Principles of Outsourcing
Dmitry Dyatlov said: “it's hard to get shit done when there's no one to do it for you”.
And we completely agree! However, those who have “discovered” outsourcing and have understood its power and relevance in today’s world don’t have such worries. In fact, when done properly, outsourcing can be a great way to save both time and money, while getting the job done more efficiently.
So, what exactly is outsourcing? Why does it matter? How can it help your business? Your life? How should outsourcing be approached?
Honestly, you’ve probably been “exposed to” outsourcing without even realizing it. And that’s exactly why we decided to write this article - not only to help you realize some of the things you may have already known, but to help expand that knowledge even more.
Let’s start with defining outsourcing.
What Is Outsourcing?
Investopedia defines outsourcing as
the business practice of hiring a party outside a company to perform services and create goods that traditionally were performed in-house by the company's own employees and staff. Outsourcing is a practice usually undertaken by companies as a cost-cutting measure. As such, it can affect a wide range of jobs, ranging from customer support to manufacturing to the back office.
There are many reasons as to why companies and organizations opt for outsourcing. One reason, as the definition suggests, is reducing costs, however, there are other beneficial reasons too.
For instance, many wish to promote their business by hiring contractors from other countries. They also wish to refresh their ideas, and listen to what individuals outside of their company have to suggest. Outsourcing also helps employers and employees remain focused on their core tasks and functions, without getting carried away by other, not so significant ones.
However, outsourcing it’s not a piece of cake either. While it comes with a lot of business benefits, it has its fair share of challenges too.
And in this article, we’ll explore both.
Facts About Outsourcing
- business outsourcing was used for the first time back in 1989?
- Kodak is regarded as the pioneer in outsourcing information technology (also in 1989)?
- the Emperor of Russia, Peter the Great, was perceived as the first professional outsourcer and recruiter?
- India is said to be the top outsourcing country in the world?
- IT Outsourcing (usually referred to as ITO) and Business Process Outsourcing (usually referred to as BPO), are said to be dominant in the outsourcing industry nowadays (with India holding 65% of all the outsourced IT jobs)?
Definition of Outsourcing
- usually on a contractual basis;
- the opposite of insourcing;
- often times done remotely (depending on the line of work, obviously);
- said to include a wide range of services, the most common ones being:
- Professional outsourcing;
- Business-process outsourcing;
- IT sourcing;
- Process-specific outsourcing;
- Manufacturing outsourcing;
- Project outsourcing;
- Operational outsourcing;
- said to be:
- offshore: when you work with a contractor who is far way;
- nearshore: falls somewhere between offshore and local outsourcing; it refers to the act of contacting a contractor who is somewhat far away, yet they’re closer than the outosucrees who fall under the category of offshore outsourcing (for instance, you’re based in the US, and your outsourcee is in Canada);
- local: when you contact a local contractor (meaning within your country) for services; it’s also referred to as onshore outsourcing.
- always beneficial or productive (it comes with a lot of challenges that employers need to learn to overcome);
- permanent employment;
- illegal (however, it should be implemented properly);
- supposed to mean that someone is doing a boring and meaningless job, or that they’re not worthy of getting permanent employment.
The History of Outsourcing
Many believe that Ronald Coase, a British economist and author, coined the term “outsourcing”. The term is said to come from “farming out basic ‘blue collar’ jobs to outsourcing specialized and highly-skilled services called ‘white collar’ jobs”.
So, how did the concept of outsourcing historically develop? First of all, outsourcing started slowly developing in the 1950s, however, it wasn’t until the 1970s and the 1980s that it became a useful (and an acknowledged) business strategy.
What’s more, this development happened in several stages. Throughout the first stage (which lasted roughly from the early 1980s to the late 1980s), it was common to see traditional outsourcing. This meant that companies wanted to incorporate ourtosuring within their business practice in order to reduce their costs. So, oftentimes companies resorted to moving their operations to an external contractor rather than handling them internally. By reducing costs, companies were able to maximize their profits.
