Outsourcing specific responsibilities and tasks is necessary for many eCommerce businesses, not an optimisation strategy. Delegating specific tasks to an outside agency, freelancer, or BPO is often the only viable way to grow your business, launch a product, or manage operations.
Simply put, outsourcing uses third-party service providers to handle specific business functions.
This is also not a new trend. To combat rising labour costs and an increasingly global marketplace, the outsourcing industry has existed since the late 1980s and early 1990s.
Previously, outsourcing services were only available to large multinational corporations. However, businesses of all sizes can now reap the benefits of outsourcing.
In this post, we’ll discuss what you should and shouldn’t outsource and some key benefits.
What Should You Delegate?
The best processes and tasks to outsource are those that require a significant amount of time to complete and are not a core competency of your team.
Accounting and bookkeeping, for example, are the first functions many eCommerce businesses outsource. However, if you are not an accountant, managing your own accounts can be time-consuming and divert valuable time away from more important business tasks. Not to mention that getting it wrong can lead to compliance and tax issues.
Customer service, order fulfilment, and writing are other common outsourced tasks.
You can outsource almost any aspect of your business if you have the right processes in place. However, it is generally best practice to keep any part of the business that is a core competency or competitive advantage in-house.
Five advantages of outsourcing specific processes
1. Concentrate on your primary business practice
Spending your time doing what you’re good at is more efficient.
If you excel at business development and structuring partnership deals to grow your eCommerce business, you should devote more time to it.
However, you have a lot of tasks on your plate that don’t match your abilities. Perhaps you’re not very good at managing your finances, providing customer service, or filling out human resources paperwork. Every minute spent on tasks outside of your skill set is time wasted.
“Most entrepreneurs have great talents, but they often think they can do it all,” says Laura Lee Sparks, owner of an attorney outsourcing firm. “That has the potential to stymie the company’s growth. The business owner has more time to focus on revenue generation by outsourcing day-to-day back-office tasks.”
Outsourcing things that aren’t related to your strengths will save you the most money, time, and stress.
2. Lower labour costs
Hiring and training full-time skilled workers is costly, especially for short-term projects.
Outsourcing converts fixed labour costs into variable costs, which means you only pay for the services you use. This gives you staffing flexibility that in-house employees do not have.
Outsourcing allows you to tailor your service consumption to your specific requirements. As a result, you only pay for what you use and can seamlessly scale your consumption as your business grows or shrinks.
For example, you probably don’t need a full-time in-house CFO if your annual revenue is less than $10 million. It’s a vital job that can’t be overlooked, but you don’t have enough work to warrant a full-time salary.
Hiring a fractional or virtual CFO allows you to pay only for the services you use while maintaining the dependability of a dedicated employee.
3. Maintain cash flow control
You convert a fixed cost (a full-time salary) into a variable cost when you outsource (a pay-what-you-need service). This frees up cash flow for investment in other areas of your company.
Back-office tasks, for example, typically have their own expenses, such as office space, furniture, copier paper, and so on. Even remote teams have expenses, such as equipment and software access. These costs may not appear to be significant, but they add up quickly.
You may be able to fit one person into your current office, but if hiring that new assistant requires moving to a larger (and more expensive) space, it may be more cost-effective to hire a virtual assistant agency to meet your needs. Yes, the outsourcer technically includes their overhead costs in their fees, but all of their customers share those costs.
You could put the money you save towards improving your products or running marketing campaigns. This is particularly useful in the early stages of new projects, such as launching a new product or entering a new business vertical.
4. Gain access to top talent
Hiring a new team member frequently necessitates costly recruiting and training. You must train them on your processes and workflows (or develop special processes just for them). There is also the sunk cost of being in a lot of extra meetings and/or Zoom calls if your team isn’t async-first.
