DO I DO IT MYSELF OR DO I OUTSOURCE IT?
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Outsourcing or subcontracting srefers to the practice of contracting another company or individual to perform a specific task rather than doing it in-house. This strategy is used to reduce costs and improve efficiency in non-core areas of the business.
When a new company decides to use outsourcing, it must consider several factors, such as cost, quality of work and confidentiality of data. It is important to find the right balance between cost and quality of work to ensure that outsourcing is cost-effective.
Examples of areas that can be outsourced to a start-up include web development, graphic design, accounting, cleaning, equipment maintenance and social media management.
It is important to remember that outsourcing is not suitable for all areas of the business and that certain key activities should be carried out in-house to maintain control and quality. In addition, it is important to ensure that you have a clear and detailed contract with the contracted company or individual to avoid misunderstandings or legal problems in the future.
In summary, outsourcing can be an effective strategy to reduce costs and improve efficiency in non-core areas of the business in a new venture, but it is important to find the right balance between costs and quality of work and to remember that certain key activities must be performed in-house.
How can an entrepreneur know which activities to outsource?
An entrepreneur can determine which activities to outsource by following the steps below:
- Identify key activities: The entrepreneur must first identify the key activities for his business, those that are essential to realise his value proposition and generate revenue.
- Assess their capacities and resources: The entrepreneur must assess his or her current capabilities and resources to determine whether he or she is capable of carrying out all key activities on his or her own or whether he or she needs external assistance.
- Cost-benefit analysis: The entrepreneur should analyse the cost-benefit of outsourcing an activity rather than doing it himself. He/she should consider the costs of outsourcing and the impact this will have on the quality and efficiency of the work.
- Identify potential external suppliers: Once the entrepreneur has decided which activities to outsource, he/she should look for external suppliers that are reliable, efficient and offer a fair price.
- Establish a clear contract: It is important that the entrepreneur establishes a clear contract with the external provider, including deadlines, detailed specifications of the activity and any other necessary conditions.
By following these steps, the entrepreneur will be able to make an informed decision on which activities to outsource and ensure that his or her business has the best chance of success.
SOME PRACTICAL EXAMPLES OF SUBCONTRACTING IN A NEW COMPANY ARE:
- Accounting and financial services: Many companies outsource their account management and taxation issues to accounting and finance services, as this requires specialised knowledge.
- Marketing and advertising services: Outsourcing marketing and advertising services allows companies to have a specialised marketing and advertising team to develop advertising campaigns and marketing strategies to drive their growth.
- Software development services: For many companies, outsourcing software development services is a way to save costs and to have highly qualified staff to develop applications, websites and other IT systems.
- Logistics services: Companies that require a national or international distribution and shipping process can outsource logistics services to carry out these activities.
- Cleaning and maintenance services: Companies can outsource cleaning and maintenance services to keep their facilities in good condition without having to hire a full-time cleaning team.
- Human resources services: Companies can outsource human resources services to carry out activities such as recruitment and selection, payroll, time and attendance, among others.
In short, outsourcing allows companies to rely on highly qualified personnel to carry out specific activities that are not part of their core business, allowing them to save costs and focus on their core business.
Which activities should not be outsourced?
Activities that are critical to the company's success and that relate to its unique value proposition, competitive advantage or brand identity should not be outsourced. These activities are the ones that differentiate the company from its competitors and are the ones that allow it to offer added value to its customers.
For example, if a company is focused on offering high quality and sustainable products, it should not outsource the production of those products as this may jeopardise its quality and brand identity. Similarly, if a company is focused on delivering exceptional customer service, it should not outsource customer care as this may negatively affect its ability to deliver exceptional customer service.
TYPICAL SUBCONTRACTING IN A START-UP:
- Accounting and financial services: A startup could outsource accounting and financial services to a specialised firm to handle its accounting, tax, payroll and other financial aspects.
- Software and technology development: If the startup does not have technical expertise, it can outsource software and technology development to an external team.
- Legal services: A startup might outsource legal services to a lawyer or law firm to help with company structuring, investment agreements and intellectual property.
- Graphic design and branding: A startup could outsource graphic design and branding to an agency or graphic designer to create a logo and other visual branding elements.
- Digital marketing: A startup could outsource digital marketing to a specialised agency to help with marketing strategy, online advertising and social media.
It is important to note that the outsourcing that a start-up will need may vary depending on the nature of the company, its specific needs and its available budget.
Typical outsourcing in an internationalisation may vary depending on the company and the sector in which it is located.
SOME OF THE MOST COMMON SUB-CONTRACTING INCLUDE:
- Consultancy: A company can subcontract consultants specialising in international expansion to assist in identifying potential markets, regulations and laws in each country, suppliers, logistics and other important factors.
- Legal services: the company may need to outsource legal services for advice on tax, intellectual property, trade laws and regulations, and other relevant legal issues.
- Translation: the company may need to outsource translation services to adapt its website, documents, contracts and other materials to the local languages of the target countries.
- Marketing: the company can outsource digital marketing services to create an online marketing strategy that is tailored to target markets and reaches potential customers.
- Logistics: the company can outsource logistics services to manage the supply chain and ensure that products reach international customers on time.
It is important that the company carefully assesses outsourcing needs and selects reliable and experienced suppliers to ensure a smooth transition to internationalisation.
Subcontracting, outsourcing, externalisation of resources. Outsourcing is an arrangement whereby one company hires another company to be responsible for a planned or existing activity that is or could be carried out in-house and, sometimes, involves the transfer of employees and assets from one company to another.
It is therefore the outsourcing of activities that are complementary to the main activity of your company. Its objective, basically, is to reduce costs by resorting to another company specialised in that activity, so that the company can concentrate its efforts on the main activity of its business.
