Organizations of all sizes and levels of experience are increasingly prioritizing efficiency, agility, and, often, a lean team. If this is your company’s goal, you may consider outsourcing.
In the business world, outsourcing tasks and processes to third parties is becoming more popular as a way to enhance performance capabilities and achieve more with less. Although there are mixed perspectives on contracting business needs to other service providers, it’s generally seen as a convenient way to accomplish better, more efficient work that saves both time and costs.
At Mäd, we’ve been on both sides of the equation: consulting our clients on which vendor to select when they outsource their work, as well as being the contractor that collaborates with other companies on a project basis. With this in mind, we explore the benefits and drawbacks of outsourcing, some risks (and how to mitigate them), as well as how to choose the right provider.
Outsourcing in a business context involves hiring a third-party company or individual to perform services or tasks that would otherwise be performed by internal staff. This can include routine activities such as customer service, accounting, IT support, and other administrative tasks. But, this could also be larger and more complex activities such as the end-to-end project delivery of a digital product — something we specialize in here at Mäd.
Turning to external service providers can have a number of advantages for a company.
1. Cost Savings. Outsourcing can reduce financial spending in two primary ways: by 1) enabling a business to focus on its core competencies while contracting out non-core activities and 2) thus reducing the need for full-time employees in some departments. This can help save money on resources, labor, and other overhead costs, as the company no longer has to purchase additional tools or hire new people.
2. Access to Expertise. Engaging a third party can provide access to specialized expertise and resources that are lacking or unavailable in-house. This can help a business improve its products and services and stay competitive. Most commonly, this applies to services like web or app development, marketing projects and campaigns, and events, where outsourcing can be more cost-effective and organized as tasks are delegated to experts in the relevant fields.
3. Increased Efficiency. Hiring a vendor for certain projects or tasks can help businesses to streamline processes and increase efficiency. Outsourcing speeds up workflow by eliminating the time required to train in-house staff and leveraging the experience of specialized providers. This can also reduce the risk of project failure by giving businesses access to better resources and expertise of third-party vendors.
4. Flexibility. Outsourcing can provide businesses with the ability to scale up or down depending on their needs. This benefits companies’ adaptability: they are able to adjust to changing market conditions and customer demands without affecting factors like employee turnover, productivity, and the quality of their products or services.
The case for outsourcing portions of a company’s workload is solid, and this is particularly evident in the current business landscape. Many businesses are trying to give full focus to their main line of work yet also attempting to enter new markets or scale their reach.
In addition to the benefits of outsourcing above, here are some further examples of when contracting out tasks and projects can be highly beneficial for your business:
While this process should be unique to your company and its goals, if you do make the decision to outsource, use this basic step-by-step guide to sourcing and selecting a suitable vendor.
1. Research the vendor(s). Do a background check on each provider’s history, experience, and reputation. Check online reviews and ask for references from other businesses that have used the vendor’s services.
2. Consider the costs. Compare the cost of outsourcing to the cost of hiring an in-house employee or team. Don’t forget the cost of training, benefits, and other overhead costs associated with full-time staff.
3. Evaluate the capabilities. Determine if the vendor has the skills and resources to complete the tasks you need. Ask for a portfolio of their work, and if you’re selecting among several contractors, request them to submit project proposals with their approach, scope of work, and budgets.
4. Measure the timelines. Make sure the vendor can meet your timeline and deadlines. Ask them to create a detailed timeline of when each step of the project will be complete, how long they will take, and how they will be monitored.
5. Establish a contract. Lastly, ensure sure you have a written contract that outlines the final scope of the project, the timeline, and the payment terms. This will help protect both parties in case of any disputes.
Even with the benefits of outsourcing, sometimes building up a firm’s internal capabilities might be a better choice. Ultimately, this depends on the business and the tasks in question.
Start by asking yourself: is the task central to your operations (for instance, accounting, IT, or customer service can be outsourced — management and sales shouldn’t!)? Do you have enough resources to complete the project internally? Or do you have limited time but a high enough budget to afford a vendor?
At Mäd, we have been on both the client and the contractor sides, but as we’ve shifted toward consulting other businesses, we’ve established our own way of finding great providers. We built and sourced an expert database of top contractors, consisting of individuals we’ve worked with in the past (or work with regularly) and other potential candidates with good references.
Having a list of trusted vendors is a great asset for our business and workflow. It enables us to quickly and easily find the right person for the job, eliminating the need to search for new contractors, which can be time-consuming and costly. Plus, having worked with these individuals or agencies before, we can be confident that tasks are done correctly and efficiently, delivering high-quality results. This saves us not only time and money but also sleep!
Building long-lasting relationships and partnerships is another added benefit, as it can improve communication and reduce misunderstandings. This is aligned with our principles of collaboration, transparency, and accountability, and helps us better advise our clients.
Essentially, our approach begins with a thorough assessment of the client’s needs and objectives so that we can identify the best outsourcing provider for the project. We then focus on creating a collaborative relationship between the client and the provider — setting clear expectations, establishing a timeline, and developing a communication plan.
It can be difficult to decide whether you should delegate a project or task to someone else, or if it can be done internally. But for companies and firms operating in the current business environment, outsourcing is often an effective solution to improving performance and productivity.
Contracting out work can save businesses time and money, allowing them to focus on primary business objectives while being more flexible in adapting to external shifts. It also provides access to the expertise of vendors specializing in other fields. This increases companies’ opportunities to enhance their product and service offerings, improve both customer and employee experience, as well as pursue growth and innovation.
Of course, the drawbacks and risks of outsourcing should be considered, and some businesses might find that working with a third party is not a suitable option for them. This can be due to a lack of resources or even if the project is highly strategic and crucial to the business and would be better off handled by an in-house team.
At Mäd, our approach to outsourcing emphasizes the importance of collaboration, transparency, and accountability, ensuring that the client and the provider are working together to achieve the desired results. If you haven’t done so already, we highly recommend compiling a list of contacts of individuals and agencies that you can request to work with when you need to outsource your (or your clients’) tasks.
If you’re interested in enhancing your company’s strategy and improving operational excellence through digital transformation and better processes, don’t hesitate to reach out to us at firstname.lastname@example.org.