Working with an agency, consultant, or freelancer comes with specialised knowledge. (Or, at the very least, they should)
Furthermore, they will likely have access to skills and tools you do not require today but will require in the future. If they don’t have someone on staff who can help you, they most likely have a network of specialists with complementary skills from which they can draw. In-house employees do not have that kind of freedom.
Assume you have a designer on your team, but they specialise in print materials. They can create an excellent brochure, but they are unfamiliar with digital products.
When it comes to creating a new website, your designer will be of little assistance. However, if you outsource your design work to a creative agency, you will have access to designers with diverse skills.
Outsourcers bring specialised knowledge, expertise, and experience that you could not afford to hire in-house. The outsourcer is responsible for obtaining any licences or accreditation required for the work. Outsourcers stay on top of industry changes and trends by focusing on their speciality, learning new techniques, and constantly honing their skills.
Furthermore, outsourcers have access to skills and tools you may not require today but will require in the future. If they don’t have someone on staff who can help you, they most likely have a network of specialists with complementary skills from which they can draw. In-house employees do not have that kind of freedom.
5. Maintain full-time employees
Employee turnover is especially painful these days. When someone leaves, all of the money you spent on hiring and training goes with them. In addition, turnover at the wrong time (and is there ever a right time?) can disrupt business operations and add to your team’s stress.
Outsourcing is beneficial in two ways:
- As your team progresses, you can promote them (with a pay raise and new responsibilities) and then delegate the repetitive processes and tasks to them.
- Delegating also adds consistency to your business. For example, if your full-time customer support manager leaves, you’ll need to fill the position. However, if you have 3-4 freelance support reps handling tickets, you will have more time to find a great new manager rather than having to do all of the support yourself for a while.
Three drawbacks of outsourcing
Now that you’re aware of many of the benefits let’s take a quick look at some of the drawbacks of outsourcing (and how to mitigate the risk).
1. Exposed confidential information
There is a risk involved when certain aspects of a business, such as HR, payroll, and recruitment services, are outsourced because confidential company information is revealed to a third party.
To some extent, you can mitigate these risks by carefully screening any agencies or vendors, ensuring that they follow cybersecurity best practices, and putting your own safeguards in place.
For example, the person in charge of updating your chart of accounts should not be the same person in charge of approving bank transfers and payments.
2. Deliverables synchronisation
Some businesses may deal with longer delivery times, subpar quality output, and incorrect categorisation of certain responsibilities. If you find yourself in this situation, hiring a full-time project manager or bringing certain problematic business areas back in-house may be beneficial.
3. Be wary of hidden fees
While outsourcing is typically a cost-effective strategy for your company, there are occasionally hidden costs.
When you outsource aspects of your business that provide a competitive advantage, potential hidden costs tend to balloon.
If you have custom-built software or a secret-sauce product formula that makes your product 10x better than your competitor in some way, you should keep that information in-house.
FAQ on Outsourcing Processes
This FAQ has been included to summarise some of the points made above and answer any additional questions about outsourcing your business processes.
- What services are typically supported by outsourcing firms?
Services typically supported by outsourcing firms include information technology-enabled services, knowledge process outsourcing, legal process outsourcing, research process outsourcing, and customer interaction services.
Back-office transactions, IT and software operations, finance and accounting services, human resource services, and knowledge services are all areas in which some outsourcing companies specialise.
- Which business functions are best suited for business process outsourcing, and why?
You can outsource several business processes to help free up time and focus in your business, ranging from administrative tasks and IT operations to lead generation, customer service, and marketing.
- What are the various kinds of BPO services?
Back-office and front-office business process outsourcing are the two most common types. In addition, internal business processes such as billing and purchasing are examples of back-office services.
- What does the future of business process outsourcing look like?
Automation will be critical when it comes to BPO services in the future. For example, data entry and image recognition are simple, automated tasks, whereas handwritten data and telemarketing may be more difficult. However, all industries will likely begin leveraging emerging technology to help reduce costs and accelerate business growth.
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