Why Outsourcing is not for Everyone
What is Outsourcing?
Outsourcing has come to be known as offshoring and it is not the same. Outsourcing is merely making a covenant or contract with an entity outside the parent organisation for specific activities or functions. It does not have to be done in another country. The finance industry uses arbitrage, which is capitalising on the variance of cost between markets. This is part of the reason many organisations decide to outsource. The competitive market advantage it creates brings more value to stakeholders. The fundamental of business is generating profit.
Why do organisations outsource?
Organisations, especially digital marketing agencies, have an operational imperative to outsource to offshore sources because the cost of labour for highly technical skills can cause their overall costs exceed what consumers are open to paying. Developers in America, Australia, Europe and Japan can be paid in excess of $100k for their skills. In countries such as India, Philippines, Pakistan, Nepal and Indonesia, the labour costs are significantly lower for the same skills. The challenge is being able to leverage a displaced team that will deliver with the same or better quality, in a shorter time frame. Variables affecting quality can come in the form of cultural challenges, language, communication issues, etc.
For the most part, challenges with outsourcing are a result of poor communication. When two parties are not sharing the same expectation, motivations for delivery and values, a breakdown is inevitable. These issues can cause the loss of clients by the agency and in the worst case scenarios, not being able to generate profit. Well-intending entrepreneurs and organisations all start out with pie-in-the-sky ideas on how lucrative outsourcing will be. Without taking the time to document business and sales processes, test communication systems and have all activities accountable and vested, outsourcing can be a nightmare waiting to happen.
How to Outsource like a “Boss”
The most effective outsourcers take the following actions:
- Well documented processes and procedures written at a 5th-grade reading level that can be taught to anyone;
- Engage technical project managers that understand both the agency requirements and the technical capacity of their teams;
- Expert experience in providing a specific solution to a problem for a niche client and or industry;
- Take time to really understand the cultural nuances of the individuals doing the work. This includes spending time in their country, building rapport and trust.
- Regularly building and cultivating rapport between the agency and the offshore teams;
- Understanding the drivers, values and vesting the outsourced team to the agency;
- Remembering outsourced assets are people; they are not ‘things’ to be manipulated;
- Develop internal case studies in addition to comparing controlled financial historical data for best practices;
- Always looking for greater efficiencies to deliver more quality faster without harm to the environment or people;
Is it for You? (CTA)
Clearly, outsourcing is not for all agencies. If your agency has poor procedures, documentation and organisational values, outsourcing is not going to resolve that. Just because you’re saving revenue by paying less for labour only means more opportunity to do worst to more people. Outsourcing can ruin a business if they do not have a solid relationship with the outsourced team.
Relationships always come before deals.
A relationship always comes before business.
Relationships always come before deals (say it with me, it’s important).
If you are not willing or ‘don’t have time’ to cultivate a relationship with your outsourced team, do not do it. There will always be missed expectations. Do the math from every angle. Once there is an agreement, trial the service so you can experience the results first hand.
If you are keen to generate more time, more revenue, deepen the breath of your offering and have services that deliver 100% of the time at a high level, you may be ready to investigate how outsourcing can make you more money.
As a white label digital services provider, StoneGye.com is positioned to offer localised services in America, Australia, Canada, New Zealand, South Africa and the United Kingdom. In addition to having a business model designed to grow your agency, you are also able to engage a digital advocate and coach who can review your business model and make suggestions on how to optimise your brand in your niche.