The word “outsourcing” may not be strange to many businesses. Sometimes, companies think they can do it all, but they need help and support. The word “help” here is about not wasting too much time and materials and focusing on what they already did well.
It could be an opportunity for companies to have their works/products done by professional expertise from other work-related-function firms. Therefore, they have more time focusing on what they do best.
In this blog, we give you a deeper view and understanding of outsourcing. Along with that, there is the biggest question that needs an answer: “Is outsourcing an opportunity or a challenge for business?”
Table of Contents
- 1 Outsourcing – A closer look at the strategic trend in business running
- 2 Global outsourcing advantages and disadvantages
- 3 Mistakes of outsourcing need to avoid
- 4 How to Choose the Right Outsourcing Provider Portfolio
- 5 Magenest’s Outsourcing – When Everything Is Beyond Your Expectations
Outsourcing – A closer look at the strategic trend in business running
What is outsourcing?
Since the 1990s, outsourcing has appeared to be a strategic move of business as it brings out a considerable number of benefits. In short, this service is the practice of cooperating with another outside company to provide some parts or the whole services, design, and manufacture goods. The demand of outsource happens when one company wants to cut off extra investment in materials, labor, and focus on what they do best.
Many business owners have applied and chosen this as a strategic plan for their companies. Also, many firms in this field set up their businesses to provide that kind of helpful service. For a more in-depth understanding, let’s take a look at several outsourcing examples in the industry.
Some outsourcing examples
Outsourcing may be more prominent in the manufacturing business field. Many companies have beautiful ideas about their new products. However, the time and money they have to spend on experiments, buying machines, components, and hiring more laborers are considerable. Sometimes, that can be the latest and most trustful technology they need to buy to create that product. In that case, a manufacturing outsourcing company is the best solution.
Another significant example is bookkeeping. Some small companies, especially start-ups, usually don’t have enough money and employees to build a professional paperwork team. Therefore, they will hire an accounting company to handle their financial figures and send them monthly reports. Sometimes they will outsource a human resource department by having another company take their recruitment and even training.
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About outsourcing services
Generally speaking, the cost of this service consists of many components. To have clear ideas about the bills that you will have to pay, let’s look at them.
Paycheck or salary
The goal of outsourcing is to have your product created by other teams. Therefore, the first expense will be the remuneration or salary for them. The fee depends on what size of partner that you hire. It could be a single developer for in-house projects, a full team, or a company for entire product development.
Talking about the cost of outsourcing IT, when hiring a single developer such as a dedicated coder, programmer to work on your requirements, you can pay them per hour, per month, or longer-term. Sometimes, the cost of it can be more affordable for business owners by paying per hour. For example, the cost of outsourcing software development can be less than usual with an outside professional IT man. However, they will also have to pay for the break and non-working hours. In India, the cost of outsourcing hr is from $20 up to $45. In other countries, the price might fluctuate between $50 and $150.
Furthermore, by hiring an entirely remote team with the project manager, developer, tester, designer, QA specialists, the price would be different. Usually, in this case, business owners often hire outsourcing companies for customer or accounting services. The cost of outsourcing customer service depends on many aspects, such as the number of clients, around $1,680/week or $349,440/year. Same with the cost of accounting services, there is also a variation of price. The cost of outsourcing accounting ranges from $500-$2,500/month depending on the number of transactions and the complexity of services required.
End-to-end product development
When an outsourcing company produces a product, from A to Z, the average cost will be $30,000. That price is for all the process of manufacturing a specific product, from setting up an idea to get it launched into markets.
Along with the costs listed above, there could be many ad-hoc ones during ventures. They could be the cost of researching, seeking outsourcing firms, the money you have to spend on getting an SSL Certificate for a product’s security, and so on.
Besides all the direct costs that business owners have to pay, there are also hidden costs that we should know. Some of them are the cost of hiring, transitioning, management, and creating contracts. In detail, they are money you have to spend on transferring your work to the outsourcing companies, launching, testing, and hiring. You can’t calculate those prices because these companies decide them or are too fluctuating based on different processes. It doesn’t consist of a waste of time when negotiating and signing contracts.
