To put it bluntly, a company can not grow without hiring employees and/or outsourcing some of the required services. For example, I own a small company. I am currently the CEO, the CPA, the chief sales person plus the lead janitor. My company is still so small that I can not afford to keep a writer, a payroll specialist, a website developer, a computer guru and an attorney on staff. Yet, each provides services that I need. As result, I outsource these services. I save a lot of money and time by paying specialists to handle those tasks. Organizations and companies of all sizes can benefit from outsourcing. However, there are pros and cons to outsourcing freelancers,subcontractors or service providers. Most of my personal experience with outsourcing has been for IT services and website development.
What is outsourcing?
The Business Dictionary.com defines outsourcing as: The contracting or subcontracting of noncore activities to free up cash, personnel, time, and facilities for activities in which a company holds competitive advantage.
Numerous American and foreign companies specialize in handling outsourced tasks.
American versus Foreign?
I’ll be honest, I would always prefer to hire a person living in the United States if I could afford to do so. As a certified public accountant, I recommend that you outsource payroll processing and book keeping tasks to a local firm in your community. That would give you the best assurances that you are working with someone that knows the tax and payroll laws and regulations specific to your your town, county, state etc. However, when it comes to IT services, I have been willing to outsource to someone located in another country.
I was, and still am, a bit apprehensive about the security issues. After all, these people have has access to the “guts” of my websites. Criminals could easily insert harmful code into my website. However, there area plenty of dishonest people in the US also.
The people that I worked with overseas came across as being very nice and polite. They have many of the same concerns that each of us has here in the United States. For example, are they earning enough money to pay for their bills? Even though I may never meet one of my website developers in person, they appreciate compliments for work well done. Just like any other person, outsourced workers occasionally make mistakes. Yet, since they specialize in IT and website development, they are correct the errors faster than I can.
When I have outsourced IT and website development, I was able to communicate with my contact just enough to view the person as a person. The communication allowed me to view them as a person rather than rather a faceless name on that showed up in my email box. For example, I worked with a guy named Ruri. If I recall correctly, Ruri was in the Phillipines. He did an excellent job and he communicated well.
Advantages of Outsourcing:
1. Access to qualified people with the skills that you need when you need them. You do not need to recruit, train and keep qualified people on payroll.
2. Save on infrastructure and technology. You do not need purchase computer equipment, software programs, provide office space for or training for people that are performing outsourced tasks.
3. Outsourcing allows you or your staff to focus on your core business activities that generate an income for your business.
Advantages of global outsourcing
1. Cost savings.
Flatworld Solutions, an outsourcing company in India, states:
The most obvious and visible benefit relates to the cost savings that outsourcing brings about. You can get your job done at a lower cost and at better quality as well. Due to the difference in wages between western countries and Asia, the same kind of work that is done over there can be done in India at a fraction of the cost. There is a cost savings of around 60% by outsourcing your work to India. Plus, the quality of the services provided is high thereby ensuring that low-cost does not mean low-quality.
As a disclaimer, I have never used the services of this company so I can not review their services other than their website ranked on page 1 of Google for outsourcing.
2. Time zone advantages.
During the US workday, you are able to focus on your business tasks. Due to time zone differences, it is likely that the outsourced job will be done overnight while you are sleeping.
If your IT job is a simple job for a qualified person, it may take less than one day to complete. In my case, I checked my email at night before I went to bed to make sure that the person working on my website did not have any questions or need more information.
Disadvantages of Outsourcing
1. Communication Challenges: In many outsourcing cases, you will not be able to see the people you are working with. Emails may be your primary form of communication. You must be aware that these communication challeges will exist. You much be willing to take extra steps to ensure that adequate communication exists.
2. Risk of exposing confidential data: When a business outsources their human resources, payroll, recruiting or customer data, there is a risk if exposing confidential company information to a third-party
3. Synchronizing the deliverables:. In case you do not select the right partner for outsourcing, some of the common problem areas include stretched delivery time frames, sub-standard quality output and inappropriate categorization of responsibilities. At times, it is easier to regulate these factors inside within your company rather than with an outsourced partner. Again, this goes back to potential communication challenges.
4. Hidden costs : Although outsourcing can be the most cost-effective solution; there could be hidden costs. Enforcing contracts that span across different states within the US or international borders can be more challenging. If you sign a written contract, make sure you understand the provisions. If possible, have an attorney review the contract.
How to Safely Outsource
Entrepreneur magazine published an article by AJ Agrawal, “How I overcame my fear of outsourcing developers.”
The following is quoted from his article:
Hidden costs include money wasted on unproductive operations abroad, money lost due to cultural differences, transition-related costs like temporary decreases in productivity and the costs of managing the outsourced team.
Luckily, good communication will do a lot to mitigate these costs. In addition to informal daily communication with your “abroad” team, schedule teleconferences or meetings regularly to discuss larger issues that might be hindering productivity or cohesion. The more you can get to know your abroad team, the better: You’ll be able to verify that this particular team is the right fit for your company.
You can also avoid hidden or extra costs by planning ahead. Establish clear productivity and team-building goals, and have the outsourced team commit to accomplishing those goals within a set period of time. Make milestones frequent and achievable by adjusting them as necessary.
Selecting the wrong vendor
The fear of choosing the wrong vendor to handle your development needs is valid and common. However, you can take certain precautions to make sure you’re happy with whom you choose.
Pick your outsourced vendor wisely. Instead of just choosing the cheapest service, look into experience, success metrics, testimonials and potential language barriers. Also, ensure that the vendor will be willing to work on your schedule. Depending on your project, close collaboration might be necessary; as such, you’ll want your abroad team to operate on your local team’s hours.
Most importantly, don’t be afraid to switch! One great thing about outsourcing development is that outsourcing opens the door to many viable options. If you’re unsatisfied with the work product of your outsourced team, you can easily find another team for a comparable, or even lower, price.
Skill gaps between outsourced and local developers
Another common fear is that leaders won’t be able to ensure efficiency due to skill gaps between outsourced developers and local developers. Creating strong ties between the two groups, however, is an easy fix.
Depending on the structure of your company, consider keeping a few skilled developers in-house. You can then implement systems to check the outsourced work as it is created, to avoid receiving a subpar work product.
For example, re-compile and build your software every time a developer submits work for a product. Doing this will help detect problems immediately so they can be remedied without delay. You can also require that outsourced team members develop and run individual tests for their products during development.
Creating tests prior to the implementation of a feature can help clarify what the software should ultimately do. These tests can then be run again and again throughout development. Testing needs to be automated and thorough, and the end-user experience should always be kept in mind.
Collaboration is another valuable method to mitigate the skill gap. If possible, in addition to frequently communicating with your outsourced team members, strive to collaborate with them to better resolve potential problems that occur during development. Using Scrum is a great way to facilitate this collaboration.
Finally, require that your outsourced team members create technical documentation so you can better understand their work. If you switch vendors in the future, you’ll need the technical and architectural specifications for the tasks your current outsourced developers are working on to avoid future delays.
Security is a concern for many developers who work with trade secrets and other types of private data, so it’s imperative to take this into account when selecting a vendor. International certifications for data privacy exist, and most reputable vendors should meet the certification requirements.
When choosing an outsourced vendor, look for past incidents regarding client security. How did the vendor handle it? How would you handle it? By considering possible security issues beforehand, you can avoid potential disaster later.
In today’s world of globalization and near-instant communication, outsourcing is more viable and beneficial than ever. By looking past some common fears, you can create a strong international team that will create great products and bolster your business.