How to Outsource Work?

• Outsourcing allows companies to save labor and operational costs while increasing the flexibility and productivity of employees.
• It helps in the specialization of work and helps the core team focus on important clients rather than tedious tasks.
• Outsourcing reaps proven advantages if proper research is done on the basis of what the company needs.
• Apart from the IT sector, outsourcing is becoming important in BPO services or sectors such as advertising and customer service.

Outsourcing is practiced by companies and organizations when they hire third-party services either for a few projects or ongoing operations. It has become a common practice even in small businesses as well due to its various advantages.

Why do companies choose to outsource work?

“The important thing about outsourcing or global sourcing is that it becomes a very powerful tool to leverage talent, improve productivity, and reduce work cycles.” – Azim Premji, Chairman of Wipro Limited

In 2023, an estimated expenditure of about $731 billion was spent on outsourcing globally. 92% of the G2000 companies relied solely on this for IT. The question remains why is outsourcing gaining popularity over the years? 

Cost Savings

One of the major reasons for outsourcing is labor and operational cost savings. Businesses hire specialized workers without having to pay for infrastructure. The partner takes care of the operational cost. Outsourcing employees from countries with lower costs, such as India and the Philippines makes labor costs very minute. This allows companies to achieve efficiency without spending on various resources.

Flexibility

Remote working has anyway been promoted after the pandemic, whereby even employees prefer working at home. When asked, 76% of attorneys in Am Law wanted to continue working from home post-pandemic. Only 37% even considered going to a central office as an option.

This has led to a flexible work culture. Employees work at any time from anywhere on their own terms. This increases productivity and the will to work. Another advantage for company employees is that they do not have to engage in tedious work. These tasks can be outsourced. This frees up their time to focus on much more important tasks and clients at hand.

Access to Expertise

Outsourcing enables companies to hire workers with specialized skills and expertise that may not be available in-house. This is particularly beneficial for areas requiring advanced technical knowledge or niche skills.  For example, a clothing company hires an IT company on a contract for website building. This also helps save time, money, and effort to hire and train employees in that particular field. 

Continual Growth

Going through stagnancy in the workplace is possible, especially when everyone working is a long-term employee. Outsourcing work is contractually based which not only allows continued improvement, but also versatile ideas. Outsourced companies need to keep working hard to showcase their value. Including different people in your core team leads to variations in ideas and discussions leading to growth.

Apart from this distributing work also prevents risk factors. A company is less responsible for employees working under them, or the resources they have to provide them. This helps in case of any disruptions in the business.

How to Outsource Work: A Step-by-Step Guide

Now that we know that outsourcing is a good business practice, we can improve productivity while achieving cost-cutting. The next step is to learn how to outsource work to attain maximum benefit. 

Know Your Tasks and Cost

It is important to identify the tasks which need specialization. Outsource work which is either cumbersome or work that needs niche expertise and can be handled by an external party. On the basis of your needs, analyze your cost. Knowing your price and project helps you to negotiate better while searching for third parties to outsource work. 

Choose the Right Partner

On the basis of your tasks and pricing, select an outsourcing provider that matches your needs. Look for partners with a proven record, relevant experience, and positive reviews. Also, define your own set of criteria and consider points like geographical location, time zone differences, and cultural compatibility.

Create a competitive situation even if you are happy with your current partner. This allows them to give more ideas for improvement and workflows. 

Define Clear Objectives

Before signing off a deal, it is important to define clear goals and objectives. These include your expectations on the quality of work and the time and labor that will be provided to you. Establish key performance indicators (KPIs) to measure success and ensure alignment with your business objectives. Apart from that also clearly states cancellation terms, to prevent problems in the future.

Outsourcing Pricing Models

Another important aspect of how to outsource work is to manage the pricing of the same. There are various pricing models to choose from, each with its advantages and drawbacks. These models have evolved as outsourcing has become more common but with evolving strategies. There are many varying pricing models depending on the sector it is needed for. However, some common pricing models are discussed below.

Fixed Price

Fixed pricing models are predictable in nature and don’t change even if the market pricing changes. However, it also means that the partner must meet all the services needed by the company within this set price. Therefore, such models lack flexibility.

Time and Materials

Here, payments are based on the actual time and resources used. This is helpful in long-term contracts where it is difficult to calculate specifications. This model is flexible, however can lead to higher costs if not managed properly.

Outcome or Performance Based

This model is much like time and material-based, with the advantage of incentives on the basis of performance. This encourages the partner to work and produce better results. However, this also means that the third party might also have to pay a penalty if they produce unsatisfactory results. Therefore, it is important to have set guidelines on the basis of which the work performance will be measured. 

Key Areas of Outsourcing

Apart from knowing how to outsource work, it is also crucial to know what work must be outsourced. The IT sector is majorly outsourced by companies. Other than that, a few more common key areas include marketing, customer services, and human resources.

Business Process Outsourcing (BPO)

Business Process Outsourcing takes place when the company gives control of an entire body of function to another party. These include processes like payroll, accounting, and human resources.  The company can outsource from onshore (within the country), nearshore ( neighboring countries), or offshore (distant countries) parties. The scope and impact of BPO allow companies to focus on strategic goals while benefitting from the efficiency and expertise of specialized providers.

Marketing Outsourcing

Marketing outsourcing is another key area for companies to promote their brand image. 

This can range from digital marketing, content creation, and social media management to comprehensive marketing strategy development. This helps them recruit experts who can evaluate and help the company improve advertising through professional tools and strategies.

Customer Service Outsourcing

Customer engagement and loyalty are other key areas where every company is focused on selling their services. Customer service outsourcing allows companies to hire external providers to handle customer interactions. This can include call centers, email support, and live chat services.

This is a tedious process that helps the company’s core team to focus on other important tasks. It can improve response times, improve customer satisfaction, and provide 24/7 support, all while reducing operational costs.

Conclusion:

The increase in outsourcing is because of its ease simultaneously with its various advantages. It has become a common practice not only because of company benefits but also because of flexibility within the employees. It is important to know how to outsource work as it allows for productivity and gaining expert knowledge. 

What is outsourcing?

Outsourcing of work means hiring employees from third-party services on the basis of the contract. It can be done for a few projects or for handling a service in the company for a long time. 

What are the major advantages of outsourcing?

It allows for companies to have cheaper workforce, while also gaining expert knowledge. The employees of the company can focus on major clients and projects, without having to worry about tasks that can be outsourced.

What steps must be kept in mind when outsourcing?

It is important to know how to outsource work properly. The company must set clear expectations from the organization you are thinking of outsourcing employees from. Having a third party that has the same vision as your company helps to achieve the targets you set for them promptly. Also, keep in mind to take regular work reports while giving them creative freedom to allow both accountability and independence.