Outsourcing: Pros, Cons, & Projects to Consider When Hiring a Third Party
This blog post has provided information designed to help our readers better understand the issues surrounding outsourcing and does not necessarily represent the strategies of HubSpot. If you are looking for a professional opinion on your business structure, we suggest consulting a professional.
You know the feeling of bliss you get when you reach inbox zero or cross the last item off your to-do list? Yeah, neither do most of us. Because of that, many companies turn to outsourcing as a tool for small or overworked teams.
It doesn’t end there — other companies rely on outsourcing to fill knowledge or skill gaps they don’t yet have the headcount or budget to hire for internally, including paid advertising, video production, and payroll.
Think you might need to outsource some projects? Here, we’ll look at the pros and cons of outsourcing, see it in action with a few examples, and explore which tasks businesses commonly outsource.
The first step to outsourcing is browsing for freelancers or third-party providers that offer what you’re looking for. They typically outline what they do and a pricing structure so you can decide based on how your needs and goals align with their abilities.
Once you’ve decided on a provider, you’ll create a written contract that outlines tasks, goals, deadlines, and pricing. You’ll also likely share any resources you have to help them learn more about your brand or business so that whatever they produce or do aligns with your brand. For example, providing a design team with a logo or giving a payroll expert compensation information.
Why do companies choose to outsource?
According to a recent Deloitte study, the main reason companies use traditional outsourcing (for simple tasks that can be automated, like network administration) is an overall need to cut costs. Most recently, challenges in employee retention, a competitive talent market, and keeping up with new technologies have drawn businesses to outsourcing — “Organizations call upon the service provider ecosystem to provide critical solutions that are agile and integrated.”
Managed services outsourcing is outsourcing to providers with advanced expertise that offer specialized services, like a cybersecurity provider. The most common reasons businesses say they use managed services outsourcing are increasing the pace of technology and digital transformation, to gain access to new capabilities, and because of increasing and more complex cybersecurity threats.
Deloitte found that the most common business functions outsourced are legal, tax, and HR tasks and IT tasks related to cybersecurity, app/software development, and IT infrastructure services.
Let’s look at how two companies, Slack and WhatsApp, use outsourcing to meet business goals.
Slack, a workplace communication tool, has become one of the most popular corporate chat rooms. It’s hard to believe that it owes much of its success to outsourcing.
Back when Slack was just a rough prototype, the company hired a Canadian design team, MetaLab, to design the app from the ground up — along with the brand and website.
Leveraging MetaLab’s expertise in interface design, the Slack team overhauled its model with playful colors and interactive elements.
Since officially launching in 2013, Slack has become the fastest growing business application of all time. It’s also a prime example of why outsourcing is such a powerful tool for growing and scaling a business. It also speaks to how outsourcing can play a role in even the most crucial parts of a company — such as its entire look and feel.
WhatsApp is a messaging app used by millions around the globe to send texts, images, and audio. In 2012, the scrappy startup had only 30 full-time employees and a handful of part-timers at its California headquarters.
To scale the company while reducing costs, it outsourced most of its development to a group of app developers in Russia. In doing so, its California team could focus on other operational and customer support functions.
By outsourcing, WhatsApp was able to unlock access to global talent at a significantly lower cost while alleviating the workload for its California team.
1. Pro: Cost-effective
Outsourcing tasks like content writing or accounting can be cost-effective if you don’t currently have the funds or ability to hire a full-time employee dedicated to those tasks.
2. Pro: Faster turnaround
Depending on the task, the person you outsource may only take one project at a time, and having one person devoted to your job allows it to get done faster.
Setting a timeline up front lets you dictate when you need a job finished, and since freelancers don’t always have to meet the same demands as a full-time position, you can set realistic timelines focused on the exact task at hand.
3. Pro: Specialization
Need to hire a designer who specializes in stop-motion graphics? Outsourcing makes it easy to hire an agency or freelancer who’s an expert at stop-motion instead of an all-purpose, full-time designer who might not have stop-motion experience but will be a more realistic choice for day-to-day needs.
4. Pro: Access to more talent
Outsourcing lets you hire the best and most specialized in your area of need. For example, recruiters with experience helping startups develop a diverse baseline team.
5. Pro: Can prevent burnout in full-time staff
Outsourcing can save the day if you don’t have the budget to hire a full-time employee but need to provide relief to your existing team. You can take simple tasks or time-consuming projects off your plates and avoid burnout while still obtaining high-quality work.
