The concept of outsourcing is pretty simple: delegate or transfer tasks that do not fall under your core competence so you can increase the level of productivity; improve quality of work and generate cost savings. You might even have outsourced without knowing it. When you pay a gardener to mow your lawn or hire a personal chef to cook your meals, you are outsourcing tasks.
But when taken on a larger scale where there are repercussions on your business, you will have to plan your outsourcing strategy. Here are 7 steps you can take to create a solid outsourcing plan:
1. Research About the Process
Before you enter any venture, you should always conduct thorough research. Most importantly, research should be conducted with an objective mindset. In the case of outsourcing, find out the pros and cons about the process.
Where should you start? Research the history of the process; uncover how outsourcing developed from a cost-saving option to a strategic partnership arrangement within a global economy. It will give you a better understanding of how your outsourcing process may evolve within the framework of your business.
Online research is not enough. Reach out to resource people who are highly knowledgeable on the industry. Arrange meetings and learn what you can about their experience in outsourcing. Ask if you can consult with them frequently.
Research should also be all-encompassing. Outsourcing is a global process; the primary destinations are remote locations like the Philippines and India. Contact the regulatory agencies in these countries and get as much insights and information as you can.
2. Establish Your Goals
Businesses primarily outsource in order to streamline costs. But there are other benefits and reasons to include the process in your business development strategy:
- Increase Level of Productivity
- Introduce Flexible Business Modeling
- Improve the Quality of Deliverables
- Reduce the Risk of Business Expansion
- Develop Global Linkages or Connections
- Capitalize on Economies of Scale
- Capitalize on Advanced Technologies
It is possible to have multiple goals but these should be complementary, well-balanced, realistic and achievable. For example, if you emphasize cost savings, you may end up contracting an outsourcing partner on the basis of price. By commoditizing the process, you may end up compromising the product or service.
3. Identify the Tasks You Want to Outsource
The question of which tasks to outsource can be approached in a number of ways. But generally, these tasks are determined by the needs of your business. The most popularly outsourced duties and responsibilities are as follows:
- Administrative – Supportive or clerical functions; e-mail filtering, calendar management, appointment setting, CRM updates, data entry and phone handling.
- Specialized/ Technical Work – Web Design and management, SEO, graphics design, text and image moderation, transcription, market research and bilingual services.
- Back Office – Accounting, Human Resources and Information Technology.
- Marketing – SEO, Content Writing, telemarketing, Social Media Marketing, traditional marketing services and e-mail marketing.
- Creative Process – AutoCAD, animation and computer graphics.
- Customer Support – Inbound phone handling, outbound surveys, chat support, e-mail support and social media moderation.
The tasks that you plan to outsource will determine the work flows of your operation. The work flow will identify the specific skill sets of your outsourcing team. It is a fully streamlined and effective approach.
For example, a telemarketing work flow would look like this:
Agent > Supervisor > Quality Assurance
Thus you would need 3 different skill sets in a telemarketing work flow; each one has their own function and set of responsibilities. In this case, the agent makes the call, the supervisor verifies the details and Quality Assurance reviews the process to make sure it is in line with guidelines.
4. Determine Your Technological Profile
Outsourcing arrangements are typically run on remote set ups. There is no shared space collaboration with the client and service provider. This makes it very important to have the ideal technological profile in place.
Similar to skill set, the technological profile will depend on the demands of your outsourcing process. In our previous example, a telemarketing campaign would need the following:
- Minimum 85KB per computer unit.
- Inbound/ Outline phone connectivity.
- Programmable Predictive Dialer system.
- Call forwarding feature.
- Call recording feature.
You have to check with your outsourcing partner if the technological profile is possible. The outsourcing partner should also be allowed to propose recommendations but these should be intended to improve performance not just result in cost savings.
The technological profile must also provide tight security and data protection features. Most businesses are hesitant to outsource because they are concerned there might be a breach in data storage.
5. Plan Out Your Budget
As mentioned, businesses outsource to streamline costs. Whether it is a large scale corporation, a small scale business or a startup, outsourcing can generate significant cost savings.
However it will still entail expenses. Depending on the size, scale and type of outsourcing process, advances and investments could be made.
If you are outsourcing a large scale operation; a department or a variety of services to a third party, the outsourcing partner will most likely request a pre-operating budget. This will cover acquisition of equipment, set up fees and working capital for the first 3 months of operation.
The budget will determine your cash outlays for manpower, technology and operating expenses. It will be used as a reference point for cash flow and income projections to keep track of the viability of the outsourcing strategy.
6. Qualify Your Outsourcing Partner
When you mention the word “outsourcing”, thoughts of the Philippines, India or some other remote location will probably come to mind. These countries have been associated with outsourcing because of the comparative cost advantages in labor, the existence of economies of scale and the high quality of deliverables.
For example, when you contract the services of an outsourcing company from the Philippines, labor costs will be calculated on wage rates that range from $2.50 to $5 per hour. In the US, UK, Canada and Australia, wage rates average $16 to $20 per hour. Thus, the cost savings on the basis of wages alone are quite substantial.
But there are clear challenges to working with remote locations particularly in the areas of language, culture and social nuances. Some countries are also fall behind in terms of technological infrastructure.
The Philippines and India have been widely criticized for having slow but expensive Internet services. Protectionist policies by the respective governments have hindered competition in the telecommunication industries. You will have to take steps in qualifying your potential outsourcing partner.
Here are some tips to consider:
- Join focus groups in LinkedIn; start out a thread and get recommendations.
- Contact regulating agencies and ask for a list of member outsourcing companies in good standing.
- Get recommendations from friends and associates.
Come up with a shortlist of candidates and invite each one to an online interview. Ask them to provide a company profile and a list of references you can contact.
7. Prepare Your Development Time Table
Outsourcing is more of a process than a strategy. If you want to maximize its benefits, you should plan for its growth and evolution within your business framework.
Let’s take a look at a small scale example of a startup outsourcing tasks to virtual assistants:
Month 1 to 3- Administrative Services:
- E-mail filtering
- Calendar Management
- Phone handling
- Preparation of reports
- MS Office services
Month 4 to 6- Marketing Services
- Social Media Marketing
- E-mail Marketing
- Content Writing
Month 6 to 9- Back Office Operations
- Human Resources
In this example, the entrepreneur started out by outsourcing administrative tasks to a Virtual Assistant. He probably wanted to get his feet wet first, learn more about the process and limit his risk by delegating non-essential services.
As he gains confidence and knowledge on outsourcing, he hires another VA this time to handle the marketing requirements of his business.
Large scale companies with more complex business needs will come up with more extensive time tables. But the bottom- line is to always plan for the future.
Despite the challenges posed by nationalists, outsourcing will remain a valuable tool in the business strategy tool box because its ability to streamline costs while increasing productivity is a powerful hedge versus uncertainty.
Outsourcing is a by-product of globalization. It represents the direction of the new economy; one that is influenced by technology and the need to explore new avenues to ensure the growth and stability of business.