Outsourcing is the practice of hiring an external service provider to partially or completely deliver the functions required by a business. This strategic activity can be a mixed blessing that comes with both benefits and challenges to enterprises. Take your time as in today’s post, we will analyze the issue and suggest best-matched outsourcing strategies to ensure your outsourcing initiatives succeed.
Table of Contents
- 1 Outsourcing Strategies and Some Common Forms
- 2 Outsourcing Strategies From A Two-sided Perspective
- 3 How To Develop Comprehensive Outsourcing Strategies
- 4 Cannot-miss tips for building successful outsourcing strategies
- 5 Magenest’s outsourcing services – Let innovation comes to you
- 6 Conclusion
Outsourcing Strategies and Some Common Forms
Outsourcing strategy is basically a comprehensive plan built on the assessment and analyses of the functions that should be better performed by an outsourcing service. Specifically, the company needs to identify tasks which are hard or impossible to perform internally with its own resources. Then, it begins to search for the service provider that has all the tools and qualified staff to accomplish the desired task within the stated time frame.
Outsourcing strategies can serve in various forms depending on the needs and expectations of the business. In particular, companies may choose among the following types:
- Onshore outsourcing: companies outsource services within their own country
- Nearshore outsourcing: the outsourcing location is a neighboring country or one in the same time zone
- Offshore outsourcing: the place is a more distant country.
Each of the types comes with a certain set of positive and negative points. Having said that, among three forms, offshore and nearshore outsourcing strategies are more favorable approaches in terms of costs.
In addition to the geographical classification, outsourcing strategies are also usually grouped into the following categories:
- Professional Outsourcing: Any type of specialized, professional services that your business desires to outsource. Some professional outsourcing strategies can be legal, purchasing, accounting, and administrative jobs.
- Multisourcing: This outsourcing strategy is the practice of hiring a combination of IT services and other business functions from the outsourcing vendor.
- IT Outsourcing: This strategy means hiring an off-shore third-party IT team to work with certain projects such as software development, maintenance, infrastructure,…In fact, it is the most common form of outsourcing in recent years.
- Manufacturer Outsourcing: This is a strategy in which you look for a manufacturer to produce the products under your brand.
- Project Outsourcing: If you have loads of projects to handle, you might want to hire a project outsourcing provider to help you complete one or a certain number.
- Process-Specific Outsourcing: This strategy means to hire an outsourcing company which specializes in a narrow or specific service.
Outsourcing Strategies From A Two-sided Perspective
In order to build up effective outsourcing strategies, it’s crucial to address both the pros and cons of outsourcing. By comparing those aspects and considering the current situation of the firm, business owners can get assured while outsourcing their operations.
Benefits Of Outsourcing
The practice of outsourcing brings numerous advantages as below
External cooperation brings numerous advantages with regard to the cost. Instead of paying a huge amount of money to hire local employees or exploit domestic materials, firms can reach out to a more cost-effective solution when outsourcing. For example, a US-based IT company can hire teams or individual developers from Asian countries. They are parties that offer services at a lower price compared to the domestic market but are of high quality at the same time.
Moreover, there is also no need for firms to invest in new tech tools, which turns into a considerable saving at the end of the day. This is because outsourcing agencies already have all the necessary infrastructure and technological tools to work on your desired task.
Level Up Efficiency
Outsourcing activities can result in higher efficiency for the firm’s overall performance. In particular, a team with a deep understanding of the field and years of experience can get you covered with complex tasks. At the same time, they also can provide the most effective solutions for your operation, which translates into a higher level of productivity and efficiency of the work.
Tap Into A Larger Talent Pool
Globalization has opened opportunities for expertise to be exchanged among countries universally. Therefore, through outsourcing, businesses can have a chance to tap into a huge talent pool in other parts of the world. If you need specialized help which is far beyond your team’s capability, it often makes sense to expand your search.
Outsourcing can be a time-efficient strategy that saves time in the recruitment and training process for the in-house team. You no longer have to spend hours or even years searching for the best fit or provide internal training programs. Furthermore, while getting the projects off the ground, you can focus your resources on other urgent and important aspects of your company’s development. As a result, within the same amount of time, you can stand a chance of outperforming the competitors.
Access intellectual property and innovation
Innovations and intellectual property are certainly strong points that encourage businesses to conduct outsourcing activities. By outsourcing, firms have access to the inventions, and the specialized capabilities of the service provider that are not available or otherwise costly to achieve internally.
Time Zone Advantage
Another noticeable benefit has to do with the time zone gap between your country and the location you are outsourcing to. If you choose a vendor located in another continent and in a different time zone, you can make full use of this downside point. Get your job done while you are closed for the day and wake up to your service being delivered the next morning.
Drawbacks Of Outsourcing
Lose Managerial Control and Pose A Threat To Security
When you sign a contract to outsource any part of your business, you are giving them the management and control over that function. Therefore, there is a risk that security and confidentiality might be compromised.
Possible Quality Issues
As an external party motivated by profit, the outsourcing agency will not be driven by the same standards and mission as your company. Since the price is fixed under the contract, irresponsible outsourcing agencies can trade off the quality. For example, they can ignore some rules or standards to get the work done as quickly as possible.
