In this post-pandemic era, every business is forced to review its traditional staffing methods to offshoring, outsourcing and work-from-home options. At this situation, outsourcing, and offshoring help businesses to stash their operational costs and rebuild their business perspectives. In this article, we are going to elaborate on the types of outsourcing and help you to choose the right one that suits your business.
Of course, there are many different outsourcing situations, most of which fall into four basic categories.
The four basic types of outsourcing are:
- Project-Based Outsourcing
- Traditional Outsourcing
- Offshore Incorporating (known as “Offshoring”)
- Managed Offshoring
These different types of outsourcing suits different sectors and let’s take a deeper look at each type.
Type 1: Project-Based Outsourcing
Project-based outsourcing is usually a freelancer or a company, which we’ll call the “contractor” herein, who specializes in the project or task at hand. For instance, where your company or internal team may not have the skillset or free time to complete this task or project, a contractor can complete the task for you.
This contractor can do the assigned work onsite or from anywhere (via the internet), depending on the type of work and your specific needs.
In a different type of industry, there are menial tasks such as data entry, report generation, etc, as well as more complex tasks like graphic design. Both are perfect examples of project-based work that can be outsourced and completed by a contractor from anywhere in the world.
Other examples might be hiring a web designer from Fiverr to develop or enhance your website, hiring a freelancer on Upwork to design a logo, or paying a contracted company to provide SEO-rich content for your blog.
The Crucial Benefits of Project-Based Outsourcing
- Recruiting for a very specific skill set, based on your needs
- Cost savings due to more affordable rates and not paying benefits or overtime
- Ability to hire anyone, anywhere for work that doesn’t need to be done onsite, giving you more options from a much larger hiring pool
This outsourcing model suits for specific industries and tasks such as:
- Small businesses and startups with limited resources
- One-time projects that require specialized skills
- Tasks that take time but don’t produce significant value or return for your team
- Businesses that don’t require or desire more full-time, dedicated team members
Technology enables incredibly collaborative environments that are no longer bound by walls or even continents. In this COVID-19 era, it is crucial than ever for employers to utilize technology to run their businesses efficiently.
Type 2: Traditional Outsourcing
Traditional outsourcing is probably what you think of when you think of business process outsourcing services. In this type of outsourcing, the model contractor does absolutely everything, from recruiting, hiring, and managing employees to handling facilities and business processes. They are fully responsible for the results as well.
In other words, you essentially hire a contractor, then hand over the keys and let them take charge.
Examples of this might be hiring a provider to handle end-to-end call center service or hiring an external group to handle all things web development for your company. Generally, you’d have very limited contact with this group, though they are essentially an extension of your team.
For all the same reasons as mentioned above in reference to project-based outsourcing, traditional outsourcing can be extremely beneficial.
Traditional Outsourcing is Best Suitable for
- Businesses that need a specialized task done but don’t have the internal skillset
- Transactional tasks (think product support call centers, etc.) that can be done anywhere
- Tasks or businesses that require a very fast (or immediate) turnaround
Type 3: Offshore Incorporation (Offshoring)
In offshoring, you personally travel to the destination location to set up the company or branch, including facilities, infrastructure, recruiting and hiring staff, and all HR functions (like payroll). Then you stay to manage the day-to-day work.
You will need to be knowledgeable (or learn) about local taxes, customs, laws and regulations, telecommunications, and labor resources. As you can imagine, this is a very involved type of outsourcing, one where you are responsible for every aspect of the business, just as you would be onshore in your home location.
Examples of offshore incorporation include opening an office abroad to handle incoming inquiries by phone or email or a manufacturing facility in a country that has a favorable environment for your business.
You might even be able to set up operations, staff the facility and get business rolling—say, for the first three to six months—then come home and manage the branch from afar. This model allows a business to scale resources up and down between the countries. It is more beneficial now than ever before in this pandemic situation for a business to shift or share priorities away from home.
Offshore Incorporation is Ideal for
- Larger companies that have the time and resources to invest in setting up offshore branches or facilities.
- Businesses that have a deep understanding of the culture and country in which they plan to offshore; they are committed to the local community and establishing long-term operations to recoup the initial investment
Type 4: Managed Offshoring
From the above types of outsourcing, Manage Offshoring seems to be the trending one among the small businesses. Setting up operations abroad with an experienced local partner who handles your offshore team needs is known as managed offshoring. This is the outsourcing type that most of the businesses make use of it to boost their profits.
For example, your company sets up operations in a country with a favorable business environment and you’re able to save significantly on labor costs. However, instead of going there yourself to set everything up and run the business (like you would with traditional offshoring), you hire a partner located in the desired destination to set up and run everything for you.
This local partner would handle facilities, infrastructure, recruiting, and hiring staff, HR and payroll, IT support and legal. It’s up to you, though, how to manage your offshore team.
Say your company is located in California. An example of managed offshoring would be hiring a local partner in India to set up a division that handles all your customer service calls, complete with a full-time customer service team and dedicated facility.
This is the type of outsourcing model that Vserve handles for clients from different countries for all type of eCommerce support services.
Managed Offshoring is Ideal for
- The businesses who want or need to scale and grow—and fast
- Businesses who desire a dedicated offshore team but don’t have time to spend months (or years) setting it up themselves
- The businesses that would benefit from having a local partner who is knowledgeable about the customs and culture
- Those with efficient systems and processes that can apply to the offshore branch to save time and money
- Larger businesses that want or need full-time roles filled or ongoing help with certain tasks
Types of Outsourcing: Choosing the Right Type that Suits Your Business
Reading through the examples above, you should have a pretty good idea of the types of outsourcing and which type you might be able to employ and for which tasks or projects. Most importantly, let’s talk about some factors that will play into your decision whether to invest in outsourcing
Certain things to consider to aid your decision:
- Do you plan to outsource a single project or an ongoing task or process?
- Do you need or want full-time staff, or could you hire freelancers, part-timers, or contract staff?
- What level(s) of skills and experience do you need to hire?
- What type of infrastructure and resources do you have and can you provide?
- Do you need local knowledge offshore?
- How will you manage your outsourced team? How will they connect and interact with your onshore/full-time team?
- Payment process: How and how much do you plan to pay your contractors (think: per project or per hour, etc.)?
- Will you see significant cost savings or other benefits from outsourcing?
Most businesses, no matter how large or small, can benefit from outsourcing of some type. As you’ve read, there are myriad ways to utilize an outsourced team, and it’s becoming more common all the time.
Think through the questions above and consider the benefits as well as the challenges. If your business seems to be fit for offshoring or outsourcing, go for it.
It could be just the productivity boost you’ve needed.
Now you know everything about outsourcing and the types of outsourcing that you need to know. As the evolution of outsourcing is booming in this post-pandemic world, most of the small and medium scale businesses turning their way to outsource their non-core tasks. Therefore, the benefits of saving cost and time are valued more by companies that strive to maintain their position on the market by improving their positions.
Get connected with us to get a deeper insight into eCommerce outsourcing services and to drive more potential opportunities to your business
Interesting posts to read:
Benefits of Outsourcing & Cost-Saving Secrets in Pandemic Era
Is Business Process Outsourcing Relevant for your Small Business?