There is a huge competition among startups so this is the prime time they must focus on the core business operations of the organization. The owners need to handle a plethora of things; however, handling everything by them is not possible. They need to look after many things like business funds, employees, and business expansion.
This is the reason most startups prefer to hire outsourcing services. Because in-house work leads to an increase in cost, resources, and demand a lot of time.
Why Prefer Outsourcing?
90% of startups go out of business in less than 1 year. This happens when business owners do not clearly understand the business operations and try to do everything themselves. It is very important to outsource so that they can focus on what they can do best. Outsourcing helps to reduce workload and saves you money.
For many startups, accounting is a nightmare as you need to be very careful during financial calculations. The startups hire virtual accounting services to analyze their finances and get the best advice from professionals.
Reducing costs is an important part of any startup's work, if you don't want to join the number of projects that closed in the first years of life. And according to statistics, more than half of startups die within the first four years. Attracting investment also takes time, and in order to reach this stage, teams have to save money. Conscious cost reduction can help in business, as an example, successful companies GitHub, Basecamp, which at the start saved on the office, used the cloud and useful services to optimize costs up to corporate trips.
Many successful companies used the outsourcing tool during its formation as a tool for reducing costs by up to 60%. For example, a platform like Engre offers more than 1000 different engineering contractors for business. Everyone is waiting for their own tasty startup that will hire them for some purpose. You don't need to spend time creating a team that is needed for a small goal or a specific solution, hire it for
Yes, outsourcing a highly qualified team is always beneficial. You can have flexible rates and engagement models. There are a lot of startup consulting workshops as well in which you can participate to actually validate your idea.
Well yes, outsourcing is good for a startup but only if you do it right. When you just outsource and you don't know anything then it will fail. Outsourcing is really for startup businesses than for small to medium type businesses. In order to save more time and money for the expansion of the business, they will outsource some of the tasks first and focus on the business core and create strategies that can help the business attain success. You can learn more about outsourcing here: http://www.offshorebusinessprocessing.com/bpo-services.
Well, let's consider what is generally good for startup: Idea? Investment? Cutting costs? Quality?
Agree? So what can a start-upper do about this points to follow them? If we talk about development, it's vital to find relevant skilled team that will contribute and help you deliver product on time at lower cost.
These guys are definitely aware of what kind of team do startups need: http://www.nexgendesign.com/concept
My personal rule of thumb on outsourcing is similar to the last couple of posts, only I view it as follows: If the activity and/or knowledge is directly linked to the "crown jewels" (competitiveness and profitability) of your business then "No", it makes zero sense to outsource those people, or that IP and activity. However, just about everything else can be considered for outsourcing.
Example 1: In the mutual fund industry, the "internal, financial analysis models and investment ratings reports" are the crown jewels of the business; as are the best performing Portfolio Managers. These activites and knowledge will never be outsourced.
Example 2: At software companies (Google, Microsoft, Oracle & Salesforce.com), their development groups and source code are the "crown jewels". They would never foolishly outsource their core development teams or publicly release their core revenue producing product source code.
Example 3: McDonald's has a different understanding of their company's "Crown Jewels". In effect, "outsourcing" (franchising) is the driver of their profitability; however, the "cookie cutter business model" and "product supply distribution" are the core crown jewels behind their continued success. McDonald's heavily regulates and inspects franchises to make sure they are following the business model / process and buying their supplies from McDonald's distribution centers. They want customers to have the same service and food experience not matter where in the world they enter a McDonald's restaurant!
So ask yourself, "What drives my company's competitive edge and profitability?" Once you know that, you know what NOT to outsource.
I see that there are mixed opinions there. Some strong objections too. Outsourcing is a great option if you know exactly what you want. Someone mentioned here that businesses will not succeed if core activities are outsourced. Of course they won't! If you want some assistance with secondary business tasks like bookkeeping, accounting, call handling, etc outsourcing is a great option. You will have more time to focus on your core business.
But if you outsource your very core, it means that you are letting the outsourcing firm take over. In that you do not have control over your business and so naturally you will have a bad experience. So if you know what you want, and go to the right company, yes, outsourcing is great. Check for data security measures like 128-bit encryption, 24/7 surveillance etc. Once you are sure everything is in place you can begin. The cost reductions and quality of work at some of the firms are great - real value for your money.
But the secret lies is "knowing" what you want. Cheers!
Yes, and in fact it is essential for a start up to outsource.
While the CEO or Founder needs to be in the lead, manage and control the venture, one cannot "stand up" a new venture without help from others - especially if you need to be a fast company. This help can be for IT infrastructure or other operational roles (like back end accounting, payroll, etc.), strategic business design to gain financing; and revenue generation before a full sales force is on board. (Just to name a few areas.)
In fact, all companies large and small, once they are in in steady-state mode, still use outsourcing to run and grow their business. This was confirmed with the acknowledgement of the strategy of "Core Competence" which became big in 1990s and drove a lot of business and industry redesign since then. The approach is to find your competency and then outsource the rest in order to have a most efficient, flexible and competitive business model that can compete globally. It was observed in the information and computer sectors at first and once it was recognized by leading business school professors it expanded.
Example: Apple is a design and marketing company and outsources actual manufacturing to Korean and Japanese companies, etc.
Example: Banks outsource customer services and IT operations.
And there are historic roots. The value of international outsourcing builds upon the 18th century Theory of Competitive Advantage by economist David Ricardo.