For example, working on a marketing campaign to announce a rebrand is an all-hands-on-deck time-consuming project. To make sure everyone puts their best foot forward, maybe you outsource video editing to an expert freelancer so your teams can focus on business-specific tasks since they know it best.
6. Con: They don’t know your business
A good freelancer will do their best from the resources you give them to learn your company’s goals, brand, and style, but they won’t understand your business as an employee does.
7. Con: Communication challenges
You might never meet the people you’re outsourcing work to because it’s not unusual to conduct business entirely online or over the phone/video. While today’s digital workplace makes this increasingly easy, you could find yourself playing phone tag, keeping up with different time zones, or having trouble communicating over email.
8. Con: Difficulty with quality control
When you outsource, you typically give a vendor or freelancer a statement of work, sign a contract, and wait for a finished product. If you’re less involved, you might miss out on opportunities to suggest updates or edits and aren’t as satisfied with the finished product.
9. Con: Can be tough on team morale
Outsourcing can lower morale if people think tasks are outsourced because there’s a missing skill set, or they might get nervous that you will outsource more and more work until their job becomes obsolete.
If you do outsource, make sure you communicate the reasoning and goals behind outsourcing. For example, “We’re outsourcing initial outreach to give our existing sales team more time to close higher-value deals.”
10. Con: Slow response time
You might not be the only client a freelancer has. Unlike an employee, you can’t tell a contractor to prioritize a certain project. Be respectful of their time but assertive if they’re not meeting your agreed-upon timeline.
It’s worth noting that with many of the cons outlined above, there are ways to control them when you outsource. For example, you and your team can develop a media or vendor kit of crucial information about your business, mission, and branding elements (tone, logo, color scheme, etc.) that you can share to ensure finished products align with your needs.
You can also create a process where you have periodic check-ins to see how things are going and offer suggestions or ask for adjustments before it’s too late. Not all vendors or freelancers have this process, but if you’re worried about being less involved, you can seek out those who allow it.
How To Tell if You Should Outsource a Task
When you’re part of a small team or growing business, it might be challenging to figure out where to allocate budget for other people to complete tasks might be challenging. Instead of thinking about the money you’ll spend, think of it as an investment in the growth and productivity of your team.
And before outsourcing a task or project, have a checklist of questions you ask yourself:
Is the task a primary service or benefit of your business offering? If yes, consider hiring someone internally to scale company growth responsibly. If not, it might be a task worth outsourcing.
Will outsourcing this task free up time for you to grow your core business or product? If that’s a yes, outsource it.
Will it cost less to outsource this task than to hire someone new or tackle the task internally? If yes, outsource it.
Can someone else complete this task better and faster than your internal team? If yes, you should outsource.
Is this a rare or one-time need? If so, it’s time to outsource.
Will it give you a competitive advantage to handle this task in-house? If so, try to hire staff or complete this project internally to avoid outsourcing.
By using this list of questions as your compass for whether or not to outsource a task, you’ll ensure your decision to outsource is always the right one. These questions will keep you honest and your business growing steadily. This list of best sales tools for small businesses can help too
Outsourcing Marketing and Design
Small businesses often don’t need the volume of content and design work that necessitates a salaried position. By employing freelance writers and designers, businesses can pay by blog post or creative project instead.
Social media content creation
Social media management
Data management and reporting
Canva image creation
PPC campaign management
Writing and blogging
Competitive and industry research
Guest blog outreach
Blog comment moderation
Press release writing
SEO site audit
Editorial calendar management
Outsourcing Administrative Tasks
If you’re bootstrapping a business and need your or your team’s time to be devoted to high-value projects, outsource administrative tasks. Having someone manage your calendar, plow through mindless data entry, or transcribe meeting minutes can give you extra minutes back in your day.
Greeting card sending
Outsourcing Sales and Support
Similarly, there’s a lot of administrative work in sales and support. If you need your reps purely devoted to outreach and demos — and not to data entry — it might be time to outsource.
Expense report creation
Outsourcing HR and Operations
Don’t have the time or expertise to take care of your company’s taxes or hiring? These are just a few of the jobs you can outsource. This cuts down on costly errors and draws on the expertise of others.
Candidate screening tests
IT support and network administration
Outsourcing Personal Tasks
Sometimes everything is going well at work but your personal life is suffering because of it. In this case, hire help with tasks like laundry, house cleaning, or grocery shopping to give you a better work/life balance.
School pickup and drop off
Doctor appointment scheduling
Mail pickup and drop off
Outsourcing is a form of business delegation that can save you time, money, and energy better spent on growing your team or business. Consider outsourcing where it makes most sense for your company and foster a healthier work environment and better results.