In the second stage, which lasted from the early 1990s up till the early 2000s, there was a rise in so-called strategic outsourcing. Strategic outsourcing differs from the traditional one in the sense that its focus is on gaining access to external expertise. Such expertise is believed to complement the already existing one. This can further help boost the company’s progress, as well as bring new, fresh ideas.
Next, we have the third stage. This stage started from the early 2000s - it’s when strategic outsourcing started slowly shifting to transformational outsourcing. This kind of outsourcing is seen as a refreshing and contemporary business model that helps companies adjust to various market demands, enhance a wide range of ongoing operations within the company, as well as strive to deliver an innovative approach. Another great thing about it is that it can also live up to the ever changing business expectations and needs.
Nowadays, we see outsourcing evolving much further. We already covered the types of outsourcing (offshore, nearshore, and local), which only proves how versatile the concept of outsourcing has become.
All in all, the concept of outsourcing has brought about businesses refining their operations and revising their strategies. It has become an important aspect in terms of how businesses formulate their plan of action, organize their services and functions, and execute their plans.
Why Is Outsourcing Important?
It’s enough to take a glance at a few outsourcing definitions and a short explanation to understand what makes outsourcing so important. And we’ll probably sound repetitive with this (as we tend to explore some of the benefits that come with outsourcing in some of the sections later on in this article), however, it seems we can’t stress enough how significant it is to understand the importance that outsourcing has for your business. Only then can it be applied correctly.
First of all, outsourcing takes your business to the next level. How? By allowing you to explore options, ideas, resources, and people (contractors) that you probably wouldn't have if you constantly keep relying on your in-house employees. And while there’s nothing wrong with counting on your employees and trusting them with important information (after all, they’re your primary staff), opening yourself to outsourcees forces you to take a step back, get out of your comfort zone, and take a look at your business from a different perspective.
Then, outsourcing helps companies cope with the ongoing business growth. For instance, your company may struggle to keep up with all the demand, and so partnering up with a third-party provider may be the best thing you can do. This is especially advisable when you’re not sure whether the growth your business is experiencing is temporary or permanent, so it’s much easier to test the waters by hiring contractors rather than offering permanent employment without fully knowing where your business is heading.
Moreover, outsourcing helps companies save a lot of money. Imagine having somebody do their job, but you don’t have to pay any bonuses, all the extra taxes that come with having in-house employees, and various pension and insurance plans? How cool is that? Well, that’s what outsourcing allows you to do.
These are just some of the reasons why outsourcing is so important in the corporate world. We’ll delve more into some of them in the upcoming article sections, however, we hope this part laid the basis for the importance of outsourcing as business practice.
How To Develop an Outsourcing Strategy?
There’s not a one-size-fits-all approach when it comes to creating an outsourcing strategy. However, there are certain steps and stages each outsourcing strategy should go through before it’s applied in practice. Here are some of them:
1. Define your outsourcing goals and ambitions
Why are you outsourcing? How’s that supposed to help your business at this stage? What type of services do you wish to outsource? How many contractors are you going to need? What are you trying to achieve with this?
Answering these questions should give you a head start, because let’s be honest - dealing with outsourcing for the first time can seem quite daunting. You’re not sure how to approach it, who to consult, and whether you’re supposed to do it at all. However, taking the time to analyze your business goals should help you get started. It’s all about realizing how outsourcing can take your business to the next level. And then, once you’re properly motivated, step by step you’ll get there.
2. Plan your budget
Hiring a contractor may be cheaper than hiring in-house employees, however, it still requires proper budget planning. What’s more, you need to plan both the expected and the unexpected costs.
Expected costs are fairly straightforward, but what do unexpected costs refer to? Well, while mapping out your monthly, quarterly, or even yearly budget sounds neat, you can’t fully rely on those budgeting plans. In other words, sometimes you may need to spend much more money than you initially planned.
