Outsourcing some functions can help your business grow quickly, gain access to resources and expertise and save money but it is not always an easy process. Shifting to an outsourcing model may cause problems initially as you and your outsourcing partner learn and adapt to each other’s business and expectations. As companies look to scale or expand through outsourcing, choosing the right outsourcing partner will help produce the best possible results.
Following these best practices will not only allow you to find the right outsourcing partner but will also help you build a competitive advantage.
Before you start reaching out to potential outsourcing partners, write a clear scope of work document. It’s your responsibility to decide business goals, what it is that your business needs and what could be the best possible solution to achieve your desired outcomes.
If writing a scope of work document is too technical for you at the beginning, then you can also start by answering some simple questions like:
Answering these two simple questions will help you identify the problem you’re solving, prepare a clear roadmap for solving that particular problem and identify your overall business goals.
It’s important for you to understand that outsourcing isn’t a plug-and-play proposition but a way to accomplish a specific goal. Nobody knows your business better than you. Expecting an outsider to promptly have the same level of familiarity as you isn’t fair to the outsourcing partner.
In simple words, you cannot share vague requirements with your outsourcing partner like “create a mobile app that our customers will love” or “introduce something new in our web app” and then expect the best outcomes.
The key takeaway is, if you want to yield the best results possible, you need to be extra specific in terms of what you want to build.
Even once you are up and running with your outsourcing partner, perform regular assessments to make sure the relationship is meeting your needs. You may find that you want to fine-tune your current relationship, switch partners, scale up or down or stop outsourcing that function.
After writing the scope of work document, you can start reaching out to prospective outsourcing partners. Once you shortlist three to five vendors, you need to evaluate them based on the following factors:
Remember, technical expertise, even though is often overlooked, is crucial for the success of any outsourcing deal. Therefore, you should never choose an outsourcing partner who has expertise in limited technologies, even if they’re best in those few technologies.
The general rule of thumb is, the more software technologies an outsourcing partner has expertise in, the better the quality of your project will be.
>> Learn More: 5 Warning Signs You Need to Outsource Your HR
No business can afford to compromise on quality. But more importantly, no business can also afford to work with a partner who always misses deadlines or is not polite to work with. Therefore, it is equally important to check the market reputation of your outsourcing partner before signing an agreement.
In today’s internet-connected world, it isn’t difficult to check the history and reputation of an outsourcing partner. There are even platforms like Clutch and GoodFirms, for example, where you can check out their past clients’ reviews.
If there are still any doubts, you can always connect with a few of their past clients and note their experience working with the outsourcing partner. In any case, you should only hire an outsourcing partner if you’re fully convinced that the selected vendor has a good market reputation, can align well with your business goals and has a track record of delivering on time.
In your assessment of potential partners, make sure they align with your objectives, goals and culture.
Cost is one of the most underlooked factors that can ruin not just your relationship with an outsourcing vendor, but also your project. If you expect superior services from an outsourcing partner, then you must also know that those services often cost more than the average.
Before approaching an outsourcing partner, you need to figure out and finalize how much money you are willing to invest in your project and communicate clearly about your budget with the selected outsourcing partner.
In today’s digital era, privacy and data security are two of the biggest concerns, especially for businesses. When you outsource a project, you will often find yourself sharing sensitive business information with the outsourcing partner.
If such sensitive information is not managed properly, then your data can be mishandled. It is highly recommended that you sign a nondisclosure agreement with the selected partner before sharing any sensitive information.
Apart from this, you must also consider hiring a vendor who conducts network and security audits in their workplace regularly. They must be using specific tools that will help in protecting all your sensitive data and prevent any data leaks from happening.
The only way to survive in today’s market is by accommodating customers’ always-changing requirements. To accommodate the changing needs of your customers, you have to utilize Agile methodologies.
Agile methodologies offer a highly collaborative environment and give quick results. If you want to be a leader in your industry, prefer to hire a vendor who follows Agile methodologies so that they can adapt easily to changing requirements of your customers.
Flexibility is also important when choosing an outsourcing partner for your project. Your selected outsourcing vendor must be flexible enough to serve any urgent requirement or problem when it arises. Flexibility is especially critical when you and your partner are in different time zones. You must include flexibility in terms of urgency and support in the agreement before finalizing.
There are numerous benefits to outsourcing one or more areas of your business.
Saving money is the number one reason that businesses decide to outsource, with 59 percent of companies citing this as the reason they do so, according to Statista. Companies that concentrate on doing one particular thing, whether that is information technology services, human resources (HR) management, customer service or marketing, tend to have efficiencies that they can pass on to their clients.
Often, outsourcing companies that are based overseas offer lower costs to their clients because labor expenses are cheaper in their countries than in the United States. For an outsourcing relationship to be beneficial, the cost needs to be less than you would pay for a comparable level of quality in-house.
Companies that outsource can benefit from the specialized expertise of their outsourcing partner. Since the specific business function is all they do, they have much more experience, knowledge and sophisticated tools than a small to medium business (SMB) would typically have in that area.
For example, an outside call center is likely to have the most sophisticated telephone system and software. Custom programming companies will have experience creating all kinds of software and their programmers will know the latest software languages and tools. This kind of deep expertise is difficult for SMBs to duplicate cost effectively. Choose an outsource partner who can bring this extra level of expertise to your operations.
If your company needs something that is project-based or temporary, it often won’t make financial sense to hire someone to do it in-house. This is why so many companies outsource their website development and app development.
For rapidly growing companies, outsourcing gives them the ability to leverage other companies’ expertise and standing to quickly expand their operations. If a big push is needed for a limited time, such as for a product launch, a flexible outsource partner can ramp down efficiently when needed.
Typically, businesses engage in a variety of functions on a day-to-day basis that have little or nothing to do with their core business. For example, a manufacturer must do accounting, hire new workers and manage its finances, in addition to buying raw materials, manufacturing its products, marketing its products and distributing products to its customers. When a company outsources some or all of these noncore functions, its executives and employees can devote more of their time and attention to the things that will make a difference in the company’s market success and bottom line.
Although there will always be some degree of oversight of the outsourcing partner, having a competent and experienced partner will minimize the need for time-consuming management of the relationship.
The agility, specialized expertise and cost savings offered by outsourcing provides competitive advantages. They can improve the quality of your products and services, allow you to take advantage of market changes quickly and pass savings along to your customers in the form of lower prices. The ideal outsourcing partner will truly see itself as a partner, not a vendor and will make suggestions proactively to help your company become even more competitive.
When building a business solution, you always have two options: Hire an in-house team or outsource the project. [Related article: The Best HR Outsourcing Services]
While many businesses find it difficult to outsource their requirements, outsourcing can boost business growth and efficiency. Many popular global companies like GitHub, Skype and Slack have done it before. The only question is are you ready to follow their lead?
If your answer is yes, then these are the main points you should lead with when choosing an outsourcing partner for your next business idea or project.
Jennifer Dublino contributed to this article.