The revenue of the global outsourced services industry rose steadily year over year from 45.6 billion U.S. dollars in 2000 to 99.1 billion in 2012. – Statista.com
When two college friends founded Macphun in 2008 and subsequently released their first wildly popular application Cartoonatic – they never would’ve anticipated the success (and increase in workflow) that they would face. Paul Muzok the founder of Macphun, is responsible for creating a software development company that specializes in providing user-friendly SaaS software to photographers of all skill levels, world-wide. After rave reviews on their debut app, they continued to produce photo-editing apps that consistently top the App Store charts.
While their applications were receiving awesome recognition and they grew to over 22 million customers worldwide, they still sought to streamline some of their essential business processes anyway they could. Kevin, VP of Macphun tells us that he considered outsourcing so they could be able to support their customers in a professional manner and free up the internal employees that were previous working with customer support in order to help Macphun grow and be more productive.
“We definitely did respond to customer inquiries by email and phone, but again it took man-power within the company that we could otherwise deploy in other ways.” – Kevin La Rue, Macphun.
Now this is just one small niche of outsourcing, but each sub-category all share the same purpose, which brings us to the core of this guide
HOW CAN OUTSOURCING HELP YOU GROW? (and what you need to know)
So incase you’ve gotten this far and still don’t know what outsourcing is exactly… here’s a short and straight to the point definition by Merrill Matthews of Forbes.
Outsourcing is when a company contracts with an outside person or company to provide some product or service, such as bookkeeping, payroll processing or janitorial services, or more complicated functions like marketing or IT services. And families do the same thing when they turn to professionals for major plumbing, air conditioner or car repairs.
While outsourcing is typically seen as a maintenance strategy for some immense corporations like GE, Microsoft, Intel, Oracle – it has also recently been popularized as a growth strategy for many lower-level startups that need to prioritize more important areas. Startups like Skype, Slack, Uber, AirBNB, etc., are known for their use of outsourcing processes from coding and development to marketing and customer support. Nancy Mann Jackson from Entrepreneur backs this up by saying, “Entrepreneurs have long seen outsourcing as a strategy reserved for big business, but technology has made it a more accessible tool for small businesses and for some small firms, outsourcing has made a powerful impact on their growth, productivity and bottom lines.”
As stated above, high-quality outsourcing is becoming more and more popular with small businesses, because of the increasing accessibility to technologies that make outsourcing smoother and more efficient. BUT, in addition to this, outsourcing is blowing up because, there are a extraordinary amount of qualified professionals that have chosen to leave the corporate world in favor of working in a less stressful environment like their homes or small startup offices. These professionals include: virtual assistants, marketing directors, copywriters, graphic designers, website/software developers, etc., that all have the ability to work from anywhere in the world.
Now you probably have a few questions that you need answered before even considering outsourcing like…
What to outsource?
When to outsource?
Where to outsource?
Concerns with outsourcing?
Cost vs. benefits of outsourcing?
Now that you’ve asked all of these questions, it’s time to make this guide as comprehensive as possible by simply going down the list.
Which Business Processes Should I Outsource? It’s likely that you’re already outsourcing some of your business tasks like payroll administration or background and criminal checks for employment. And with the points mentioned above, it’s easier than ever to outsource nearly any task that you see necessary. BUT this doesn’t always mean that you should outsource just because it is easy for you. Many processes are better off being taken care of in-house, depending on what your priority is… For example, if your priority is to generate huge amounts of revenue with your special sales technique that only your in-house team has perfected then it’s probably not the best idea to give that task to an offshore contractor. On the other end of the spectrum if your priority is customer support, then it’s probably OK to outsource something like graphic design.
Here’s a quick list of tasks that are better off left for an outsourced contractor to take care of:
Tasks that require highly skilled expertise. Let’s say you are a CEO of SaaS startup and don’t have a group of executives established yet, for example CFO, COO, CIO, etc. Outsourcing some of these positions (at least temporarily) can help get your startup off the ground. So in the end you will have a highly skilled task outsourced for much less than it would cost to have a full-time employee do it.
Repetitive tasks. This can be anywhere from outbound sales calls to get the word out about your product or conduct customer satisfaction surveys to very common troubleshooting issues. Let’s face it, giving these repetitive tasks to your highly qualified in-house team to worry about may be a HUGE waste of your company’s time and resources.