For instance, you may have found a copywriter and you may have decided on a $50 hourly rate, and they’re supposed to work for 20 hours the whole month (which equals $1000). You decide to put that money aside, as it’s already planned for that specific contractor. Then you continue planning the rest of the budget - let’s say you need to find a graphic designer, a content writer, web developer, and so on.
However, once you get to revise your contractor’s work you realize that the content doesn’t really live up to your expectations. In fact, it’s not what you settled on. There could be pieces of information missing from a technical document, the slogans sound way too cheesy, and the emails are much lengthier than what you instructed.
If this happens, and you decide to hire another copywriter (an outsourcee), then you may need to pay double (because you’ll end up paying the other contractor for the work they did). This is just one example. Of course, there are many ways as to how this can go - you could ask the contractor to re-do certain slogans, re-write the emails, and just keep everything as it is. Or you may do something entirely different.
On the whole, the point is that you need to be flexible when planning your budget because unexpected things may happen.
3. Choose an adequate outsourcing model
We already explained and defined the various types of outsourcing (offshore, nearshore, and local), and so it’s up to you to choose the most suitable one.
Of course, this is very closely related to the previous two steps - once you set your goals, and plan your budget, it’s easier to see which option is the most feasible one.
4. Find contactors and establish communication
Lastly, you need to find outsourcers. For instance, you may look for freelancers on platforms such as Upwork, Fiverr, and JobRack. You can also check what your competitors are doing and how they’re approaching this.
Once you find your outsourcees, you need to settle on an adequate communication platform (this is especially important if you’re dealing with offshore outsourcing). We suggest several such platforms in our FAQ section, so make sure to check that out.
Examples of Outsourcing in Everyday Life
Outsourcing is used across a wide range of business contexts. In fact, there’s rarely a company or an organization that doesn’t outsource at least some of its functions and services. In the past, usually larger corporations made use of outsourcing, however, nowadays businesses of all sizes can take advantage. As Josh Steimle put it:
“If: You are 100x better at marketing than accounting...
Then: Focus on marketing, and hire someone else to do your accounting.
What do you need to stop doing yourself, and outsource to someone else?”
So, it’s each company’s responsibility to analyze their services, employees’ qualifications, and take a closer look at both its strengths and weaknesses. By understanding what areas of the business need helping (that is, outsourcing), you empower the current employees to fully devote themselves to doing what they do best.
Here are some of the most commonly outsourced jobs:
- Customer service
- Information technology
- Content creation (copywriters, content writers, editors, and so on)
- Visual content (video editors, graphic designers, and so on)
- Social media management
- Event management
- IT solutions
- Web design and development
- Tax preparation and filling
- Legal services
- Human resources
- Bookkeeping and accounting
It’s worth mentioning that most of the people that offer outsourcing services are, in fact, freelancers. Freelancers are said to represent 40% of the workforce in 2020.
And here are some of the most famous companies which outsource:
Reasons for outsourcing in business
Why is outsourcing such a prominent activity in each business? What are the reasons behind it?
First and foremost, outsourcing gives you the opportunity to be flexible in each business decision that you take. This means that you have the option to downsize or expand by using outsourcing much faster than if you were fully depending on your regular employees.
There is a peace of mind that comes with having outsources, too. For instance, if you’re running an eCommerce website, chances are your team aren’t IT experts or web designer specialists. However, you may need such services every now and then, so it’d be much more logical to find outsourcees rather than offering full-time employment.
Outsourcing also allows you to access a much larger talent pool. Namely, when you hire employees locally, you usually have to pick someone from the same city, which means your choices are limited and you may have to compromise at times. However, outsourcing gives employers access to different parts of the world. So, it’s absolutely advisable to expand your search, strengthen your requirements, and search for specialized assistance.
