As any busy entrepreneur or business owner knows, there’s rarely enough time in the day to get everything done. While business owners may feel like they must do everything themselves, hiring others with specific expertise often improves efficiency, productivity, and profitability.
But not every day-to-day task needs to be done in-house by a full-time employee. Many essential capabilities can be delivered better, faster, and cheaper by a third party. Outsourcing such work to external companies, services, or individuals frees up business owners and employees to focus on more valuable activities. It may also help ensure that important aspects of these additional tasks aren’t overlooked.
What is outsourcing?
Before digging into the best activities to outsource, it’s helpful to define what the term ‘outsourcing’ means, as there can be some confusion about the topic. Outsourcing is a practice whereby a business hires a third party to provide services or fill certain job functions on a contractual basis.
The term “outsourcing” got a bad rap for some time, as many people conflated the word with outsourcing jobs in manufacturing or IT, for example, to companies in other countries, leading to layoffs. But this type of outsourcing – offshoring – is just one subcategory of outsourcing.
There are many other types of outsourcing. Companies can outsource specific tasks to a virtual assistant. They can contract with freelance professionals to provide certain services on an as-needed basis. They may pursue IT outsourcing, partnering with large service providers to deliver application development services or digital transformation initiatives.
Many companies outsource their payroll and accounting services or customer support to external business-process outsourcing providers. HR outsourcing is also popular amongst smaller firms which may lack the in-house skills to navigate regulatory complexities. Other businesses may take advantage of executive-for-hire firms that provide part-time chief financial officers (CFOs) or chief information security officers (CISOs) to oversee finance or cybersecurity for them.
Benefits of outsourcing
There are any number of reasons a business might choose to outsource a task, role, or function. It may be part of a wider strategic vision or a simple cost-cutting move. Outsourcing may be the only way to source specific capabilities a business is unable to hire for directly, or it could boost productivity or efficiency in a certain area.
Some of the most compelling benefits of outsourcing include:
- Lower costs: outsourcing is often less expensive than performing a task in-house, due to economies of scale or lower labour rates. It also reduces or eliminates the costs of hiring, training, and retaining employees and providing benefits. It may also reduce capital expenses, such as when companies outsource IT or customer support, for example.
- Increased efficiency or effectiveness: service firms typically have highly efficient processes and the latest technology, which, along with their focus on an area of expertise, enables them to perform tasks faster or to a higher standard.
- Cutting-edge solutions and specialist resources: large outsourcing companies provide specialist services, intellectual property, thought leadership, or expert talent that businesses might otherwise not have access to.
- Variable capacity: for businesses with fluctuations in demand for certain services, outsourcing offers a way to easily scale up or down in ways that can’t be done with full-time employees, offering additional flexibility.
- Increased ability to focus on core business activities: outsourcing frees owners, managers, and employees to spend their time on income-generating or market-differentiating activities.
- Expanded growth opportunities: outsourcing non-core activities creates space and frees up cash and other resources to help businesses explore additional growth options.
OUTSOURCING MAY BE THE ONLY WAY TO SOURCE SPECIFIC CAPABILITIES A BUSINESS IS UNABLE TO HIRE FOR DIRECTLY, OR IT COULD BOOST PRODUCTIVITY OR EFFICIENCY IN A CERTAIN AREA.
Top opportunities for outsourcing
There are many potential advantages to outsourcing, but it might be tough for business owners to know where to begin. While outsourcing strategies will look different for every business, there are a range of tasks that often drive significant results, including:
1. Administrative tasks
Scheduling, travel arrangements, data entry, and other administrative tasks are often offloaded to a virtual assistant or administrative service. While these tasks are crucial to the proper functioning of any business, they are not usually core business activities and are, therefore, fair game for outsourcing.
2. Lead generation and customer service
Although lead generation and customer service are two completely different types of tasks, both involve what can be tedious time spent on the phone. Sales calls, for instance, are often a numbers game – more calls equals more sales and leads. If an outsourced lead generation provider is hired to do initial outreach, internal teams can focus on closing deals.
A talented salesperson’s skills are better utilised for building relationships and closing sales than in making cold calls. Likewise, customer service outsourcing can be more efficient and effective than maintaining a fully-fledged call centre, especially for small, product-based companies.
3. Accounting and finance
Outsourced accounting firms or individual certified public accountants (CPAs) help smaller businesses with services like bookkeeping, invoicing, and accounts payable and receivable, not to mention financial reporting, analysis, and planning. Outsourcing payroll processing alone might save considerable time and money. Many finance and accounting providers can bundle these tasks for even greater savings.
4. Marketing
Effective marketing determines how brands and companies are perceived in the marketplace. A third-party marketing firm or consultant can provide an outside perspective and broad experience that internal marketing staff cannot.
Freelance marketers, copywriters, and content marketers can also develop high-quality, polished content to boost marketing efforts. Website design, brand development, press releases, and online marketing duties, such as social media, blogging, and search engine optimisation, are other good candidates for outsourcing.
5. Information Technology (IT)
IT is an essential business function, but not necessarily a core capability, especially for small businesses. It can be extremely expensive and complicated, requiring extensive knowledge and skills that are hard to acquire. IT outsourcing gives businesses access to a team of experienced experts who can develop and maintain the best IT strategy.
6. Human resources
Human resources (HR) is a highly complex and important function. For many small to midsize businesses, it makes sense to contract this work out to a specialist agency. Providers of HR outsourcing services have well-developed skills in various aspects of HR, from recruiting, screening, and hiring to benefits administration. They also stay up-to-date on the latest employment laws and standards to make sure businesses stay compliant.
Lean on professional networks for advice
When considering outsourcing for any of the above categories, the best way to locate high-quality outsourcing prospects is often by soliciting recommendations from professional networks. A referral from a trusted partner is a much more reliable gauge of quality than a random listing or a partner chosen on cost alone. Professional groups or associations and social media can also be great resources.
Key takeaways for outsourcing business tasks
Outsourcing is not without its challenges and risks. Businesses may feel uncomfortable handing over full control of key business functions or tasks, amid concerns about proficiency, communication issues, cultural barriers, or time zone differences. But, in many instances, the benefits of outsourcing outweigh the downsides. It allows businesses to lower their costs whilst improving productivity, giving teams more time to focus on what matters most to the business.
This article contains general information and is not intended to provide information that is specific to American Express, or its products and services. Similar products and services offered by different companies will have different features and you should always read about product details before acquiring any financial product.
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