What is the one business hack that Jeff Bezos, Tim Cook, Larry Page, and Mark Zuckerberg are doing that you are probably not doing?
Well, you guessed it: Outsourcing.
All the major companies have shifted their backend offices to other parts of the world.
Well…You might be thinking, “Hang on a sec! These are giant corporations we are talking about. They have unlimited resources. It is a lot easier for them to do it than me.”
Let me tell you a secret. It is not at all difficult to outsource.
In this post I am going to provide you a simple step-by-step process that answers all your questions about outsourcing: How to outsource, advantages of outsourcing, pitfalls to avoid.
But first let us get started by the definition:
What is outsourcing?
The term “outsourcing” only started becoming popular in the early 2000s. But outsourcing as a practice has been around for WAY longer.
Yes, these guys were the first to outsource work. Back in 1800, sea voyages weren’t for the faint hearted. Every voyage had a high mortality rate.
By the time ships reached the coast of India from England, many crews had lost nearly 25% of men to diseases. Out of necessity these crew members were replaced by Indians.
And later the economic benefits of hiring a cheaper crew led captains to outsource certain roles.
This was the very first instance of outsourcing.
Outsourcing today has come a long way from the 18th century. Rapid advancements in tech like high-speed Internet have made outsourcing really simple and effective with the aid of tools such as screen sharing, video conference, collaborative online workspaces etc.
Why does outsourcing matter?
Let me ask you a simple question:
How important is money in fueling growth?
It’s very important.
Money saved is money earned. Money saved can be used to fuel growth.
Now let us consider two companies:
Company A and Company B are competitors in the same market.
Company A outsources non-core tasks. By doing this “A” saves a lot of money. They use this money to spend on advertising and growth, thus gaining a competitive edge over Company B.
As they say: Money saved is money earned.
I know that you may be thinking, “Arjun, saving money is great and all, but my number one priority is quality.”
Excellent question! Now let me put your mind at ease.
Outsourcing has come a long way since the 2000s. Setting up a remote team doesn’t mean that you have to sacrifice quality.
The key here is candidate selection. You need to make sure you have a rigorous selection process. You can check out section recruiting below or click here.
Types of outsourcing
There’s more than one way to skin a cat!
Outsourcing happens predominantly in the following ways:
1. Outsource the complete work
2. Set up an offshore team
3. Hire freelancers
Option 1: Outsource the complete work
Here’s how this works:
1. Initially, you find a qualified vendor.
2. Give them your requirements.
3. They will produce the final outcome.
For example, you can reach out to a qualified IT vendor, give them your requirements and ask for a software application to be developed.
• No hassle
• No control over quality.
• Difficult to find a reliable vendor.
Option 2: Hire freelancers
• You can find reliable freelancers who have good reviews.
• Freelancers won’t work exclusively for you.
• They are not your permanent employees. You can’t train them to undertake more complex activities.
Option 3: Set up an offshore team
Here you hire a remote employee who will work exclusively for you. The employee will report to work directly to you from an office space.
• Will work exclusively for you.
• Better candidates to select from. Employees prefer the stability of a full-time job over freelancing gigs.
• You can select candidates from 1000’s of resumes.
• Employees will stay with you long term, therefore you can train them to carry out complex tasks.
• The time that needs to be invested for training will be a little more, as the training will be done remotely.
How to implement successful outsourcing
Now, to the most important question. How do I get this right?
We believe, the most successful and profitable type of outsourcing is offshoring.
In this scenario, you set up a remote team.
You hire a remote employee who works full time for you and reports directly to you.
There are three main keys to success in hiring a remote employee:
• Performance appraisal
Key 1: Recruiting
If you ask me, “Hey Arjun, what is the single most important factor between successful offshoring and failure?”
I would say recruiting!
You are not in the market for cheap labor but for quality labor at a low cost.
In order to hire the best, you need a stringent recruiting process, in which only the cream of the crop makes it through to the final interview round.
Here is what we suggest:
We recommend four rounds of selection.
- Round 1: Test of written skills
- Round 2: Test of oral skills
- Round 3: Test of technical skills
- Round 4: Cultural compatibility
For successful offshoring, good communication is essential. A communication gap can be extremely frustrating to deal with. So, it’s best to avoid it.
Round 1 and Round 2 ensure that there will be no communication gap. These rounds are specifically designed to test a candidate’s command of English (written and oral).
Round 3 is the candidate’s technical assignment. In this round a candidate is given a task similar to the one that he will face on the job. When the task is complete you should review it so that you can make sure that the candidate is technically well equipped to perform the task to the required quality level.
Round 4 is an interview round. Only the candidates who cleared the previous three rounds make it to this round. Here you interview the candidate to see if he has the right mind set and that he fits in culturally.
It is very important that you don’t sacrifice quality. You need to be ultra-selective in your hiring. Don’t hire if you don’t find anyone suitable.
Does outsourcing leading to job losses?
Outsourcing is no longer a luxury, it is a necessity. Most of your competitors are doing it. Market forces will soon make you do it. It’s a good time to start.
Old jobs in the US will disappear and new jobs will appear. For example the US outsourced manufacturing, but this led to the birth of the tech companies.
You can read more about the advantages and disadvantages of outsourcing here.