A lot of companies take into account some tax-efficient outsourcing locations such as Taiwan, Hong Kong, Singapore, Ireland, and so on. These countries are said to have quite low corporate tax rates, so they’re attractive both for small and larger businesses.
Pros of outsourcing in business
It’s already clear that outsourcing in businesses is a fairly common practice. In fact, it has become an integral component of each business out there. And to fully understand why this is the case, you need to understand some of the benefits that come with taking advantage of outsourcing:
- It’s time-saving. Outsourcing non-core activities and functions is time effective, which allows you to focus on your main responsibilities (the same applies both to employers and employees).
- Hiring outsourced help reduces costs. Regular employees receive insurance and pension benefits, bonuses, and so on, whereas outsourcees are only paid for the work they do. This is also linked to lower labor cost. Just think about how many companies in the USA outsource individuals from India or other low-income countries in the world - they not only save money, but provide adequate performance too. It’s a win-win situation for both parties.
- Outsourcing enhances international ties. In other words, if you have a UK-based business, but have outsourcees from various countries in Europe and Asia, you end up “promoting” your business globally.
- Outsourcing boosts companies’ revenue. By saving money and reducing costs (through finding outsourcees from low-income countries), the company’s profit increases.
- You have access to greater expertise (which is closely related to what we already discussed). In other words, if everybody in a company handles their own responsibilities and their own tasks, then each person will be dealing with what they’re assigned to do. The same applies to outsourcees. If you need an IT technician, then you’ll be hiring an IT outsourcee. If you need writing services, you’ll be hiring a copywriter/content writer outsourcee. Such allotment improves overall efficiency and productivity.
Finally, it’s worth noting that each employer should develop an adequate standardized training program for prospective outsourcees. In essence, they’re expected to onboard new members, provide them with continuous learning tools, and offer further help when it’s needed. That said, one size doesn’t fit all, so it’s necessary to come up with training strategies that best suit your current company’s needs. You may even need a few strategies in order to meet all outsourcees’ expectations. What’s more, providing such training and proper training strategies not only helps your overall business, but also allows outsourcees to feel as part of your company.
Cons of outsourcing in business
There are some disadvantages to using outsourcing in business. That doesn’t mean you shouldn’t consider implementing outsourcing as part of your business strategies, only that you should be aware of them, and try to minimize their impact as much as possible.
So, here are some of the most common cons of outsourcing in business:
- At times, outsourcing may trigger some communication issues and misunderstandings. That’s why it’s very useful to take these questions into account when you’re communicating with your outsourcees (especially the international ones):
- What time zone does the outsourcee live in?
- Does the time zone match your working hours?
- What’s your preferred means of communication - email, phone, instant messaging, or?
- Does your outsourcee have a reliable internet connection at all times?
- A lot of employers are concerned about being faced with a lack of control. They know they’re dealing with a contractor rather than their own employee who is not physically working in the company, so employers feel as though they have no idea what their outsourcees are up to.
- Outsourcing may sometimes have a negative impact on the overall company culture. What does this mean? Well, employees may feel abandoned or replaced once they see an increasing number of outsourcees handling a lot of tasks and responsibilities. They might feel as though they’re not good enough, and now their employer is finding others to get the job done. Some may be confused - they may not understand the purpose behind outsourcing. This may further cause management difficulties within the company.
How to approach this?
If you’re an employer:
- What makes outsourcing so popular nowadays? Has it become mainstream or is it a highly useful practice when applied properly?
- What are your current objectives and goals when it comes to outsourcing? Are you engaging in outsourcing because you’re trying to simplify your current business life, provide the market with something new, or is there an entirely different reason behind it? Is outsourcing helping you focus on your main tasks and responsibilities without getting distracted?
- Which tasks and services do you usually outsource?
- When is the right time to oursource? How can you tell?
- How does outsourcing give you an advantage over your competitors? Will outsourcing make you more competitive over the course of 5, 10 years? Why? Why not?
