How do I decide what should be outsourced?

October 2021
 

Whether you want to reduce operational costs, access first-rate expertise or free up internal teams, there are plenty of reasons for outsourcing.

When you outsource, you delegate tasks or processes to a third party or external agency. It’s a useful way to get something done faster, cheaper, or better than you could with your team. But that doesn’t mean you should start outsourcing off every task straight away.

Key lessons of outsourcing:

  • Understand the task or process you’re outsourcing

  • Have clear reasons for outsourcing

  • Recognise that outsourcing is about building a relationship – not just a way to hand risk over to someone else.

Common reasons for outsourcing

There are a number of different reasons for outsourcing:

1. Lower costs

Lower costs are one of the biggest benefits of outsourcing. Specialists can carry out the work more efficiently and have economies of scale. This means the cost of completing a project is often lower than you could achieve internally even after they’ve added a margin.

Outsourcing can help to keep costs low by avoiding bringing on additional team members, which requires not only the salary but also the investment in office space, equipment, and management time.

2. Access expertise

Most businesses don't have every specialist they need in-house. Look at digital marketing for example.

To build a competitive online presence, you need expertise in email, social media, Search Engine Optimisation, paid advertising, Google Analytics and more. How do you ensure your marketing activity is as effective as possible?

Outsourcing is useful because it gives companies the chance to fill skills gaps with specialists. A digital agency, for example, will have staff who are proficient in each area of marketing.

3. Free up internal resources

If your internal teams are tied up working on ambitious projects, you might want to outsource routine tasks. A common example is developers; if your internal team is focused on building a new platform, you may opt to work with an external agency to deal with bugs and day-to-day issues.

A caveat to this point is that you still need to factor in time for project management and clear communication with external contractors. While technology makes it easier to stay updated on projects remotely, it’s important to put in the time and effort to make sure everyone is on the same page with goals and objectives.

4. Improve company focus

Improved focus is one of the main reasons for outsourcing tasks. If your employees are bogged down with low-impact, administrative tasks on a daily basis, they won’t have the time to be creative or think about the bigger picture. Outsourcing frees up their time, allowing your business to make the most of your in-house expertise.

Deciding what should be outsourced

To decide what tasks to outsource, it’s a good idea to start with these three statements. List relevant activities or processes that could fit under each heading.

1. These tasks are time-consuming and add little value being in-house.

Think about the activities that your staff do simply because there isn’t anyone else to do them. These tasks might be vital to the business but keeping them in-house doesn’t add any extra value.

For example:

  • Bookkeeping and payroll

2. These tasks are valuable, but my company doesn’t have the time or expertise to execute them properly.

Be realistic about the tasks you aren’t doing justice to. These are activities that will have a positive impact and drive growth, but they regularly slip down the list of priorities. Perhaps you don’t have the time to develop a proper strategy, or you lack the in-house expertise to reap the benefits.

For example:

  • Social media marketing

  • Event management

  • Recruitment

3. These tasks are expensive to run in-house and would be cheaper to outsource.

Tasks that require specialist equipment or technology fit into this section. Is a client looking for a one-off project that requires cutting-edge technology? Does it make business sense to hand over these operations to an expert?

For example:

  • IT operations, including hosting and cybersecurity

  • Software development, particularly if you’re a small business and don’t have a fully-fledged team in-house

What not to outsource

While there are numerous tasks you can outsource, there are also certain tasks that you should keep in-house.

Don’t outsource core competencies

Think about tasks that are vital to your business. Is it a core part of your brand? Is it something you do better than everyone else? If so, keep it in-house.

Outsourcing lets your company focus on what it does best – so don’t outsource what you do best!

There are two main reasons for this:

  1. Outsourcing prevents you from developing staff and growing a talented team of experts in-house

  2. Outsourcing can go wrong. If it’s vital to the success of your business, don’t pass it on to someone else

Don’t outsource problems

Every business runs into problems along the way, whether it’s a technology challenge or an advertising campaign that isn’t working. It might be tempting to outsource but having a third party blindly take over probably won’t lead to positive results.

Outsourcing problems can also create a reliance on contractors or external agencies. It means that your team won’t be pushed to solve challenges in the future and might lack an understanding of how elements of your business or product work.

The next steps in outsourcing

There are plenty of reasons for outsourcing tasks or projects. It frees up time to focus on what really matters, gives you access to external expertise and ensures key tasks aren’t side-lined.

Once you’ve decided what you want to outsource, the next step is to choose the right contractor or agency. Talk to a number of different firms and do a trial run before you hand over an important project. Some companies are good at selling themselves but have little substance behind the sales patter.

Be wary of any professional partner that offers a blanket ‘yes’ response too. Not all projects you want to outsource will be viable. A partner that agrees to everything you pitch could ultimately do more harm than good.

It’s helpful to talk to peers and using personal recommendations. Many businesses prefer to buy a service that they know someone else has had a good experience with.

How do I decide what should be outsourced?

Outsourcing is a useful way to get something done faster, cheaper, or better than you could with your internal team.

  • Understand the task or process you’re outsourcing

  • Have clear reasons for outsourcing

  • Recognise that outsourcing isn’t about handing over internal problems

Common reasons for outsourcing

Lower costs

Outsourcing can help to keep costs low, particularly for small businesses who might not have enough work to warrant taking on a full-time employee.

Access expertise

Most businesses don't have every specialist they need in-house. Outsourcing can fill skills gaps with specialists.

Free up internal resources

If your internal teams are tied up working on ambitious projects, you might want to outsource day-to-day tasks. Remember you still need to factor in time for project management.

Improve company focus

If your employees are bogged down with low-impact, administrative tasks they won’t have the time to be creative or think about the bigger picture.

 

 

This article was written and originally published by The Productivity Group (trading as Be the Business). Be the Business is an independent, not for profit organisation set up to help business owners and leaders improve the performance of their business. © Copyright 2021 The Productivity Group.  All rights reserved.

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