Sometimes the outsourcing of services is enabling companies to achieve high levels of competitiveness through innovation and flexibility in their activities.
We start by outsourcing what brings the least value to the customer, the secondary activities, never our core or the task from which our competitive advantage is born. (see key activities (+)) that can translate into a strong competitive advantage. In this context, outsourcing has an eminently strategic function. To get the most out of outsourcing, a number of basic requirements must be met, i.e. the essence of outsourcing must be respected so that it can fulfil its function in the best possible way.
A positive outcome that translates into a competitive advantage will be the result of smart choices in deciding which activities to outsource and to which companies. In some cases, for example, it may be appropriate to outsource key (but not essential) activities where the company may not be the best. The criteria will therefore be different for each company.
Generally speaking, it is essential, relegate to outsourcing activities that are not fundamental to the company, such as supplier control, quality control, security, strategy, company control functions or the company's own image. Having specialised services, coping with a changing market or avoiding intensive use of resources, expenses or capital investment are some of the important reasons that are decisive when making a decision.
Advantages of outsourcing
- Specialised services are chosen, resulting in greater effectiveness.
- Lower labour and investment costs, which will be passed on to the subcontracting company.
- Increased effectiveness in the company's core business.
- A more elaborate result that results in a higher quality product.
- Possibility of savings in logistics and labour costs in case of presence abroad.
- Cost reduction and replacement of fixed costs by variable costs.
RISKS OF OUTSOURCING:
Far from being paralysed by the potential drawbacks of outsourcing, it is important to be aware of them in order to be able to prevent them.
- Risk of being disadvantaged by an outsourced company that does not share our culture.
- Higher costs, especially if used in a non-strategic way, such as outsourcing of personnel (outsourcing).
- Contingencies and difficulty in negotiating prices, especially if dependent on a few suppliers.
- Quality problems or other deficiencies due to lack of proper guidance and control.
- Cases of corruption, exploitation, theft or fraud.
Although the disadvantages are numerous, business reality shows that outsourcing is very advantageous and can be a key element if we are looking for rapid growth, given, moreover, the facilities offered by new information technologies for seamless communication around the world.
In today's highly competitive local and global environment, successful outsourcing reinforces quality and reduces product or service costs.
Outsourcing in internationalisation
Although there are many challenges that a company faces when setting up in a new country, perhaps the main one is discovering information about its new market and environment. The advantages of outsourcing a service within our company, but how to do it if we are thinking of internationalising our business?
What will I be able to outsource and what will I not? How can we be sure that this new company will meet the quality standards to which our organisation is accustomed? Although many questions will come to mind, there are also many advantages to outsourcing activities to another country.
Have you thought about the possibilities it would give your business to have partners to support and contribute to the entry into a new environment? In making such agreements with foreign suppliers, your company will be put in direct contact with partners who are active in this new market and who can guide you in setting up.
However, the choice of an outsourcing provider is a very delicate moment for your company. Being cautious with the information you provide to this company will be a safeguard when internationalising. You are moving in an unfamiliar environment and do not know your clients or their reputation.
If your company's human resources or international experience is limited, or your export team is working to the best of its abilities in other markets but understands that internationalisation is a basic need for diversification and increased sales of your products, it is in your best interest to find a good supplier to outsource to a team of experts with long experience. in foreign trade and export to help you start the internationalisation process of your company.
- You can benefit from a contribution of value, experience and expertise but with a flexible commitment.
- There is no need to hire new employees and other fixed infrastructure,
- It saves money and opportunity costs, allowing your company to focus on its core business while the international commercial and business development tasks are handled by external experts.
- Some of the fixed costs become variable. Interviews, leads, sales, reports, completed projects, etc., will have a cost depending on the degree of acceptance and quality of the work. You only pay for what meets agreed standards, which eliminates much of the risk.
- Outsourcing places the risk of errors (except for the company's own) on the outsourced company. In these arrangements, you always want everything to go smoothly, but it is important to clearly delimit the possible risks.
- Outsourcing internationalisation actions allows the organisation to focus its own talent on other areas. In this way, the organisation is freed up to undertake other critical tasks.
Your company converts its experience into best practices. Acquiring these best practices is essential to innovate and get ahead of the competition and takes advantage of the economies of scale of the outsourced internationalisation consultancy, whose costs will always be lower due to its specialisation.
APPLY THIS TIP TO YOUR PROJECT
Maria is an entrepreneur who has launched her own online shop selling organic products. As her business starts to grow, she finds herself increasingly busy and lacks the time to manage all areas of her business. Maria realises that she needs to outsource some activities in order to focus on the strategy and growth of her business.
AFTER A DETAILED ANALYSIS OF HER BUSINESS MODEL, MARIA DECIDES TO OUTSOURCE THE FOLLOWING ACTIVITIES:
- Logistics and shipping: Maria realises that spending time packing and shipping orders is too time consuming. She decides to look for an external provider to handle logistics and shipping so that she can focus on customer service and customer acquisition.
- Graphic design: Maria also realises that creating graphic content for her website and social media is a time-consuming task that requires specialised skills. She decides to outsource to a graphic designer to help her create high-quality, engaging content for her company.
- Accounting: Maria has no accounting experience and does not want to make mistakes that could negatively affect her business. She decides to outsource the bookkeeping and financial reporting for her business to an accountant.
- Digital marketing: Maria knows that marketing is crucial to the success of her business, but she doesn't have the time or skills to manage advertising and social media campaigns on her own. She decides to outsource to a digital marketing agency to help her create and execute effective marketing campaigns.
With these decisions, Maria will be able to focus on the key activities of her business, while external providers will take care of the activities that are not critical to her company's success. In this way, Maria will be able to better manage her time and take her business to the next level.
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