Outsourcing: the good and the bad
If you’ve landed here, you probably have some sort of idea or position about outsourcing. Whether it’s positive or negative, you’re doing your research, right?
So, what would it take to tip the balance one way or the other? Perhaps a list of the pros and cons could help you decide. I’ll get you started with five of each.
This is not a complete list, of course, but not to worry, I have more resources for you. Elsewhere, I’ve written a lot about this topic, from the top objections to outsourcing sales to the steps one must follow to outsource customer service or whether it is really possible to outsource customer success.
So, let’s get started, shall we?
5 Pros of Outsourcing
1. You can implement and scale quickly
You’re growing fast and that means more clients that need support and loads of prospects to follow-up on.
Can you handle it internally? Are you able to scale (hire, train and manage a team) fast enough to meet the demand?
Here’s where I think outsourcing makes more sense. You simply hire a team already trained in sales or customer success, do a quick on boarding, and start working. If you were to do this on your own, hiring reps for your in-house team, you would spend a lot of money and about 6 months (3 in hiring and another 3 in training) to get them up and running.
Now, think about a couple of scenarios where you’d want to scale quickly.
- You’re expanding internationally and you need to start selling fast, but getting set up in a new country takes time and effort. An outsourced sales team would help a lot.
- A high-volume sales and support time comes around, the launch of a new product for example, and you need to scale up in a matter of weeks. Outsourcing would be your best bet.
Think of it as a prefab home — less work and you get to move in quickly.
2. You get experts with a proven track record
Let’s be honest here. We don’t know everything and sometimes we need outside help.
Just as you may hire consultants for a particular issue at your company, you’d hire a managed service or outsourcing company for their expertise in a particular area. For example, you may lack expertise in some sales functions, such as lead generation, or lead nurturing. Or you may be introducing a new product that calls for sales skills you haven’t tried so far.
In fact, outsourcing is often more efficient than generating leads in-house because managed service companies have more expertise. They’ve probably been at it for longer than you have.
It all comes down to finding the right partner, a company that has experience generating results. Before signing a contract, examine your candidates’ track record and talk to some of their previous clients. Pick a managed service company with an omnichannel approach (phone calls, online chat, email, social selling) and determine their capacity to handle high-volume queries and/or in-depth conversations, depending on your needs.
Once you begin working with them, set some Key Performance Indicators (KPIs) to evaluate the performance of your outsourced team.
3. You save tons of time and money
Hiring a full sales team in-house (with 4 BDRs and support staff) may cost your company more than $455k per year with salaries and benefits, while working with a managed service company that provides a high-quality sales team, can cost you only $200k per year.
On top of salaries and benefits you’d have to pay for office space (around $12,000 per employee). Then add desks, chairs, computers, phones, internet connection, utilities, maintenance, cleaning and more. Then again add the cost of technology, such as specialized software, licensing fees per user and IT staff.
Outsourcing would save you all those costs and more.
Now, apart from money, let’s look into time savings.
You can spend a total of 1,170 hours spent hiring reps. Once you hire a rep, you’ll spend three months training him or her. A year later the rep will move on to another job or will be promoted. That means you’d have to start hiring again every year.
Managing employees also requires a lot of time, from HR paperwork to daily management.
When you outsource, others take care of hiring, training and management. With all that free time, you’ll be able to focus on doing what you’re best at.
Sounds like a no-brainer for outsourcing so far.
4. You gain access to a larger talent pool
When you hire for an in-house team, you’re usually restricted to local talent or the few people that are willing to relocate (and if they do, you may have to offer expensive perks or cover moving expenses).
Outsourcing opens up the talent pool, as many of the managed service companies out there have offices around the world, with multilingual professionals that can serve your international customers. Because the cost of living in some of these countries is cheaper than the US, the salaries are at a lower scale and the outsourcing companies pass those savings on to you.
Other than language and costs, global talent brings a fresh perspective that many times results in innovation in your field. People educated abroad and with job experience in other parts of the world bring a different set of skills that local hires probably lack.