Of course, the outsourcing contract will cover the details of the outsourcing services. Anything outside the contract that eats up the budget will be the basis for additional charges. If firms ignore this aspect unintentionally or lack experienced lawyers to review the paper, it is easy to lose a huge amount of money on hidden costs.
In the case of overseas outsourcing, language can be a real issue. Misunderstanding prompting from the language barriers can hinder the whole process or even lead to project failure.
How To Develop Comprehensive Outsourcing Strategies
After evaluating the above advantages and disadvantages of outsourcing, you are ready to come to the outsourcing checklist. This will serve as a framework for any task during the whole process.
We’ve compiled a list of essential steps to follow as below:
- Decide the suitable part/project to be outsourced
At the starting point, be careful as there is a chance that you might fall for the cost-driven trap. Here, you need to make sure that the outsourcing strategies are aligned with your business strategy.
- Analyze what you expect from the outsourcing project
In this stage, you need to brainstorm and develop a sound business case. This is like a mock test that outlines the business value of outsourcing activity and how it can support your company’s objectives.
- Choose the right outsourcing service provider
The outsourcing vendor you hire should be capable of completing tasks of any complexity and produce high-quality work.
- Create an effective win-win contract
The contract should clearly state the strategic goals and define your expectations for the vendor during/after the project. In addition, it should be a win-win one to keep motivation for both parties.
- Keep track of the process
Finally, you have to make sure that the senior management of your business is involved in the process, and keep track of any phase. What’s more, it is a good practice to keep your project on the right track with detailed reports on its progress and transparency.
Cannot-miss tips for building successful outsourcing strategies
As you’ve got a checklist of important tasks to be done, it’s time to jot down some important notes to ensure the success of your outsourcing choice.
Address Communication Problems ASAP
Effective communication is one of the crucial elements of a successful outsourcing project. Technically, you have to make sure that there’s no sign of a language barrier. For instance, if you are a US-based company and you’re trying to conduct marketing campaigns in the domestic market, then English competence for the outsourcing service is a must.
Next, you should clearly state your requirements and ensure a sound understanding of the service provider. Then, if any issue prompts during the process, the two parties should be notified as soon as possible. This can avoid any conflict or disagreement in the long run, and maintain a seamless workflow.
Last but not least, companies should make the contract or any talk simple and clear for both parties to fully understand the requirements, terms, and conditions of the cooperation.
Build a virtual office
To accommodate and have better control over a remote team, one of the best outsourcing strategies is to establish a digital hub that connects two parties. This ecosystem should be built upon project management tools, communication apps and other cloud-based platforms.
For example, it’s a good practice to replace email – the so-called communication tool with something faster and more robust. We highly recommend Salesforce, the optimal choice among the list of contact management software applications for businesses to integrate into their operation.
Concern about security and intellectual property
The other important note for businesses is about security, confidentiality as well as intellectual property when conducting an external corporation. In detail, before officially establishing the outsourcing relationship, it is crucial for both parties to discuss this issue and include relevant provisions in their agreement. Meanwhile, the contract should include detailed termination provisions in case intellectual property rights are compromised.
Another approach would be for both the business and the outsourcing service provider to own jointly the developed intellectual property. This could be a good idea, though the process to gain agreement is quite complicated.
Magenest’s outsourcing services – Let innovation comes to you
As mentioned before, IT outsourcing is the most dynamic section of the outsourcing industry. Hereby, IT outsourcing strategies are the key growth engine of the firm’s sustainable competitiveness in today’s technology-intensive business.
Selecting an ideal IT service provider is a tough decision for businesses. First, you need to define what exactly you want from the outsourcing relationship, then figure out the most important criteria you seek in that company. If you are going back and forth about choosing a service provider for your IT outsourcing activity, rest assured as Magenest is here to cover all your tasks.
By way of explanation, Magenest is a top-tier IT outsourcing service specialized in providing solutions to businesses of all sizes. Along with the trend in eCommerce and the digital area, the company has shifted its focus toward Magento development. Throughout its path, Magenest has claimed to be among the prominent outsourcing companies in Vietnam.
Magenest delivers success to Magento e-store owners through a comprehensive technology expertise package, including advisory services, solution design, implementation, and managed service. Thanks to the innovative one-stop solution, the company has officially become Magento Business Solution Partner.
At the same time, the outsourcing provider has successfully accomplished many Magento projects of universal clients. Beside serving the domestic market with well-known customers such as Trung Nguyen Group, Flexfit, Mobifone,…, Magenest also takes care of outsourcing projects from world-class corporations: ACFC, Heineken, Universal Music Group, Nestle, and more.
In conclusion, outsourcing has both its pros and cons. If it is on the right track, it can open up lots of business opportunities. Otherwise, it can end up being a double-edged sword if implemented haphazardly. Hence, building well-structured outsourcing strategies is essential to lay a solid foundation for the success of outsourcing activities in later steps.
That covered all we want to share about Outsourcing strategies. We hope that with this guide, you can easily make the best out of your outsourcing activities. If you have any questions, feel free to leave a comment below. We will get back to you with a complete solution ASAP.