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What Is Outsourcing?
Outsourcing is an agreement where a business contracts a third party to perform services and job functions that were traditionally performed by the company’s employees.
Any business operations that can be performed from an offshore location can be outsourced.
Examples of business operations that can be outsourced include call center services, bookkeeping services, inventory management, IT services, Payroll solutions, etc.
Outsourcing Key Takeaways
- Before outsourcing any business operations, create a detailed request for proposal
- The RFP document outlines clear objectives and creates the requirements that the potential service provider must meet
- Outsourcing can bring big benefits to your business, but there are also significant risks and challenges involved
Understanding How Outsourcing Works
Many companies choose to outsource so that they can focus on the core business areas that increase revenue and profits.
To outsource your functions and responsibilities effectively, start with a clear statement detailing what the company wants to accomplish.
When selecting a service provider, check their references and request feedback from the list of their past customers. It is always important you look out for specific experience depending on the project you are undertaking.
Do not choose a service provider based on the price. Rather, review portfolios and work samples to make sure that their previous work meets your expectations. If you are engaging a service provider for the first time, start small and tie payment to clearly defined project scope.
Finally, negotiate work ownership and do not forget to get the contract on paper.
Real World Examples: Outsourcing
Alibaba outsourced website development services to a US-based firm. According to Jack Ma, china faced a scarcity of development talent, and so he had to source the website development.
Working with experts in website development and e-commerce infrastructure, Jack Ma managed to build a successful company that is today listed among the famous eCommerce marketplaces.
In 2014, Alibaba's initial public offering became the largest IPO in the industry.
Expensify is a company that provides a tool for collecting expenses so that users can keep track of receipts and transactions in a more convenient way.
With over 2 million customers and slightly above 100 employees, managing the backend and front-end systems was simply overwhelming.
The company’s management outsourced management of their back-end systems to an international software house.
Following the decision to outsource, the in-house team could concentrate exclusively on front-end development and ultimately grow their business.
How to Get Started
If you are interested in outsourcing some of your job functions, here are important steps for outsourcing successfully:
- Determine which tasks or functions to outsource
- Document every step of your process
- Establish a steering team that includes members with appropriate skills and be committed to the mandate
- Engage an outsourcing consultant to work alongside the steering team
- Decide the method for completing the outsourcing contract
- Decide on the vendor selection process
- Develop a negotiation strategy
- Ensure all agreements and responsibilities are documented
Outsourcing may sound like an overwhelming practice at the start. If so, it helps if you engage the services of an outsourcing expert to guide you through the seemingly difficult task.
Here are two amazing tools to help you find the right freelancers:
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