If you’re considering outsourcing for your business, you may still have some concerns about the process. This may be because of some widely-held misconceptions about outsourcing.
For example, you may wonder if outsourcing will help or harm your business. That’s why understanding the reality of outsourcing can help you make an informed decision.
In this article, we’ll describe 12 such common outsourcing myths and aim to debunk them.
Let’s get started.
Top 12 prevalent outsourcing myths
Here’s our list of 12 common misconceptions about outsourcing and the facts that debunk them:
Myth #1: Outsourcing and offshoring are the same
Many people believe that outsourcing and offshoring are the same and that outsourcing is always done abroad. The two concepts are different in a few ways.
Outsourcing is the process of contracting your non-core business operations to a third-party company, domestically or abroad.
For example, a business located in the UK may wish to outsource the development of its marketing campaigns. They can hire a marketing outsourcing provider within the UK or in a foreign country such as India. In the case of hiring overseas, this is known as offshore outsourcing.
A prevalent type of outsourcing is Business Process Outsourcing (BPO). Some examples of business processes you can outsource include:
- IT outsourcing such as technical support or software development.
- Human Resources (HR) functions, like the payroll or recruitment process.
- Financial services through an outsourced accounting firm.
- Sales support with an external sales team.
- Legal assistance through a third-party law firm.
- Customer service with an outsourced call center.
However, outsourcing is even done in fields such as healthcare and manufacturing.
Offshoring is similar but always takes place in a far-off country, especially with a highly skilled talent pool but low labor costs. The offshore employees can be employed by your company directly or by a different offshore company. Irrespective of hiring, offshoring is often done to leverage low labor prices in many developing economies.
There’s also the option of nearshoring, which is offshoring to a country close to your own. For example, a company in Germany can nearshore to Poland.
Read more about the difference between offshoring and outsourcing.
Myth #2: Outsourcing is too complicated
Adding an outsourcing partnership to your business model might seem overwhelming and demanding. However, it may not be as complicated as you might think.
Managing an outsourced team shouldn’t require more effort and supervision than managing an in-house team. The outsourced team can even help lessen your workload in the long run.
Setting up an outsourcing arrangement may differ from hiring in-house but isn’t necessarily more complicated.
This is because business-to-business (B2B) relationships can be a lot like business-to-consumer (B2C) relationships. Outsourcers can offer a personalized and straightforward onboarding experience to companies looking to hire them. Taking the time to select the right outsourcing partner can also help ensure that this happens.
In fact, outsourcing may be simpler than starting an in-house team from scratch. Once you set up a partnership, the outsourcer will likely take care of the necessary staffing to handle your portfolio.
Myth #3: You won’t have control over your project
It’s a common outsourcing myth that you lose all control of the outsourced function. This typically won’t be your outsourcing experience.
Outsourcing providers are hired to execute the task you delegate to them, just like an in-house team located in your offices. Your chosen service providers shouldn’t have influence or authority in your business.
For example, if you outsource to a software development company, they’ll execute the task while consistently reporting back. You remain in control of decision-making regarding the end result. You can do this without being involved in the minor details of project management.
To ensure this, you need to choose an outsourcing partner who keeps you in the driver’s seat. They need to:
- Work according to your protocols and procedures.
- Work towards the Key Performance Indicators (KPIs) or metrics you provide.
- Provide you with performance updates and regular reports.
- Use collaboration and communication tools to stay in contact with you and your team.
You can ensure that this happens by setting up a strong outsourcing agreement. It can include a description of the outsourcing services, payment, and contract duration.
Myth #4: Outsourcing leads to low-quality deliverables
Some people believe outsourcing will result in services of poor quality. However, you likely won’t have quality control issues if you evaluate the outsourcer beforehand.
Choosing the right outsourcing partner is vital to ensure you’ll be satisfied with their work. You can start by researching and vetting companies to assess whether they match your business’s capacity needs, work culture, and industry experience.
Many excellent outsourcing companies provide exceptional services and high-quality end products.
