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Outsourcing Pros and Cons: How to Save Time and Money

January 23, 2023

Outsourcing B2B professional services has become increasingly popular over the years. So much so, that Deloitte expects global spending on outsourcing to hit $731 billion in 2023. From IT services to marketing agencies, the opportunities available for outsourcing are endless. However, outsourcing pros and cons are similarly infinite. 

For many, outsourcing is a crucial component of a company’s ability to scale. By equipping teams with cost-effective expertise that propels projects forward, businesses can save time, money, and resource. And yet, outsourcing requires a bit of thought to get right.

In this article, we tackle the pros and cons of outsourcing and explain how you can save valuable time and money where it matters most. 

What can your business outsource?

Let’s start at the top - what can your business outsource? The answer? Almost anything. While IT services take a sizeable chunk of the demographic (about 72% to be precise), you can use outsource a range of services including:

  • Accounting
  • Marketing and sales
  • Cyber security 
  • Customer service
  • HR and employment services
  • Legal services

At Stephenson Law, we provide outsourced legal expertise for scaling businesses. Think you’d like an expert lawyer without the expert cost? Explore how we help scaling companies.

Why do companies outsource?

While each company is unique, there are a few core reasons why businesses opt to outsource. According to Deloitte’s “Outsourcing Survey”, the majority of companies choose outsourcing as a cost-saving measure that allows them to “stay relevant in the modern age of disruption”. Following closely behind is the ability of outsourcing services to scale businesses, provide expertise, and supply much-needed resources in business critical areas. 

The disadvantages of outsourcing

Despite its value, outsourcing is not always the solution. Depending on the nature of the need, outsourcing may be more costly than its worth, and it's important that companies truly weigh up the benefit. Below are a few disadvantages of outsourcing, alongside what to watch out for when deciding to outsource a task.

Skills not kept in-house

While not always the case, outsourcing often means that skills aren’t kept in-house. For example, let’s say you hire a marketing agency to take on the creative pursuits of your business. It might save your company time and money, but it also means that the business lacks any in-house marketing skills. And, as the company scales and increasingly requires marketing expertise, you may find yourself craving an in-house marketer to take the business to the next level.

Depending on what you’re outsourcing - this may never become an issue. Perhaps you’re an SME outsourcing IT admin that the business will never need to scale. Or, perhaps you’re outsourcing niche legal expertise that your business will never require day-to-day. Take the time to consider the long-term ambitions of your business, and assess whether outsourcing in the present day can short-change you in the future. You want to cultivate core skill-sets in-house to ensure your business is a lean, mean, well-oiled machine.

Hidden costs

Despite their benefits, not all outsourcing providers are equal. While some operate to a high standard, others might leave you wanting a little more. 

Perhaps one of the biggest let-downs is when a service provider hits you with a hidden cost at the end of the month. Let’s say you’re working with an outsourced marketing agency to bring your 2023 ambitions to life. You’ve discussed the scope of work, agreed on costs, and the work has commenced. All of a sudden, you’re hit with a surprise invoice that the agency insists was needed to complete the project. Communication has broken down, you’ve gone beyond budget, and the business is now under unnecessary - and unexpected - strain. It’s frustrating, right? 

When using an outsourcing provider, it’s crucial that you discuss expectations, standards of communication, and a detailed scope of the work. This is where it can be particularly handy to have a lawyer review contracts and ensure the business is protected from hidden costs or hiccups on behalf of the supplier. While many suppliers will be upfront, it’s sadly just a matter of time before one lets you down. Ensure you’re protected with squeaky-clean terms for your business.

Grasp of culture

We often talk about culture fit when it comes to building teams. But why is it so important? Aside from having the hard skills required to do the job, your business will be reliant on people that understand the end goal of your business and share your vision in achieving it.

However, this can be a bit more challenging when it comes to outsourcing core functions of the business. Does your cyber security partner understand the scope of your needs? Are they aware of future projects? Do they know the foundations you need to go the distance? Or are they too far from the business to make a real impact?

Without the right outsourcing relationship in place, the work of your supplier can quickly act at odds with the goals of your company. It’s important to find a partner that works closely with you to achieve your goals, and, if that can’t be achieved, it might be time to hire in-house.

The advantages of outsourcing

From cost-cutting measures to invaluable expertise, below we tackle the pros of outsourcing in finer detail. Let’s dive right in. 

Reduce costs

With rumblings of a global recession on the horizon, many companies want to cautiously manage their cash flow. For some, that means limiting expenditure on research projects, for others, it simply involves doing more with less. However, how can you do more with less, when it’s a business-critical function?

Outsourcing can provide much-needed support at a fraction of the cost. Take our legal subscription, for example. Businesses can leverage the vast expertise of a team of lawyers - without the price tag of a fully employed legal team. Companies stay squeaky clean on the legal front, while much-needed cash is reserved for other areas of the business.

Save time

Time is in short supply and by outsourcing certain tasks, you can make room for core activities that the business needs to survive. Better yet, by outsourcing, you’ll often secure industry experts who can handle your needs effectively, efficiently, and affordably. 

Access expertise

Expertise comes at a premium and it’s often not feasible for companies to hire specialists for every requirement. This is where outsourcing really shines. Companies can hire paid media specialists to fuel their marketing strategy, accountancy experts to bolster their budgets, and HR service providers to streamline their onboarding. Outsourcing equips growing companies with enriched expertise that won’t break the bank, while avoiding a lengthy hiring process to bring new skills into the business. 

In a nutshell: more expertise, for less upfront hassle. Pretty nifty.

Flexibility and agility

Agility is key for companies navigating the hurdles of scaleup life. And yet, it’s difficult to build a team that can pivot at any moment. Outsourcing can be a useful tool when a business is still taking form, allowing the company to evolve, restructure and reform, with a reliable resource on its side.

Let’s say you’re building the foundations of your business. You need to hammer down your terms of business, website documents, shareholders’ agreements, articles of association… the legal list goes on. However, the legal needs of your business will evolve as your company grows. In the future, you may want to seek investment, incentivise your team through shares, or commercialise your intellectual property - and do to so you’ll need a different breed of lawyer entirely. And yet, it’s not going to make sense - financially or time-wise - to build a new legal team every time you reach a company hurdle. 

Thanks to outsourcing, you can have an agile and flexible legal team in your back pocket, with the ability to evolve as your business scales. 

Not sure how you’re going to scale the many legal needs of your business? Discover the Flamingo Subscription, designed to help scaleups soar. 

How we save you time and money

When done right, outsourcing can act as rocket fuel for a growing business. That’s why our legal subscription is designed to equip companies with an expert legal team, without the hassle of building a legal department. 

We prioritise cost transparency, open communication, and niche expertise, ensuring companies have a true legal partner as they face the hurdles ahead. 

Discover how we support fast-growth scaleups.

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