There are many ways businesses can grow their teams. Here’s what to know about freelancing, outsourcing, and business process outsourcing to help you choose what’s best for yours.
- Outsourcing helps businesses save on costs, increase efficiency, and focus on core competencies.
- Business process outsourcing involves contracting third-party providers to handle specifics such as IT services, accounting, and customer service.
- Under freelancing, businesses contract independent professionals to work on a per-project basis.
- Assess your objectives, then select the option that best meets those needs while staying within budget.
With the growing demand for affordable skilled labor, many business owners are turning to outsourcing as a cost-effective alternative to traditional in-house staff. The perks go beyond simply reducing labor costs, however. Savvy entrepreneurs are also recognizing the benefits.
When done correctly, outsourcing can help you improve efficiency, better utilize existing resources, and even free up time so you can focus on more critical tasks. Several outsourcing models are available, and this comprehensive guide covers the pros and cons of each outsourcing model to help you make the best decision for your business.
Digging into the BPO model
Under a BPO arrangement, you contract with a third-party service provider to handle specific business functions or processes. Many industries take the BPO route when they feel they can’t adequately perform a particular function in-house or when they want to free up internal resources to focus on other core competencies.
The advantages of BPO
Outsourcing in-house processes such as payment processing, marketing, customer relations, or IT services to a BPO can have several advantages for your business, including:
- Cost savings – The overhead costs of maintaining an in-house team, including hiring new talent, training employees, and onboarding a team, can be significant. With a BPO, you can drastically reduce these costs as you’re only responsible for paying for the services you receive.
- Saving time – Did you know employees waste about 40% of their time handling mundane and repetitive tasks? Outsourcing these time-consuming tasks to a BPO frees your team up so they can focus on more important tasks that require their expertise and can’t be easily automated. This improves morale, productivity, and efficiency, resulting in greater success for your business.
- Greater efficiency – BPOs are experts in improvement and use the latest technology and best practices to streamline your processes, making them more efficient. This way, you can be confident that tasks are completed on time and within budget while meeting the highest quality standards.
- Focus on core business functions – You can refocus your energies on core business functions by outsourcing non-core or low-value tasks to a BPO. This allows you to better utilize your internal resources, improving efficiency and overall business performance.
- Utilize experts – BPO vendors are good at their trade and have the latest tools, technologies, and processes to get the job done right. They also have the necessary skill sets and experience to deliver quality results that meet or exceed your expectations.
The potential disadvantages of BPO
While BPOs offer a slew of advantages, there are also some potential drawbacks to consider, including:
- Security risks – Since working with a BPO requires sharing and processing of company-sensitive data, there is always a risk of security breaches and data leakage. It’s essential to partner with a reputable and reliable provider with strict security measures to protect your data.
- It requires time to plan – Successfully outsourcing processes to a BPO requires careful planning and execution. There is a learning curve as you and your team get accustomed to working with an external partner. You’ll also need to spend time and resources identifying the processes you want to outsource, developing service-level agreements, and setting performance metrics.
- There’s an adjustment period for employees – Since BPOs will be taking over some of your team’s tasks and responsibilities, there may be an adjustment period as they get used to the change. There may be some resistance from employees who feel threatened by the idea of losing their jobs. This can negatively impact their morale and performance.
- There can be hidden costs – Outsourcing may initially seem like a cost-effective solution, but hidden costs may be involved. The BPO vendor might underestimate the scope of work or the complexity of the processes, for example, which can result in additional costs down the road.
What to know about the freelance model
With more than 57 million freelancers in the United States, it’s no surprise that businesses are turning to freelancers to get work done. Under this model, companies hire independent contractors and compensate them on a flat-rate, per-hour rate, per-day rate, or project-based rate. Commonly outsourced services include:
- Editing and proofreading
- Web development
- Language translation
- Computer programming
The advantages of working with freelancers
Here are some key advantages of working with freelancers:
- Saving time – Delegating specific tasks or projects to freelancers can free up your time to focus on other areas of your business. This allows you to dedicate more resources to your core competencies.
- No one needs to know you outsourced – Since freelancers work remotely, usually from their homes or offices, no one needs to know you outsourced the work. This is beneficial if you want to keep your business’s competitive advantage or confidential information under wraps.