In Deloitte’s 2021 Global Shared Services and Outsourcing Survey, 80% of people expressed satisfaction with their outsourcing arrangements, while only 10% said they plan to stop due to low-quality services.
Moreover, outsourcing companies rely on hiring talented staff and improving their expertise to compete in the market.
In the 2021 Deloitte outsourcing survey, 67% of successful companies said that dedication to innovation and improvement in their outsourcing business was a key to their success. Most outsourcers also use strategies to attract and retain top talent, like offering a positive work culture (77%) and flexible work models (62%).
A business owner could encounter poor performance whether they hire in-house or outsource. Meanwhile, there are many benefits of outsourcing and ways to mitigate this risk.
Myth #5: Language and culture barriers will stand in your way
Businesses often worry that they’ll encounter cultural differences and language barriers, especially when offshore outsourcing. This may not always be the case.
The world has become more globalized and integrated, and outsourcing a business process is no longer a new practice.
Many outsourcing service providers serve international clients, especially from North America, Europe, and Australia. Most have a good grasp of English and are dedicated to working harmoniously with their Western clients.
In addition, outsourcing companies often hire multilingual staff based on their clients’ needs to have easier communication.
For example, in South Africa, there are approximately 16.5 million English speakers. 61% of South African outsourcing service providers work for companies in the United Kingdom (UK), and 18% for the United States (US) and Canada. However, there are also around 300,000 Portuguese speakers and 17 million Afrikaans speakers (a language with a 90-95% vocabulary match with Dutch).
This points to a large potential workforce of multilingual people for outsourcing.
Read more about the benefits and challenges of outsourcing to other countries in Africa.
Myth #6: Time-zone differences decrease productivity
Many people worry that the time zone differences in offshore outsourcing could cause scheduling difficulties.
However, your business and the outsourcing service provider can utilize overlapping work hours for meetings and direct communication. An outsourcing company might compromise to have meetings before or after their work hours when it suits you.
You can also use these time differences to your advantage.
Larger time differences can mean you’ll both be productive during your respective work hours. This can create a near-24-hour cycle of productivity and increase your business’s efficiency.
A great way to ensure your outsourced team uses their work hours well is to use a time tracking and productivity monitoring software such as Time Doctor.
Myth #7: You should choose your outsourcing partner based on their country
You’ll often see articles comparing the outsourcing capabilities of different countries, and it’s true that countries have unique strengths and weaknesses in outsourcing. For example, the Philippines is known for BPO and Ukraine for IT outsourcing. However, it’s misleading to think that outsourcing to a specific country guarantees you certain results.
Regardless of country or location, the quality of outsourcing services will always depend on the outsourcing agency. This is why it’s crucial to do proper research on the company beforehand. It may also be beneficial to seek legal advice in drafting your outsourcing agreement.
Myth #8: Outsourcing poses a data security risk
Businesses may worry about data security breaches and Intellectual Property (IP) theft while outsourcing. There are different laws around these in different countries, which may make it challenging to prevent.
However, protecting data security and IP has to be a priority for outsourcers. Their professional reputation relies on their clients having confidence in them.
In addition, there are international outsourcing regulations in place to protect people’s data security and privacy. The General Data Protection Regulation (GDPR), in place for the European Union, is an example. Most outsourcing companies in the EU or that serve EU clients follow this regulation.
Outsourcing agreements also commonly contain clauses such as non-disclosure agreements (NDAs). These are legally-binding protections against leaking information and stealing IP.
Selecting a trustworthy outsourcing partner can also help prevent security breaches. For example, they should have positive reviews from previous customers.
Myth #9: Outsourcing is only about cutting costs
Cost savings are a significant benefit of outsourcing. According to the 2021 Deloitte survey, 88% of businesses achieved cost reductions through outsourcing. However, it’s an outsourcing myth that cost-effectiveness is the only benefit.
Here are three other advantages of outsourcing:
A. Providing niche talent
According to a 2021 study by ManpowerGroup, 69% of US employers struggled to find necessary talent inside the country.
