What is Outsourcing? 4 Common Things Companies Outsource

What is Outsourcing? 4 Common Things Companies Outsource

Outsourcing is all the rage right now. There has never been a better time to outsource work to other agencies in order to save money and/or time on projects that will give your business a boost. So what are some outsourcing examples for you to fully understand the scope of the trend?

Today, we will look at four simple outsourcing examples so that you can start to consider what things you may want to have performed outside your company, too.

Let’s dive right in with the basics first.

What Exactly Is Outsourcing?

Though it’s thrown around a lot on the news - typically when people are outsourcing jobs to foreign countries that could be done in the US - outsourcing is a simple concept: it’s when a business subcontracts out a portion of the company’s activities to a third-party.

In other words, it’s performing a business endeavor outside of the organization.

“Outsourcing involves subcontracting parts of a company's value-chain, (i.e. steps in the design, supply, production, marketing, sales, and services processes) to other companies or contractors that specialize in those activities. Through outsourcing agreements, the client company hires separate companies to perform specific tasks in the value-chain on its behalf. Often, the work is performed under the name of the client,” reports Investing Answers.

“The kinds of outsourcing work performed vary widely across industry sectors. Some common outsourcing activities include: human resource management, facilities management, supply chain management, accounting, customer support and service, marketing, computer aided design, research, design, content writing, engineering, diagnostic services, and legal documentation.”

What is Outsourcing?

As you can see, you can outsource just about anything these days. From sales to HR, IT to manufacturing, everything under the sun has a way to be outsourced.

But should you outsource things? Or should you try to do them in-house, allowing you to have more control over the process and also cut out the middle man? This largely depends on your organization’s needs at the time.

For example, if you are just getting started, you may want to outsource production so that you can get the ball rolling. After all of that has settled down, you may want to own the means of production by bringing everything in-house, which - if you have the proper set up - should save you money in the long run.

So, when it comes down to it, outsourcing should be viewed as a tool. You should consider it when you need it. Ask yourself: will it save you time? Will it save you money? These two things are vital for businesses to succeed. By cutting costs and allowing staff members to focus on work that is more impactful, you can give yourself a boost.

Be aware, though, that outsourcing can also have it’s setbacks. To explore those, let’s get into the list of real-world examples.

Outsourcing Examples: Project-Based Outsourcing

Projects can come in all shapes and sizes. For example, say that you want to launch an ad campaign but do not have the creative staff onboard right now to pull it off in-house. Instead of starting an entire department for one project, it makes sense to work with a third-party to contract out that work.

This is a good idea because you can find an ad agency that are experts in their craft, making sure that you have everything you need to succeed. Agencies like these are all over the place, allowing you to have the pick of the litter.

Outsourcing Examples

The one major concern here is budget. Just like any market, the outsourcing market - especially the creative side of things - can range from cheap to extremely expensive. You’ll generally get what you pay for so do your homework and make sure that whatever you go with will meet your business needs.

This same example works for any project, not just a creative one. Say, for example, that you need an email system set up, or a POS system, or something like that. You can outsource this project in the same way you outsource remodeling your bathroom.

Just do your homework before you decide to sign on the dotted line.

This leads us nicely into one of the biggest outsourcing examples of this year:

Outsourcing Examples: IT

Whether it’s to develop a new app, maintain your current IT infrastructure, or really anything else that has to do with technology, companies all over the world have started to outsource their IT needs to outside agencies.

Why?

Well, for some, it’s a cheap way to ensure that servers keep running and emails keep being delivered without the headache of managing - and paying for - an entire department.

When it comes to development, outsourcing examples abound because, just like the previous example, you can rely on expert teams to make the product without needing to hire the right individuals to do so in-house.

This can save time and, without a doubt, it saves money. However, you still have to do your due diligence to make sure that the contractor can fulfill your needs and meet your expectations, especially when it comes to bigger jobs like development.

Outsourcing Examples

Most companies already outsource some of these tasks without knowing it. For example, many companies use Gmail for their email systems, allowing the brunt of the technical know-how to fall on Google instead of their own IT department. Sure, it takes someone on staff with a bit of experience to set up and use the Gmail platform, but it’s not nearly as technologically driven as setting up in-house mail servers.

As new tech enters the marketplace, more and more things are becoming outsourced, leaving IT departments feeling the pressure. Always weigh the pros and cons of outsourcing before making the jump - this includes what will happen to your current workers when you use an outside provider to perform their jobs.

Outsourcing Examples: The Professional Level

Though IT can be considered inside this section, too, what we’re talking about when we say ‘professional’ are the departments such as HR, legal counselling, accounting, payroll, etc.

With a suite of different options to choose from nowadays, many companies have started to have professional assistance from outside companies.

For example, payroll. Payroll in today's world can be done using outside systems that track money in and money out, allowing you to pay workers on time, keep track of IRS documents, and things of that nature so that you don’t have to.

The same can be said for accounting and other paper-heavy tasks. Some organizations even outsource their HR practices, though this is usually when a company is starting up and needs to have their bases covered.

In fact, a lot of these systems are made for startups, allowing the business to remain as lean as possible while they make and launch their product. When businesses get larger and larger, it can make more sense to have these departments be in-house so that you can have more control of how they work. Also, accounting, HR, and other departments can typically help you work out your business goals in a strategic sense, making them more and more important as time goes on.

Outsourcing Examples: Manufacturing

Finally, we have manufacturing, which is probably the most known and most talked about form of outsourcing right now.

Huge companies often outsource their production because of the simple fact that it is cheaper to make things overseas. Just about every electronics company outsources their manufacturing. The same can be said for clothing companies.

For this type of outsourcing, companies need to pay close attention to quality. After all, just because you get it for cheap doesn’t mean it’s the right choice if your quality takes such a hit that it drives away business.

Outsourcing Examples: A Brief Recap

When it comes to outsourcing, you have a ton of options in today’s world. We’ve just covered the four major outsourcing examples here.

In the end, outsourcing all depends on what your business needs, how much they can spend, and how quickly they need it done. You may know how to perform a certain project, but will an outside team of experts be able to do the same thing for faster while you work on other things? Do you need to outsource your manufacturing because it’s the only way to get your product to market?

Some of these questions will likely pop up as your business grows. And it’s never been a better time to find outside, third-party help to bring those projects, products, and innovations to life.

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