A simple look-up in a dictionary will tell you that outsourcing is nothing more than obtaining goods or services via contract through an outside supplier. Sounds obvious? It is and it isn’t.
Types of outsourcing
There are as many different specific types of outsourcing as there are industries, jobs and department functions, but if you group these together, outsourcing mainly falls into three areas: technology services, business process services, and knowledge-based processes.
Technology services might include communications systems, where you hire all the telephones, the computers, the network infrastructure, and you get the technical support as part of the hire price.
Business processes include both front and back office functions. Back office outsourcing might include payroll, credit control, billing, data entry, and HR. Front office could be marketing, customer service, and technical support for customers.
Knowledge base is, effectively, talent. Specialist individuals you get in from the outside to manage specific projects, troubleshoot departments, and figure out new ways of working.
Why use outsourcing
The need for outsourcing is tied in with the benefits of the practice. That is, the reasons why companies find they need outsourcing are pretty much the reasons why outsourcing is an advantage.
The main benefits of outsourcing can be boiled down to four related areas: costs, time, talent, and resources.
Cost it out
Costs, whether they’re overheads or operational and labour costs, can be reduced by outsourcing. This matters, whether you’re a one-man-band or a multinational conglomerate.
If your company is small, the outlay needed to support its growth in-house may be greater than what its finances can muster. Take HR and payroll for example. A fully operational HR department with administration assistants, HR manager, training programmes, software and hardware, could cost upwards of $600,000 over three years.
An outsource company that supplies specialist HR and Payroll services may set your company back by around half that amount over the same three-year period. It’s a significant difference, and it is made possible by the fact that the outsource company has already spent most of its capital outlay on the department; you pay for running costs instead of overheads and running costs.
Not only that, the expertise needed to fulfil your obligations as a growing business may be prohibitively costly.
The supply of talent
Talent is a costly acquisition. Whether it’s a Head of Finance, a chairman, or a creative, it may better suit the way your company works, and its finances, if these are employed on an as-and-when basis. A once-a-week Head of Finance can be just as effective as a full-time one, provided you have a capable in-house manager. A copywriter employed on a project-by-project basis may have what appears to be an expensive rate, but will be a more efficient proposition than a salaried one.
One thing we have found for us at EnCoCreative is that with only a few of us working one-man departments, we have pretty much perfected the art of communication with only ourselves as ‘touch-points’. This is a benefit of hiring individual freelancers who are prepared to communicate well. That kind of communication can be much more unwieldy with large companies and many in-house managers, where there are potentially many touch-points and internal politics. However, when you hire a specialist outsource company, what we have found is that they tend to have this process of communication well-honed to perfection. Big bonus.
Get the most out of your resources
Outsourcing can free up the in-house resources and talent you already have to allow them to concentrate on core business development, innovation, and improvement, rather than wasting time fulfilling the mundane aspects of keeping the business running with back office functional tasks. Instead of you being the person who balances the accounts and fulfils payroll services, let a specialist company do that so that you can concentrate on accessing new business.
It can be hard to figure out what areas you should outsource; often they are simple jobs that use time and manpower (both resources that you probably need elsewhere).
Time is an important resource, and it’s hard to put a true price on it.
Our inspiration and charismatic leader is Maria. She is a young retired professional dancer with innovation and vision for a new future. Her time is best spent acquiring new business and networking with potential clients and allies. She delegates the majority of the administrative work to her able Virtual Assistant, who runs the company by the rules and solves the myriad mundane issues so that Maria’s time can be better spent.
Other areas improved by outsourcing options
Outsourcing gives you the power to improve your lot and that of your business without running too high a risk. In fact, it can even mitigate risks, and that’s a big reason why companies use it. Risk is one of the reasons that EnCoCreative uses outsourcing as part of its permanent business model.
Creatives are known for their artistic temperaments, and additionally, if they’re really good, they may have a lot of work going on. If our social media manager has a hissy fit and disappears in the middle of the project, we can employ another within the week, avoiding all the recruitment hoops to employ an in-house member of staff. They might not know the company so well, but it doesn’t take long for a professional freelancer to pick up the essence of the company’s spirit and run with it.
The process isn’t as simple if you are dealing with a specialist outsource company, but on the whole, outsourcing gives your company a flexibility it might not have otherwise had. It turns a business into a chessboard where you choose your pieces and your moves, so it’s more than worth considering as your company evolves and develops. Your pawns could turn into queens if played the right way.