Keep in mind there will always be overlooked or missed items needed. Keep transparent pricing and no hidden charges are allowed.
- Cap exposure on your intellectual or proprietary secrets under wraps. People can’t and won’t unlearn. You can’t unring the bell!
- Learn to set accurate timelines. Know your time limits. How long does it take to perform each required service? Get a handle on this early.
Yes, there are disadvantages and advantages to outsourcing in business. And yes, we have to have checks and balances in place. However, we can’t allow fear to stop us in our tracks.
All things considered, if that were the case, we would never leave our homes for fear of what could happen. Expressively, we get in our cars, or on the train/ subway, scrapped or not, and carry on with life.
Given these points, depending on how you view the glass as half empty or half full. Outsourcing staff can be a windfall for businesses to increase productivity, work efficiency, and production.
Actually, finding talented outsourcing staff with competencies and experience can reverse your bottom line from red to black. Even smaller businesses are turning to outsource companies. This one marketing strategy can allow a string of positive and productive effects.
Outsourcing Staff helps to:
- Lower labor cost
- Reduce taxes
- Save energy cost
- Require less in-house personnel
- Reduce production cost
- Minimize operation cost
- Improve efficiency
- Increase competitiveness
- Create/allows laser-focus on business competencies
Why Outsourcing Services
Now, if you’re anything like me I always want to know “why”. To tell the truth, that’s gotten me in trouble as a child and now ironically with my hubby as an adult. I have to know why. It’s just the way I process. So if you’re the same, this paragraph is for you. Above all, it’s informative and helps address curiosity and clear up the definition of outsourcing.
Firstly, let us go over many reasons for Outsourcing. Next, I’ll expound on one hypothetical scenario where outsourcing can quickly save a business that could otherwise sink.
To demonstrate, let’s say one of your small business marketing strategies consists of content marketing. This tactic entails pushing company content via written or video.
Hypothetical Outsourcing Scenario
Hypothetically, your video campaign is stellar The last video you pushed out to your surprise went viral! Your recent windfall has morphed the business into the stratosphere. Product orders or service demands have sky-rocketed through the roof.
What do you Do?
You could try to slow down demand to hire the right personnel. In which who may or may not have the skills you need. Or you can outsource to an agency that can handle your onslaught of new business. explosion,
We never know which marketing strategy will hit. As an illustration, outsourcing processes or departments is just smart business. Of course, there are pros and cons of outsourcing but that’s with everything.
According to one of my favorite business development authors and speakers Michael E Gerber. He states small business owners should work more on their businesses than in their businesses. Ideally, outsourcing is one of those small business marketing strategies that allow us to do just that.
Why Employ, When you can Outsource?
As we all know, great companies are made up of super talent. However, who says you have to employ the best when you can outsource the best for less. In fact, the most productive and highest-producing companies do!
Those that are nimble and who embrace change and take a calculated risk. Without a doubt, there are challenges with outsourcing but conversely, there are also HUGE REWARDS.
Business is balanced, and outsourcing services can definitely play a small part in your business process. Truly, I still remember the first time I outsourced services… OMG. It saves a boatload of time and printed money…you can read more about it here for a real… true story.
Lastly, to compete within our space, we must get a little uncomfortable to stay competitive. Ideally, outsourcing frees uptime, so that we can aggressively work on money-making tasks as opposed to mundane money-sucking tasks.
Please share your outsourcing challenges and concerns? Which services do you outsource the most? Have you experienced measurable results?
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