Outsourcing: A Brief Guide for SMEs

Have you considered outsourcing certain tasks or operations in your business?

Our brief guide explains the benefits as well as the challenges you should look out for. We also give you tips to help you make a success of your outsourcing initiatives.

The tips apply to all commonly outsourced areas of business. This includes IT, customer support, website design, software programming, content development, logistics, recruitment, manufacturing, and more.

Let’s look first at why you should consider outsourcing, and the potential disadvantages.

Benefits of Outsourcing

  • Access to specialised expertise – you get access to a much wider range of skills by outsourcing than you get if you employ individuals in-house.
  • More flexible business model – outsourcing gives you greater business flexibility while also making it easier to make changes and adjustments depending on market conditions.
  • Allows you to focus on your business – most businesses outsource tasks that are not core areas of their operation. By doing this, you can focus your efforts on delivering excellent service to your customers.
  • Mitigates risks – when you outsource, the risks associated with a project or task are shared between you and the contractor. You are likely to have a larger share of this risk, but it won’t be as large as keeping it in-house.
  • Can be implemented quickly – you can also progress with projects faster when you outsource as the recruitment and onboarding process is much quicker.
  • Lower costs – outsourcing will save you money, particularly in non-core areas of your business.

Challenges

  • Challenges with management – managing people is usually easier when you are in the same location. This won’t be the case when you outsource, plus you will be working with individuals and businesses with different ways of working, different priorities, etc.
  • Data confidentiality – you have to consider the impact of data privacy too, particularly if the contractor or freelancer will have access to sensitive data.
  • Hidden costs – sometimes outsourcing incurs additional costs when certain situations arise.
  • Becoming reliant on an organisation outside your control – you should also consider the fact you will be dependent on an organisation that is not under your control. What will happen to your business and the service you can give customers if that organisation can no longer provide the outsourced service, for example.

Top Outsourcing Tips

  • Contracts – putting carefully written contracts in place is crucial when outsourcing. Contracts should cover the scope of the project including the objectives, schedule, expectations, deadlines, and any other relevant information.
  • Selection process – the selection process when choosing a freelancer or contractor should be as rigorous as when you recruit an employee.
  • Experience – try to find a contractor or freelancer who has direct and relevant experience.
  • Don’t choose by price – the cheapest price is never the best, and often costs more in the long run.
  • Review past work and previous client feedback – don’t just rely on the contractor’s assurance they can do the job.
  • Work in stages – with a new contractor, it is usually best to start with small projects and then progress to large jobs.
  • Make sure ownership issues are clear – if the outsourcing work involves creating something new for your business, make sure it is clear in the contract that all ownership rights transfer to you.
  • Ensure there is adequate post-delivery support – as a backup if things go wrong.
  • Put everything in writing – this includes conversations. Even if the conversation is by phone, send an email immediately after the call summarising what was said.
  • Don’t rush the decision-making process – taking your time will ensure you make the right decision.
  • Consider the impact on your employees – employees can get nervous about their own position when a business begins to outsource.
  • Plan for the unexpected – in particular, what will happen if the contractor can no longer provide the service? How long would it take to find a replacement, and could your business cope in the interim?

Outsourcing does offer a range of benefits providing you approach its implementation carefully and with thorough planning.