Enterprises vs. Startups: Is Outsourcing Right for You?
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The factors that go into answering the question, “Is outsourcing right” for an enterprise or a startup are the same. You want to enhance your enterprise’s core functionalities without lowering the quality of your product or service.
Outsourcing often results in significant overhead savings — at least 40 percent for top-level positions — for both types of enterprises. Outsourcing needed tasks can add the most to your bottom line, but there are plenty of other outsourcing areas to consider that will help keep costs down. Is outsourcing right in these cases? It would seem like a wise decision.
Reasons to Outsource
The reasons that make outsourcing right are essentially the same for enterprises and startups.
Costs
Cost saving is the primary reason that makes outsourcing right for any company. By outsourcing major support components of your business, you can realize substantial labor cost savings. You can also save on infrastructure requirements.
Global Presence
Today, it is impossible to compete globally without outsourcing. The resources it takes to compete abroad require using specialized, self-sufficient professionals. By saving you the labor costs associated with recruiting and hiring, you can permit management to concentrate on core functions of your company.
Expanded Expertise
Outsourcing allows for partnering with very specialized resources. You can use these resources to provide more services in support of your core products or services. These expanded services can then be offered to both exisitng and new clients.
The technology that can be leveraged for your operations makes outsourcing right. It can improve productivity and efficiencies. But there is a wrong way to outsource. You have to do outsourcing right to reap the benefits.
Do’s and Don’ts of Outsourcing Right
Once you decide to outsource, there are certain things you should and should not do.
Think about these do’s and don’ts before you hire any contractors:
Do’s
Use Non-Disclosure Agreements – You need to protect your intellectual property by requiring all outsourced contractors to sign a non-disclosure and/or non-compete agreement. There are plenty of generic forms available online. Ideally, however, you should have your attorney draw one up. This ensures that you are outsourcing right for your company specifically.
Communicate Expectations – Know what your needs are and clearly communicate them to any contractor you hire. They must understand your goals and what is expected of them.
Check References – Do your due diligence. Understand, however, that contractors have probably signed non-disclosure and/or non-compete agreements with previous clients. Use whatever means you have available to get an idea of the professionalism and quality of work produced by a prospective contractor.
Use the Latest Technology – There are a lot of software products and online tools that will help you manage contractors. Find the one that best suits your operations.
Don’ts
Don’t Outsource Core Workers – You want to have core management that works directly for you. These workers are the engines that drive the rest of the workers and keep true to your corporate culture. Unless you have built string relationships with contractors, avoid placing them in core positions.
Don’t Hold Back Information – Treat workers as members of your company. Do not deny them critical information. You want them to be brand ambassadors.
Don’t Micromanage Contractors – Let workers work. If you do appropriate due diligence and set clear goals, contractors can work with minimal oversight. However, outsourcing right means that you do not neglect them, either. Keep track of what workers are doing and how they are doing it. Milestones and regular meetings in-person or online will ensure expectations on both sides are met.
Don’t Choose the Lowest Bidder – Don’t make the same mistake that governments often do. Scrutinize bidders and their pricing, then go with the contractor who gives you the best value for your money.
Don’t Let a Contractor Upsell You – To outsource right, you must only outsource necessary task areas. Don’t let a contractor upsell you on other services you may not need. Take their suggestions – they are on the front lines after all – but consider all suggestions carefully before you accept them.
Three Most Commonly Outsourced Functions
Theoretically, every element of your operation is a candidate for outsourcing. There are certain caveats, however. This is particularly true for enterprises or startups that have U.S. Government contracts or contracts with one or more foreign governments. You likely must segregate that business from the rest of your work. This can result in outsourcing the same service to more than one contractor or group of contractors.
The three most common functions outsourced by startups and enterprises are IT, accounting and human resources (HR). This does not mean enterprises and startups may not hire someone directly to manage the IT, finance, or HR operations, however. Outsourcing right can bring you savings on benefits and other costs associated with hiring regular workers as opposed to contractors. Part of outsourcing right is also knowing your particular needs and accessing the global talent pool to fill those needs.
IT
IT services require specialized expertise. Although many companies, startups, and enterprises have a core IT section, almost all benefit greatly from using third-party contractors to manage all the intricacies of IT operations.
Accounting
Startups and enterprises tend to outsource accounting services. Both types may want to hire a contract Chief Financial Officer (CFO) to assist with financial projects and operating budgets, and a bookkeeper for daily records. Enterprises may consider an outsourced CFO to help with liquidations and debt negotiations. Startups should focus on hiring a contract CFO who has experience with startup financial issues.
HR
Human resource operations require considerable time and manpower to run efficiently. Outsourcing right helps you avoid issues in recruiting, compensation, policies, and procedures. Outsourcing right offers a more efficient way to manage this critical aspect of corporate operations.
For enterprises, outsourcing HR depends on the diversity of the companies and the types of goods and services provided. Given the global footprint of most enterprises, it makes sense to decentralize HR through use of outsourcing. Startups may find that contracting out HR saves time and frees the smaller core management group to plan for growth and development of the company’s primary competency.
Other Business Units to Consider Outsourcing
Manufacturing
Virtually all enterprises tend to outsource manufacturing, including packaging and other associated tasks, due to cheaper labor and material costs. There is, of course, some controversy in doing so, but the cost efficiencies drive the decision in most cases.
Receptionists
Today there is a plethora of ways to replace receptionists with technology. Outsourcing right can cost very little. In addition, smartphones and various apps and communication software contribute to outsourcing efficiency. Virtual Assistants from marketplaces like FreeeUp can help with special projects and deadlines.
Telemarketing
Although telemarketing continues to receive a lot of bad publicity, it remains a very effective marketing tool. Conducting telemarketing correctly requires a specific skill set to avoid annoying the call recipient and at the same time generate interest. Outsourcing right means identifying the contractors who have the right experience for the task.
Final Thoughts
Enterprises and startups must remember that outsourcing right is not about making a service or business necessity disappear. You want to retain oversight and control of the function to ensure the outsourced service accurately represents your brand.
Outsourcing right removes a lot of the headaches of some day-to-day operational necessities. This helps you remain focused and ready to take your company to the next level, whether it is an enterprise or a startup.
This post was contributed by Cory Levin, Business Development Director of Air Sea Containers.
Combining automation tools and overseas VAs sounds like a winning strategy 😉
Outsourcing took a lot of control away from us, even if it did provide specialized services.
Hey Nate, that’s a very good point, and usually the case when you outsource through an agency. At FreeeUp, however, you can hire individual freelance specialists with whom you can choose to have direct contact to maintain as much control as you’d like. Feel free to set up a meeting with either Nathan of myself to talk more about it.
Іf you elect to go freelance, you’ll also bе in control of your personal schedule. As a business owner I don’t keep a nine-to-five work day so freelancing offers the flexibility I need, including time off on both sides and taking on a heavier workload some days.