- Outsourcing can be affordable – Running and maintaining an in-house team can be costly, especially if you hire multiple full-time employees to complete the work. Freelance sites like Fiverr and Upwork are two of the world’s largest platforms that connect businesses with freelancers. Fiverr starts at $5 per gig, while Upwork’s freelancer rates start at $3.00 per hour.
- It’s no different than having staff – While working with freelancers is often seen as an outsourcing solution, it’s not that different from having staff. You’re still responsible for managing them, providing feedback, and ensuring they complete the work to your standards and deadlines.
The potential disadvantages of freelance
Despite the many advantages of working with freelancers, there are also some disadvantages you should be aware of:
- More steps may lead to errors – From posting the job, reviewing proposals, and communicating with the freelancer to providing feedback and making payments, there are more opportunities for errors to occur. This can be costly, time-consuming, and ultimately affect the overall efficiency of your business.
- Customers don’t always get the real you – Freelancers may not be familiar with your company’s culture, values, or mission, which can affect the quality of work and service they receive. It can also result in inconsistency and a lack of cohesiveness in your branding.
- Good outsourcing isn’t cheap – While you may be able to find cheap freelancers, the reality is that good outsourcing isn’t cheap. If you want high-quality work, you must pay for it. Otherwise, you’ll likely spend more time and money trying to fix subpar work.
- You can’t 100% control quality – Since freelancers juggle multiple projects from varied clientele at any given time, you may not have as much control over the quality of their work as you would if you were working with an in-house team. They may also lack the commitment and dedication required to produce the level of work you’re expecting.
What to know about the outsourcing model
Outsourcing is a business model in which a company contracts out its operations and responsibilities to a third-party provider that offers specialized services. An outsourcing company can handle a range of services, including:
- IT services, such as web development, software development, and application support
- Business processes such as customer support, payroll processing, and social media marketing
- Research and development
The advantages of outsourcing
With the average cost of hiring a new employee totaling $4,129, many business owners are leveraging the benefits of outsourcing to save on labor costs. But that’s not the only advantage of outsourcing. Other benefits include:
- Your company gets a refresh – As your business grows and employees collaborate on projects, they develop similar ways of thinking and solving problems. This can lead to a lack of creativity and innovation within your company and can negatively impact the company culture. Outsourcing allows you to tap into a new pool of talent and bring in individuals with different skill sets, experiences, and backgrounds that can contribute to the betterment of your products and services.
- You stay steady – Keeping a full-time, in-house team can be expensive and strain your budget, especially during slow periods or when your business is transitioning. Outsourcing allows you to scale your team. You can bring in additional help when you need it and let them go when you don’t, as you hire them on a project-by-project basis.
- Pay smart – Working with full-time employees can result in lost hours due to absenteeism, mundane tasks, and personal time taken during work hours. According to the CDC, absenteeism costs U.S. employers a whopping $225.8 billion annually in lost productivity.
For freelancers, time is money, and they dread losing work hours, which means lost income. Since they complete work on a per-project basis, they’re more likely to be productive and get the job done efficiently and on time.
The disadvantages of outsourcing
Outsourcing isn’t without its fair share of challenges, the most common ones being:
- Reduced interviewing options – In an outsourcing model, you don’t always have the opportunity to interview candidates in person. While you can assess their work history and experience through their resume and online portfolio, it’s difficult to ascertain their soft skills and cultural fit until you work with them.
- Distance – With the distance barrier, you may lose control of the work progress as you can’t monitor freelancers efficiently. You will only rely on their self-reporting, which may not give you an accurate picture of the work being done.
- No personal relationships – Working with an in-house team allows you to interact and build relationships with your employees on a personal level. You learn their strengths and weaknesses, what motivates them, and how they work best.
This unfortunately may not be possible with outsourcing, as you’re potentially working with individuals from different parts of the world. While you can get to know them on a professional level through email and video conferencing, it’s still much more difficult to build personal relationships.
Let DOXA help with your outsourcing needs
Outsourcing, freelance, and business process outsourcing are viable options for businesses that want to save on costs and increase efficiency. They each have their fair share of advantages and disadvantages you need to consider before making a decision, however.
The key is to assess your business needs, consider what you can compromise on, then find a solution that helps you achieve your business objectives while staying within your budget.
That’s where DOXA can help. We find you great talent worldwide with the necessary skills and expertise so you always have experts contributing toward your goals. Schedule a free consultation with us today to get started.