Outsourcing Explained: Key Considerations in Making the Right Decision

Explore the importance of outsourcing and identify key decision points, from timing to contracts and choosing the right partner.

Published on September 26, 2023
Last Updated on December 13, 2023

There are several invaluable benefits to outsourcing, especially access to specialized expertise and cost savings. The outsourcing industry has grown significantly in recent years, with many businesses embracing strategic outsourcing to improve efficiency and focus on core competencies. If you're considering outsourcing, it's important to choose a reputable outsourcing partner with a proven track record of success.

It’s outsourcing explained in this episode of “Inside Out,” as TaskUs’ Chief Customer Officer Jarrod Johnson explains the importance of outsourcing and answers tough questions to consider before making the big decision.

How do I convince leadership to consider outsourcing?

“You better understand your total cost of doing the work internally and how an outsourcer's cost might compare.”

Businesses often outsource for financial benefits. A business can and should compare the costs of performing the work internally vs. outsourcing it to determine the potential advantages of lower outsourcing costs. However, the advantages of outsourcing go beyond cost savings as it offers increased flexibility, allowing businesses to adjust staffing to meet changing demands. Additionally, outsourcing provides scalability, which is crucial during periods of growth.

Businesses going through organizational changes or experiencing rapid growth or contraction should consider outsourcing as a viable strategy to help them navigate their company’s development. Outsourcing partners should cater to multiple business requirements over time, presenting opportunities for businesses to strategically expand their operations for the long term.

Why do most outsourcing companies talk about having a people-first culture?

“The dirty secret that nobody wants to talk about is that attrition - or the loss of frontline teammates or agents - is one of the hidden costs of outsourcing.”

How an outsourcing company treats its employees indicates its effectiveness as a partner. A people-first culture shows a commitment to employee engagement and retention, resulting in exceptional services. If your partner can attract and retain top talent, they will perform better for your business in almost every case.

However, attrition, or losing frontline teammates or agents, is an unpleasant reality in the outsourcing industry. Continuous retraining of new personnel adds extra costs and can negatively impact performance as new talent strives to become proficient in the work, ultimately reducing the financial benefits of outsourcing. It is important to partner with an outsourcing company with a strong employee engagement and retention strategy to ensure their suitability as an outsourcing ally.

When is the right time to outsource?

“There needs to be a point of change happening in the business.”

Identifying when to outsource is crucial for a business. Rapid growth or financial stress may signal the need for cost-cutting measures. Outsourcing allows tasks to be transferred to lower-cost regions without sacrificing operational efficiency.

However, before diving into outsourcing, ensure your business is ready and has the right reasons to take on associated risks. Businesses with the organizational maturity to reliably execute in-house processes are more likely to be prepared for outsourcing. Additionally, having well-documented procedures and clearly defined metrics helps to establish expectations and evaluate the outsourcer's performance. Last but not the least, when deciding to outsource, a business should also consider potential partners' cultural fit and shared values.

What should organizations look for before signing an outsourcing agreement?

“When you're negotiating or solutioning or shaping the agreement with your partner, one piece of advice I would give you is to really try to listen as much as you can throughout the process.”

When businesses consider outsourcing work, there are two important factors to keep in mind: the contract and the team.

The contract itself includes two parts: the Master Services Agreement and the Statement of Work. The former covers legal terms such as payment, liability, and termination clauses, while the latter defines the actual work that will be done. While it is important to review all legal clauses carefully, it is especially crucial to understand the Statement of Work, which includes details about the scope of work, performance expectations, metrics, and pricing.

Throughout the negotiation process, listening carefully and understanding why your potential outsourcing partner is raising concerns or pushing back is necessary. They may have valid reasons for resisting certain terms, and keeping an open line of communication can reveal unexpected opportunities for improvements or new services. By maintaining a positive and collaborative attitude, businesses can ensure that their outsourcing agreements are successful and beneficial for everyone involved.

How has outsourcing evolved over the years?

“There's constant evolution, constant transformation in the services—the expansion of the services. Customers are asking for different things that they've never asked for before.”

Over the years, the outsourcing landscape has gone through significant changes. In the past, businesses would outsource non-core tasks such as payroll, HR, or IT. However, business owners nowadays seek more complex and nuanced agreements involving intricate processes.

Traditionally, outsourcing followed a 'lift and shift' model where the tools and processes remained unchanged after outsourcing. This has changed dramatically over the past decade as outsourcing partners continuously evolve and expand their services to meet changing customer requirements.

Today, outsourcing partners offer advanced services such as data annotation, labeling, chatbot implementation, process improvement, and other technology-integrated services. 

Ridiculously Good Outsourcing With Us

As outsourcing involves entrusting crucial business functions to an external party, selecting the right partner is vital. The ideal outsourcing partner doesn't just provide cost-efficiency but adds value through expert talent, advanced technological capabilities, and insight to shape your processes for optimized results. 

A digitally native disruptive player, TaskUs offers a comprehensive, industry-leading suite of expertise, services, and tools to push your brand to the next level. Our formula of people-first approach, human + technology capabilities, and cutting-edge technology expertise will build, protect, and grow your brand. Whether you're a growth stage business or a Fortune 500 company, partnering with Us enables you to scale effectively and achieve your objectives, setting you up for a Ridiculously Good outsourcing journey.

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Glenn Chua
Editorial Director
Glenn is the Editorial Director of the Integrated Marketing team who is in charge of all the client-, internal-, and external-facing content of the company with the goal of generating sales and growth for the company, as well as attracting new talent to join its global growth. Creative, passionate, yet soft-spoken in person, he has extensive knowledge of fast-growing companies, industries, service lines, and emerging technologies.