Also included in this list: Filtering Emails / Managing Spam, Answering Customer Service Emails / Tickets / Chat Support, Sending and Management of Newsletters, Data Entry in Word, or Google Docs, PDF Conversion, Splitting and Merging, Preparation of Training Materials, Social Media Management, and countless others. Basically almost any monotonous task you can think of can be outsourced by freelancers/virtual assistants/call centers.
Tasks that require unique talent or knowledge.
You may have a great idea for an app and some capital to fund it’s development, but no knowledge of coding/development/design. This is where you might need to consider outsourcing the development of your app. You can hand over your ideas to an experienced developer on the other side of the world and let them take care of the rest (of course with your supervision). Another example is if you don’t have the resources to employ full time IT support personnel to manage your IT systems, you can easily employ an IT expert from freelancer sites like Elance-Odesk or Guru.
To cut a long story short… you can easily and effectively outsource nearly any business process that isn’t a priority in your company, one that doesn’t require full attention from your in-house team, or any tasks that you’re not comfortable performing yourself.
When Should I Take The First Step? For the guys at Macphun, they finally made the decision to outsource when taking care of piles of support tickets became too much for their relatively small staff to handle. But it’s different for everybody.
The time to decide on outsourcing may come very early for somebody whose product development depends on it. OR it may come at a later time for those companies that just need a little support.
For Chris Devor of Macroplant Inc. the decision to outsource came about 1 year into starting his company:
After about 1 year in business, I needed help with our support emails. It was both a time issue and an issue of being able to properly respond to my users promptly and effectively. First I had another developer doing support emails. But given the cost of a developer’s salary, it didn’t make sense to have them answering support emails all day. So next I hired a freelancer or two to help with support emails.
Where Should I Outsource To? In the world of tech and IT outsourcing services, the most well known countries to outsource to are India, Philippines, Central America, and Eastern Europe with a total workforce of nearly 1.5bn (Statistic Brain). Due to the poor economies of third-world countries, many companies choose these regions simply because of the cost-savings.
With this said, you shouldn’t go into the recruitment process with a specific country in mind, but with an individual’s unique talents/skills in mind. Remember you are ultimately focusing on quality and not just prices. You can review thousands of freelancers on sites like Elance.com or Guru.com to pick and choose which ones will fit your needs best.
Why would your normal Silicon Valley CEO hire software developers for 100k+ a year, when he can hire equally qualified off-shore workers for less than $15 an hour?
This question may bring up some ethical concerns that I’ll address below, but it’s important to remember that your typical CEO’s job is to do what is in the company’s best interests. And more times than not, saving money and time by outsourcing… is usually a CEO’s best interest.
Concerns With Outsourcing
There are a few different concerns that you need to look at before thinking about outsourcing. Concerns such as security, quality, management, poor work environment, transparency, etc.
Here’s what to look at when choosing the right contractor…
Do they take data privacy and confidentiality measures to ensure the safety of your customers’ personal info?
Will they be available to communicate with whenever you have a question or concern?
Do they protect your best interest by taking legal measures?
How do they handle the management of their team can you routinely review your outsourced employee’s performance?
Are they performing a job that your in-house team genuinely can’t perform effectively?
Can you see/visit their office and evaluate working conditions?
Do they have reputable clients they already provide service for?
If they don’t follow one or any of these simply business measures… it’s a big red flag.
Another big concern with outsourcing is language barriers and cultural differences. But by following a strict training and recruitment process this one can be overcome easily.
Finally, communicate your expectations clearly and even write up a contract before hiring outsourced members to make sure there is no confusion anywhere.
“When there is a problem [with the work], I am often the one to blame, as my instructions may not have been clear enough,” says Jeremy Belcher, owner of FoxyMelody.com
Risk Vs. Reward Of Outsourcing
Outsourcing is widely known as one of the best solutions to cut costs and many studies have been carried out to verify this fact. Booz Allen Hamilton, a leading management and technology consultancy, issued a report in 2014 describing “a mixed report card on traditional outsourcing”. It nevertheless pointed out: “Savings typically result because the outsourcing supplier can access a cheaper, more flexible workforce and the latest, most efficient technology. Organizations claim that they achieve, on average, a 15 % cost reduction through outsourcing.”
However effective outsourcing is in saving a company money – it still has the potential to harm a company’s reputation. There is a huge stigma against outsourcing. The word “outsourcing” brings to mind different things to different people. If you live in a community that has an outsourcing company and they employ your friends and neighbors, outsourcing is awesome. But if your friends and neighbors lost their jobs because they were shipped across the world, outsourcing will bring bad publicity. If you outsource part of your operations, morale may suffer in the remaining work force.