Is outsourcing a good option for startups?
We are into a global economy and companies can source products and services from wherever they found it to be cost-effective and efficient. The major reason behind this outsourcing is cost-reduction. If major companies are outsourcing their work, startups can definitely consider this option to increase business and cost efficiency in their early stages. Thanks to outsourcing platforms like Fiverr and Upwork, startups can employ top talent from any corner of the world. Outsourcing can play a big role in startups.
Sometimes, cost reduction may not be the main concern for startups. Many startups struggle to find the required talent in their neighbourhood and short on manpower for some essential functions such as HR, accounting etc. Other times it’s the inability of startups to scale up according to the demand or requirements that makes outsourcing to be an attractive option. It needs to be understood that outsourcing by larger companies is a bit different from outsourcing by startups. Larger enterprises primarily look for reducing costs of redundant work or occasional excessive work. They don’t generally outsource their core business work. Large businesses have comfortably protected intellectual property and data. Entrepreneurs, due to the lack of internal resources, often faced with the risk of divulging their core business models and data to their outsourcing agencies. There are ways to mitigate such concerns if the entrepreneur do some homework and get answers to the following questions.
- Which parts of your business, you would like to outsource because you can’t find resources? Technology advice, business functions, software development, human resources or something else
- What are the efficiencies or enhancements you are trying to achieve? Cost reduction, technical expertise, team building or something else
- Do you have to outsource 100% of a particular business activity? If yes, are there any sensitive issues that can jeopardize your company’s operations and data in the future
- If you aren’t ready to outsource 100% of your business function, are you able to separate what can be safely outsourced
- Do you prefer an individual freelancer or a company to outsource your work? Is this decision influenced by your budget?
- Do you have any preferences as to which countries or regions you can outsource your work? What are the factors that are influencing you here? Language, culture, moral issues or something else
- Are you able to select the outsourcing agency or freelancer yourself? Do you have enough knowledge of the business function you want to outsource, so you can interview and select your partner? If not, what are your plans to find the likely solution and the solution provider?
- Can you judge the quality of the work that your outsourcing partner is providing to you? If not, what are your plans to make sure that you are getting the desired quality?
Outsourcing isn’t a small decision. It puts you in contact with new people, cultures and work ethics. It is absolutely necessary to do some homework regarding, how often and how long you can depend on the outsourcing agency before developing your internal capabilities. Outsourcing has several advantages, you can continue to operate within certain costs and your operations are highly scalable. It gives you an advantage over others. But there are certain drawbacks like low quality output and lack of control, if you are not able to choose the right partner.
If you can do some analysis and pose those above questions to yourself, you are in a much better position to take advantage of outsourcing, which is a highly flexible and an effective way of accelerating startup growth.