'According to Ricardo, if one country is more efficient than another in producing all commodities, trade between the two nevertheless would be of mutual advantage. "
(more at http://timelessecon.wordpress.com/2010/05/15/ricardos-hit-comparative-advantage-and-miss-labor-theory-of-value/)
Certainly there are a lot of good points made in most of the comments posted.
The suggestion I have for you is first spend some real think time on what are the TRUE Core Competencies of your business. In other words what is your key intellectual property that will drive differentiation in your market.
Then, I strongly recommend to invest in internal resources that are critical elements of your core competencies. In my humble opinion, you should have has one of your highest priorities to "in-source" your core competencies.
Therefore, the other required business support processes that are NOT part of your core competencies are the ones that you should "consider" for potential outsourcing.
If its cheaper than doing it yourself, maybe. The second component to consider is control. How much control do you need, or give-up by out-sourcing? Lead times, quality, etc. are some other variables to consider.
in my opinion, not before you have your business model nailed down, otherwise too many variables
Everyone that's posted has an opinion but most are in the outsourcing industry. Here's my opinion, no one is going to care about your business as much as you do whether you pay them or not. Furthermore in order to run your company you have to know how it runs, when you outsource you lose control of both. To do the best job of running your company you have to be the expert and that means getting the advice of experts, which can in many cases be had for free. Free consultations and or evaluations are still the rule rather than the exception. While it's true you may not be able or capable of doing everything yourself you should still be in control of everything. The most expensive cost in any start up attempt is failure and paying people who have their own best interests at heart to take care of your business is a sure path to failure. If you are going to outsource make sure what you're outsourcing isn't critical because if it is and it isn't done right you'll be the one who pays. Success is determined by hard work, dedication and determination. Those who want to succeed find a way, those who don't find an excuse!
Not generally, I don't think. A startup should be mostly concerned with getting its product or service up and running, and as much as possible should be done in-house to conserve money, especially if the startup's exec team or proprietor is using their own money or if you have limited investiture.
Some things must be outsourced - like payroll, which was mentioned. But generally, most of what needs to be done should be done in-house, with a minimum of outsourcing and contracted help. If you don't know how to do something, get a basic how-to guide - it'll teach you a new skill and it'll be a lot cheaper than outsourcing. If it's too complicated for you to handle or you don't have the time to learn a very involved skill for what needs to be done - site building, server setup and maintenance, programming, and so forth - then I'd say it's time to outsource.
That said, it really depends on the company, and every business owner has to consider their own unique situation and decide what's best for their individual company.
I think ALL of these recommendations are spot on. From my own experience, I've learned that if you don't know your business yourself, you won't be able to effectively manage your outsourced team. So, get that down like so many of the recommendations below and be prepared to invest in slower turnaround times with your contractors until you get the hang of working with one another. Also, don't be discouraged when looking for the right fit. I went through a few contractors with various positions before finding the ones that fit with our work ethic. We don't plan on having any w-2 employees for at least beyond our first year because of the many benefits with working with contractors. Just be sure you speak with your accountant about the requirements of contractors vs. employees so you know your boundaries and rules of hiring contractors. Good luck!
Outsourcing can be a fantastic strategy for a start-up. When done properly, it gives a company the ability to compete on a equal level with companies who have developed extensive resources in a particular function. It can also give you tremendous flexibility to scale up or down and minimize risk. It can also be a disaster, if it's not done methodically. Our focus is on outsourced logistics and distribution services. We've used these services, provided these services, and now assist clients with navigating the outsourcing process.
Obviously there are a lot of answers regarding outsourcing and many things you can outsource. Our specialty is the HR/Payroll/Benefits arena. Absolutely makes sense to do it. I am happy to discuss with you.
It depends! Outsourcing development of your core technology or your key product/service, IMHO, does not make any sense. But outsourcing virtually everything else must be considered. Outsourcing admin, legal, finance, PR, ... activities that are not essential to differentiating you from others are no-brainers. You should also consider outsourcing lead generation, biz dev, sales activities, an interim CEO ... if you are not in a position to hire full time employees to do those, or existing founders lack those skills/experiences. As a founder your top priority should be to ensure that you have a viable and marketable product/service that addresses real world needs. Good luck.
Outsourcing can be great but can also be a big disaster. My business is relationship based, not transactional. You have to represent your company and yourself in the best way so what you outsource may not be done as you would want. I had a problem once. Since then I only outsource to a local group of freelance professionals that have proven themselves to me. We have the same corporate culture and it makes doing business so effortless. I may pay the extra penny, its the small stuff but I receive first class suport, extreme talent, positive attitude and total committment. So, examine your goals. I need to know who I work with! Good luck.
I've worked in the outsourcing industry since 2002 and now run a BPO firm (Business Process Outsourcing). Yes there are various strategies for outsourcing. Which is right for you, you will have to make that decision. I'd be happy to lay out some possible strategies over tea or coffee or Skype conversation.
We have some case studies on our not-yet-released website. I hope these help.
After having bad experiences with outsourcing i can say that the more you can avoid using outsourcing the better it is. if you must use some services so may it be only things like graphic design and etc. As for the technology part i believe that in 90% of the cases your startup won't succeed when the core of your business is out there, not in your hands, can't be controlled and far from your eyes.
Even if you think it will save you time and money, trust me - at the end of the day it won't.
My advice - find the way to do it yourself.