Outsourcing is a natural part of any business today, whether we are talking about a fledgling startup or a global corporation that is setting the market direction. Why does it work and which major companies are outsourcing services?
Why should you bother when someone can do it for you?
Outsourcing is the process of hiring people or companies outside your organisation to deliver a specific service or activity on a contract basis. You are probably already aware that everyone around you is outsourcing. Companies most often outsource:
- IT services
- accounting services
- human resources
- public relations
- customer service
Of course, outsourcing is not the only option for achieving business goals - the main competitor of this model is in-house work, i.e. creating such structures within your own company that the organisation can be responsible for all aspects of its functioning on its own.
This option is often very tempting - by doing things in-house you are not dependent on anyone, you have full control over the process, and employees know the nature of the company well and feel loyal to it. Nevertheless, it is outsourcing that conquers the business world. Why is this so?
Benefits of outsourcing services
1. Lower costs
This may seem counterintuitive, because how can paying someone from outside to do something be cheaper than doing it yourself, but think about it.
To make a specialist product or service, you often need a whole team to who you pay a fixed monthly salary, plus you pay taxes, insurance, etc. This is very expensive and unless you need the whole team to work all the time, just for a specific project, it will simply not be cost-effective for you.
When you outsource tasks to specialists you only pay for what you really need and when you need it, so you can fit into a smaller budget. As many as 45% of companies surveyed said that saving money was the main reason they decided to outsource.
2. You save time and resources
Every business faces overwork and too many tasks at times. By outsourcing things, you get an extra pair of hands to work with, which helps unload a difficult situation and handle it better.
This will make your employees work more efficiently and accurately, and you reduce the risk of mistakes resulting from too much time and too few people.
3. You can focus on what matters most
It's all very well being a Renaissance man and knowing everything, but in business, you sometimes need a very specific vision in front of you to get your company to the top.
As such, you can't take care of everything. Outsourcing allows you to delegate tasks to experienced companies who know their industry best. This allows you to focus on what is crucial to your organisation, knowing that the rest is in good hands.
4. You have access to much more expertise and capabilities
In fact, perhaps the most important benefit of outsourcing is that you have access to an incredible range of competencies that you wouldn't be able to get in-house.
By outsourcing development of a web application to an experienced software house, which employs the best specialists in its field and is fully focused on the development of specific competencies, you can be sure that your project will be executed with the highest quality.
Thanks to outsourcing, you don't just get additional capacity, but years of experience, expertise and knowledge from people who are constantly developing in their field and can offer you solutions and ideas that you weren't even aware of.
5. Helps you to expand your offer
No company can do everything. But a good company has people who can. Let's say you run a creative marketing agency - you have graphic designers, copywriters, PR specialists, social media managers, but no development department.
If your client expects a complex, six-month promotional campaign from you, which would include creating a website, you can refuse, because you don't have such a service in your offer...
But you can also establish cooperation with a software house, which will do this part for you. This is how everybody wins.
Even the biggest companies outsource
Outsourcing is a solution for businesses of all sizes, but let's be honest - we look for authority at the very top. So let's take a look at the companies that outsource tasks and come out great at it.
Google started as a small search engine. Now the company has 139,995 employees worldwide. That's something. You might think that with that kind of staff Google could do in-house literally anything. And it probably could, but it wouldn't be profitable for it at all.
According to Bloomberg, in 2018 the number of contractors and freelancers working for Google surpassed the number of full-time direct employees. This is particularly important when you consider that Google is one of the biggest tech players in the market, yet they outsource similar services.
While Google's employees handle their own duties, the company outsources administration, IT services, development, email and phone support and support for other products such as AdWords.
Google is a great example of the fact that when it comes to outsourcing, the size of the company doesn't matter and even with over 130,000 employees, doing certain tasks externally is still more cost-effective, gives access to new skills, solves capacity problems and improves the quality of service provided.
One of the most recognisable communication tools in the world didn't start out with such spectacular success at all. In 2012, WhatsApp's headquarters in California had just 30 full-time employees, mainly dealing with customer service.
However, management understood that if they wanted to grow their business, they needed a lot more people and technology, but hiring an expert team was very expensive, and let's remember that one of the biggest risks of startups is running out of money.
The solution turned out to be outsourcing development to Russia, where rates were much lower than in the US. Thanks to this WhatsApp could focus on developing its core business, and technological development was provided by an external team of experienced specialists.
Probably everyone who worked in any company sooner or later came across Slack. It is one of the most popular business messengers, making everyday work easier. But they didn't immediately take over the market.
In the beginning, there was a prototype and a nice technological background, but in a crowded market of competitors, this was not enough. It took great design and promotion to break through to the top with such a product, and Slack didn't have the in-house skills to do that.
So in 2013, they hired a digital agency to turn their prototype into an unrivalled product on the market. And it worked. Today Slack is valued at $2.8 billion, has over 200,000 paying users who still love the tool for its design. Design created thanks to outsourcing.
While we're on the subject of communication, let's look at another great company. Skype is a pioneer and one of the most recognisable companies in the field of video calls. It took vision and titanic networking and promotional efforts to breakthrough in the minds of users.
Under such conditions, it is difficult to focus on developing the technological base. And fortunately, you have to, since you can use outsourcing. Skype has entrusted the development and maintenance of its product to specialists from Estonia.
Their success is evidenced by the fact that in 2011 Microsoft bought Skype for $8.5 billion.
Everyone associated with the IT industry must know this tool. GitHub is one of the most important providers of internet hosting for software development. While it was the best way to share information, materials and documentation about projects, it was not ideal for smaller code snippets.
This was a serious problem to solve, but GitHub management had neither enough funds nor human resources to develop the problem themselves. This is when they decided to hire developers as subcontractors and outsource such services.
These are just a few examples of the benefits of outsourcing and the companies that have decided to benefit from this solution. Saving time and money, freeing up human resources, access to new competencies and the ability to focus on your core business are the most important advantages of outsourcing.
As you can see, the biggest players are convinced. What about you?