Outsourcing Basics

Surviving today’s business environment has become more challenging than ever. If you are a small business owner, it is highly unlikely that you possess all the skills necessary to build your company, grow your business and dominate your marketplace. Using an outsourcing company is one way for companies to manage uncertainty and ground their business in any environment – bull or bear.

What is Outsourcing?

Outsourcing can be defined as the strategic use of outside resources to perform business functions traditionally managed by internal staff. Using an outsource company will help reduce costs and gain efficiencies by leveraging the talent, technology and expertise of third party vendors.

Common Business Functions for Outsource/Offshoring

* Order fulfillment

* Accounting/billing

* Information Technology/software development

* Marketing/advertising/SEO/SEM/PPC

* Web design/development/maintenance

* Sales/business development

* Human Resources/payroll/benefits/accounting

* Customer relationship management

Why Hire an Outsourcing Company?

You have a great idea - but don’t have the necessary resources or expertise to make it happen – right now. Should you wait? Add staff? Re-prioritize your workload? Experience tells us that the earlier your concept hits the streets, the sooner you can begin generating revenue. The time required to hire and train staff may be out of the question in order to meet your goals. Outsourcing your work greatly benefits your bottom line while freeing up your precious time.

Benefits to Hiring a Outsourcing Company

Companies of all sizes struggle with escalating costs of full-time employees. Hidden behind paychecks are less visible costs. Not often considered in the decision to outsource include: hiring, training, administration, benefits, absenteeism, workspace and equipment. By some estimates, employee expenses account for up to 70% of a company’s overall revenue. In addition to providing sizable financial advantages, outsourcing’s other advantages are:

1. Expertise: Harness the talent technology and expertise of niche providers and leverage best practices. Expert sources who might carry too large a price tag to employ full-time, can fit into nearly any budget on a project-by-project or as needed basis.

2. Management: Focus on the core aspects of your business and leave the worries of non-core activities to someone else without having to commit additional managers or your time to manage a project. Outsourcing companies have their own management.

3. Personnel Flexibility: Hire specialists without being obligated to keep them on when they are not needed. It is easier to terminate an outsourced relationship than to layoff full-time personnel.

4. Capital Conservation: Concentrate financial resources on core business activities vs. investing capital in overhead, such as: office space, computers, etc.

5. Time Savings: Don’t reinvent the wheel. Someone, somewhere has done it before or developed an easy solution – why not use it?

How to Choose an Outsource Company

When you hire an outsourcing company, you are essentially choosing a partner for your business. The vendor should work in harmony with your business and have the same type of work ethic and dedication to success.

# Don’t wait until you need help. Now would be a good time to find out about outsourcing resources and who has the kind of expertise your company requires.

# Be clear about what you want outsourcing to accomplish. Communicate projects, expectations, fees and timelines to your vendor.

# Use a company to help you find the talent you need. Check out several companies yourself.

# Look for flexible organizations capable of harnessing many talents.

# Identify people/organizations who have worked remotely before.

# Technology matters. In addition to email, high speed web access, etc., is the technology of the outsource company secure with built-in redundancy in case a file gets lost? Is the technology being used secure? Will your privacy or files be compromised?

# Price isn’t everything. Ask for referrals and if possible, demo the product or service before buying.

Outsourcing is no longer about cutting costs and saving money. It is about how to do things quicker, more efficiently, getting to the market faster than your competitors, maximizing workforce flexibility and gaining access to highly qualified employees. Outsourcing is becoming one of the most significant business trends of this decade. There are many sites dedicated to putting clients/business in touch with outsourcing providers such as elance, guru, rentacoder and Odesk. Sites like YourAmericanTeam.com are sprouting up to assist the offshore company in providing real value and assistance to their US clients.

Outsourcing Defined

"Outsourcing" refers to the transfer of non-core operations from internal employees to an external organization. This transfer of non-core operations allows the company that outsources the work to focus on its core business. The organization that the work is outsourced to will typically have expertise in a given area, allowing it to add value and provide cost savings. For instance, many companies outsource payroll to one of the many available payroll vendors. The payroll vendors are able to add value in the area of payroll in a way that internal payroll departments can't achieve. Another example is human resources departments that outsource background checks to vendors specializing in this area rather than driving to courthouses and checking criminal records themselves.

* Offshore - The term "offshore" refers to where the work is being performed geographically. In other words, if a task is "offshored," then the task is being performed in another country.

* Offshore outsourcing - "Offshore outsourcing" means that work is being performed by an external company in another country overseas. Many people simply refer to this as "offshoring." Offshoring is taking place all over the world. The more common locations are India, China, the Philippines, Eastern Europe and South America. A derivative of offshore is "near shore" where work from the U.S. is performed in Canada or Mexico.