Skills shortages are especially high in advanced Information Technology (IT), such as Robotic Process Automation (RPA) and Artificial Intelligence (AI). RPA implementation is a rare and sought-after skill as it has been shown to create up to 40% cost savings for some businesses. Outsourcing can help you find a professional to access this function for your business.
Outsourcing opens up the talent pool beyond the scope of your city or region. This can help you access niche competencies from professionals around the world.
B. Lessening the in-house workload
An outsourced team can take care of some of your business processes. As mentioned previously, this lightens the load of what you and your team have to do in-house. Your team can focus more productively on core business tasks that enable you to deliver your product or service.
For example, for a retail store, core processes could include making sales, merchandising, and managing stock. Meanwhile, they can outsource functions like marketing and accounting.
C. Improved scalability
It can be difficult and costly for businesses to recruit or upskill staff when they scale up.
Through outsourcing, companies can waive this responsibility to the outsourcing partner who can equip themselves to grow with you.
In addition, having ties with businesses in foreign countries through offshore outsourcing can help you find new markets to accelerate your growth.
Read more about the other benefits of outsourcing.
Myth #10: Only big companies can outsource successfully
Another common outsourcing myth is that outsourcing is an activity only large companies engage in. However, outsourcing may be accessible to businesses of any size.
Outsourcing can help small and medium-sized enterprises (SMEs) and startups save time and money. This can be valuable for smaller businesses trying to grow, as they can focus their resources on high-priority tasks while the outsourcer delivers the rest.
On the other hand, a BPO company can also benefit from working with a small business. Doing so enables them to be a long-term service provider for a growing business. This means that SMEs may be as likely as big companies to form successful partnerships with outsourcing companies eager to help.
Myth #11: You should only trust large outsourcing companies
If you’re an SME, you may think only a large outsourcing company has the resources and knowledge to meet your needs. In reality, there are many reasons to consider an outsourcing model with a company that matches your business in size.
A large outsourcing company, although experienced, may view an SME as just another number. They may offer you standardized solutions instead of personalized services or focus their attention on their largest clients.
In addition, large outsourcers tend to implement restrictive Service Level Agreements (SLAs), which limit their services to only contractual tasks. They do this to protect their time since they have many clients.
There can also be disadvantages of SLAs if not done right. For example, functions that lie outside of the SLA may result in hidden costs.
On the other hand, small and medium-sized outsourcers are more likely to offer you a dedicated team whose aim is to assist you as much as possible.
A small company may also be more likely to prioritize establishing a long-term partnership with your growing business. They may also provide a closer working relationship and more dedication. In addition, in order to compete, smaller outsourcers need to innovate ways to constantly improve their services.
Myth #12: Outsourcing isn’t a long-term solution
Many businesses view outsourcing only as a temporary cost-saving solution. Additionally, people expect a decline in outsourcing as things “return to normal” after the COVID-19 pandemic.
According to Forbes, outsourcing has been around since the 1960s, and it has become a permanent feature of many businesses.
Trends in remote work caused by COVID-19 can give us some insights into the future of outsourcing. Both remote work and outsourcing involve business activities happening in separate locations, meaning they can be affected by pandemic trends in similar ways.
In the 2021 Deloitte survey, respondents reported that COVID-19 caused increases in:
- Work-from-home (WFH) capabilities.
- Digital acceleration, i.e., faster technological growth to adapt to remote work.
- Virtual practices, i.e., doing more work online rather than in person.
87% of the businesses also said that they would continue to utilize remote and hybrid models in the next five years. Other experts have predicted that the ratio of WFH will settle at around 40% in the medium term.
This all points to increased understanding and less resistance to working with remote teams. These developments can also improve people’s view of outsourcing in the future.
It’s possible to attain world-class services through outsourcing if you know what to look for. Businesses must know what to expect when they outsource, as this will help them to find the perfect outsourcing partner.
You can use this guide to common outsourcing myths to help you understand the reality of the outsourcing industry. It can also help you choose the right partner.
To learn more about outsourcing, you can visit the Time Doctor blog.
Andy is a technology & marketing leader who has delivered award-winning and world-first experiences.