There is one main goal that most, if not all, businesses share: growth. There are many ways to achieve growth, but one related question is: Should businesses outsource their operations or perform them in house in order to grow?
Outsourcing is defined by the Balance as “the strategic use of outside resources to perform activities traditionally handled by internal staff and resources.” There are differing opinions on this.
There are various reasons to outsource, including reducing costs, improving company focus, and making sure internal resources are allocated to purposes fundamental to the business. There are also requirements to fulfill for successful outsourcing.
The fundamental principle is to ensure that activities carried out in- house are adding value to the business and that activities to be outsourced cannot be performed by your existing employees. So, to successfully outsource, go through some research and make sure you have these things:
- Clear company goals
- A clear plan for the business
- Clear selection of the people to outsource to
- Planning of ways to keep in touch with the contractors
- Clear and properly written contacts
Outsourcing: The Practical Choice?
Entrepreneur takes a pragmatic view of this question. Outsourcing just means more efficiency. Have you ever heard the expression “jack of all trades, master of none?” Well, according to the American Psychological Association, managing multiple tasks at one time–in other words, not outsourcing certain business functions–could lead to a 40 percent drop in productivity.
This means that outsourcing will lead to more efficiency and higher productivity, not a lack of control over your business. Outsourcing functions like content marketing to increase awareness of your business, bookkeeping, payroll and admin is recommended by many business people and can help lead to more growth. Also, outsourcing based on your company’s areas of development will lead to a more vibrant and successful company, and can even save your company money.
Outsourcing can be useful for solving the operational issues of companies of all sizes. Outsourcing non-core business functions will allow your business to focus on its core modus operandi. What’s more, outsourcing will theoretically allow you to seek the brightest and best employees without geographical boundaries and time constraints.
Outsourcing to Eastern Europe is a growing trend due to the accessibility, excellent work ethics and quality IT workforce there. Entrepreneurs and business owners are opting, every day more and more, for Eastern Europe as an outsourcing destination.
A fundamental reason for outsourcing is, of course, to cut costs. Another reason for outsourcing is that it can improve your company’s flexibility and innovation, allowing you access to ideas at the forefront of business. Finally, outsourcing will allow you to seek partnerships with those who are at the forefront of technological innovation, meaning that your company will be at the cutting edge.
Reasons Why You Should Not Outsource
However, not everyone sees the benefits of outsourcing. Some experts are a little more scathing about outsourcing. Quickbooks give 5 reasons why outsourcing is NOT the answer for a business. One reason is quality control. If you do not employ in-house, then it is much harder to control the quality of employees’ work. However, this is not entirely true; people are developing more and more in remote teams and have learned how to communicate with one another in these environments.
The author claims that another issue with outsourcing is that it will make your business less flexible, as any changes to your business plan will have to be passed down to your outsourced employees, which will require retraining.
There are some companies pulling back functions that were formerly outsourced. Forbes magazine reports that many companies are deciding to minimize outsourcing – but, why is this?
One reason is that outsourced functions have failed to meet expectations. For example, outsourced employees may not have the same level of commitment to the values and ethos of your business. Another pressure that may limit outsourcing is wage inflation in outsourcing markets, which reduces the attractiveness of outsourcing.
However, a lot of experts believe that due to aforementioned reasons, IT outsourcing is witnessing a demographic change from previous destinations where people used to outsource to, making a slow but visible switch to outsourcing to Eastern Europe.
Goal: Outsource until You Can Reach the Rolex Model
In the end, outsourcing functions of your business has its pros and cons. As long as you avoid the main pitfalls and outsource in a smart way, a way that takes account of the functions that your business could not perform in-house, then outsourcing could be an amazing tool in gaining growth.
Of course, in an ideal world, your business model may follow the Rolex model. Rolex makes its own steel, its own mechanisms for its watches and control all its business functions. Amazingly, the company even mines its own gold and platinum. This is obviously not practical for the average small business, but outsourcing sensibly is the right tool that may one day get you to the position that Rolex is in nowadays.
Mike Thatcher is a digital nomad and enthusiast at Jobrack. He has been working on many startup projects in the last decade helping them grow and develop.