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Global outsourcing advantages and disadvantages
Advantages of outsourcing
Global outsourcing gives you an assessment of many other certified sources of labor. That can bring out many values to your company, and sometimes, you can take it as a chance to invite more talents to cooperate with your companies. Therefore, the brightest scene could be when the company gets ready to launch new products into new markets. Companies can have many local experts who deeply understand the need and can give out strategic plans with outsourcing.
Getting Things Done Fast
By outsourcing tasks to other firms, agencies, or freelancers, companies can get things done very professionally and fast without paying too much money on employees and facilities. Each firm or agency always focuses on this field and has great experience in one specific field. Therefore it could be an easy thing for them to handle one project, but it can be a great challenge for us to take.
>>>> Read more: Outsourcing Advantages
Disadvantages of outsourcing
Loss of Control
When hiring these types of services, especially off-shore ones, you can lose the management of your products. You don’t often communicate with them to get the latest news about the products or can not directly check the quality and other processes. This disadvantage is understandable, but you might have to be careful when choosing an outsourcing partner.
Getting Hidden Costs
Along with the ad-hoc costs, when signing contracts with them, take time to read them to get all the costs transparent carefully. It would be best if you timely discussed with your partner the extra or unacceptable costs. As at the end of the road, the goal of outsourcing is to cut down the expense.
Security Leaking Risk
When transferring tasks to your outsourcing partners, you can put your customer or intellectual property at the risk of leaking. That can cause a lot of trouble for your company as it relates to legal issues. Also, you have no idea what your partner is going to do with your data.
Financial Burdens Sharing
It can be great to share the risks with other outsourcing companies; however, it’s also hazardous to tie your business to another company’s financial well-being. One more time, you have to spell out every term and condition in contractual arrangements. Therefore, you don’t need to take a financial hit if the cooperation fails to deliver.
>>>> Read more: Outsourcing vs Insourcing: What Should You Choose?
Mistakes of outsourcing need to avoid
Along with costs, we should also know some kinds of mistake of outsourcing need to avoid.
Prefer cheap services
Choosing cheap firms or teams may help you save a lot of time and money. However, the quality always goes with the price. When these firms offer you a too-good-to-be-true price, they will try to hire the cheapest laborers and materials to handle the projects. Therefore, you can’t assure the quality of your projects.
Completely believe in outsourcing services
When manufacturing new products by cooperating with an outsourcing company, they can lead to what they want. For example, they can offer you some materials or services beyond your requirements at a higher price. However, nothing can guarantee that your products can be better with those materials.
On the other hand, when you put too much belief in outsourcing services without following the process, many minor errors can happen. You might not recognize them right away, but they might affect the product function or disappoint your clients when getting launched.
How to Choose the Right Outsourcing Provider Portfolio
After figuring all the advantages and disadvantages of outsourcing, it’s essential to list some tips for choosing the right outsourcing provider portfolio.
The first tip will always be knowing what you need to seek a suitable partner and service. Having detailed requirements can also help you get rid of unnecessary fees.
The next tip is carefully discussing terms and conditions before signing contracts. The conditions could be about the price or quality. Therefore, it’s crucial to go through all the things before getting into cooperation.
The third tip is also the key to the outsourcing process. It’s communication and management. Keep in mind that when running the project with this firm, timely and daily communication is an essential element of managing quality. So, set up a schedule to check on the partner doing with your projects to ensure they’re in the right conditions.
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Magenest’s Outsourcing – When Everything Is Beyond Your Expectations
With more than five years of outsourcing experience, Magenest deeply understands business owners’ obstacles in applying these services. We have been working with many companies of different sizes and fields. We’re confident that we can provide high-quality services and always update the latest technology and system to support and get your jobs done. With a significant number of risks that you have to deal with when outsourcing, we have qualified teams, certified partners that can timely and professionally solve or prevent them.
In short, with Magenest, we help you strongly believe in the positive things of outsourcing. For us, outsourcing is an opportunity more than a challenge. Contact Magenest TODAY to make more successful projects together. There is always a FREE offer for you to try.
For you, outsourcing is an opportunity or a challenge? Please share with us your opinion in the comment section below. Make sure to sign up to Magenest for more upcoming blogs.