Why limit yourself to those living around the corner when you can work with people across time zones?
5. You reduce your management load
Managers are busy people and they have limited time and attention.
When you outsource, your managers can focus on your core business instead of spending time, energy and resources on peripheral activities. Placing sales, support, and other operations under the supervision of an outsourced team will free up a considerable amount of time for managers and produce a beneficial shift in your business as a whole.
Depending on the partner you choose, you get more than a customer support manager or a sales leader — you may even get a whole management team. For example, our managed service teams include much more than reps — they come with an account manager, a quality assurance analyst, a corporate trainer, and a content writer.
5 Cons of Outsourcing
1. You lack total control
Outsourcing is not recommended for micromanagers.
You’ll get a bunch of people working remotely, doing who-knows-what, interacting with your clients, and representing your company. It can be a risk. Unless you up some good systems in place.
Perhaps you won’t be able to control everything the outsourced team does, but you can ask for regular reports and open communication channels to interact with the account manager. You can also set up monitoring systems to check on their work (you can use time tracking software such as Hubstaff, for example).
Still, with all these systems in place, you run the risk of them not doing the job as they should. The only way around this is to rely on the results. Set a trial period or agree on the expected results — if they’re not met, terminate the partnership.
2. You may experience communication problems
Communication issues are some of the most frustrating problems you can have, especially if your business requires fast action. What if you can’t get hold of your team for a reason?
A few years ago, I worked at a visual effects studio in Vancouver, Canada. I had to coordinate the work between a team in Canada and another one in Bangalore, India — a 13.5-hour difference in time zone. That meant that when we were getting to the office in the morning, they were wrapping up for the day. All my emails would be responded 24 hours or more later.
So expect delays if you try to work with a team on the other side of the world.
My suggestion: work with teams within your time zone or within a reasonable frame, who speak your language, know the culture of your company and your clients and are responsive to your messages. You would know if communication is an issue even before you hire them — the flow of information and ease of communication (or lack thereof) during the exploration phase would give you good hints.
3. You’d gamble with the quality of the service
An outside company doesn’t know your business like you do.
You’ve put sweat and tears into your company, you’re passionate about it, you know it inside-out, and you’re committed to its success. What are the chances that an outsourcing company would be as committed as you are?
Again, it all comes down to choosing the right partner. You’d have to work with a team of professionals with a great track record and systems in place to ensure quality. For instance, consider working only with a partner who includes a Quality Assurance (QA) Coach or similar position in their managed service team. A QA Coach keeps track of each rep’s performance, and continuously evaluates the quality of the interactions with the clients, so the team can improve and thus increase sales and customer success.
You wouldn’t want to gamble with the quality of your service, so be very careful with this one.
4. You could experience a negative impact on company culture
This may not happen every single time, but there’s a chance that people at your company would feel replaced or devalued if you outsource part of your operations.
Outsourcing could actually bring confusion and resentment within the company if the decision isn’t openly discussed with the employees who might be impacted.
On the other hand, you may also want to think about the culture of the outsourcing company and how it could affect your own culture. You are bringing an outside company to be a part of your company, so your values and goals should be aligned. This alignment requires hard work and willingness to change.
Are you ready for that?
5. You open your intellectual property to a third party
Finally, outsourcing is risky because of IP issues. Hey, you’re letting others into your company and probably giving them access to sensitive information.
Could they end up hacking your network or revealing your industrial secrets? Would there be any legal issues regarding your privacy and information sharing policies if you give the outsourcing company access to your client database?
Consult with your lawyers before outsourcing.
Then, if you decide to outsource, have them sign an NDA to protect your intellectual property and set up some restrictions on the information they can access — only share what they’d need to do their job.
Have you made up your mind yet?
Although not an exhaustive list, these 5 pros and cons should be a good starting place to consider whether you’re ready to outsource or not.
Evaluate all the variables and don’t be afraid of taking calculated risks. Hey, run a trial and see if it works. In today’s competitive market many companies are outsourcing to get ahead of the competition. The question is, should you?