- Are your competitors approaching outsourcing in the way you do? Or are they doing something else? Is there anything you can learn from their way of handling outsourcing? If yes, what is it?
- Can the process of outsourcing make you more connected to the industry you work in? Why? Why not?
- Compare domestic and offshore outsourcing. Which one sounds better to you? Why? Have you used both options? If you have, what does your experience tell you so far?
- Are you sometimes thinking about outsourcing as a way of reducing costs (which is something a lot of employers desperately wish for)?
- Apart from outsourcing, what else can you do in order to be much more competitive on the market?
- Has dealing with several outsourcing operations at the same time made you feel as though you were losing control over your business?
- Do you give bonuses to your outsourcees? Why? Why not?
- Outsourcing might make “things” a lot cheaper for employers, however, does it necessarily bring about better performance and achievements? In other words, has it helped make businesses much more successful? If yes, how so? If not, what can be done to fix this?
- Are you concerned that outsourcing may impact your business quality in a negative way? What can be done to prevent this from happening?
- What are some common pitfalls to outsourcing and what can be done to avoid them? Can outsourcing be done for wrong reasons? Explain this further in your own words (or think about any type of bad experience you may have had).
- Can a company be too small or too big for outsourcing?
- How do you usually approach the process of training with your outsourcees?
- How do you establish proper communication with your outsourcees? Have you ever had any negative experiences?
- Have you ever received negative feedback from any of your outsourcees? How did you handle this? What did this experience teach you?
If you’re an outsourcee:
- How long have you been working in your industry?
- How do you usually find clients?
- How do you know if you have the tools, knowledge, and qualifications to work for a specific client/company?
- Have you ever thought about getting a job at one specific company instead of providing outsourcing services for various different clients?
- Are your customers/clients satisfied? How can you tell? Have you ever received any negative feedback? If you have, how did you react to it? Did it affect your self-esteem? Did that make you question your qualifications, work experience, and work commitment?
- Do you have any client testimonials? How important are they for your line of work?
- Do you know what percentage of clients would gladly refer you?
- Do you get asked to show previous samples of your work? Have you said “No.”? Why? What happened next?
- What makes your outsourcing services different from the others out there? What specific skills, work ethics, and experience can you offer?
- How long have you been providing outsourcing services? If it’s been a while, what kept you going so long?
- What security measures do you offer as a way of protecting your clients’ privacy?
- Have you ever made a mistake? How did your client react? How was the issue resolved? Did this affect your professional relationship? Is there a way to compensate your client in such moments? Provide a longer explanation.
- How often are you expected to communicate with your client?
- Are you always aware of all your obligations, tasks, and overall responsibilities?
- Do you have any trouble meeting your deadlines? What would happen if you missed a deadline?
- Should outsourcees be required to sign a contract? Why? Why not? Let’s imagine you’re working for several companies at the same time, and some of them are competitors (for instance, a freelance content writer providing services to various web hosting companies). Is this something that should be allowed in the first place? Is it a problem at all?
- What’s the longest you’ve worked for a client?
- Why do some many employers decide to outsource instead of hire in-house? What do you think? Have you ever spoken openly to any employers about this? What were their thoughts?
- How do you charge clients? Is it a fixed price, an hourly rate, or? Have you ever received less money than what you settled on? How did you resolve this with your client?
- Has a client ever asked for a refund? Let’s say you’re a graphic designer and a client hires you to design a logo, you decide on a price, you create the logo and then send it to them. However, they’re not happy with it, and they want to get their money back. What did/would you do?
- What questions and concerns do you usually have before you start collaborating with a new client?
Whenever people think about education and the individuals that are part of it, they always seem to think of the educatees changing, as they tend to come and go, and the staff being more or less permanent.
However, that can’t be further from the truth. Of course, people get fired, retire, or even quit themelevs, but here we’re referring to workers who engage in providing outsourcing services to educational institutions.
First and foremost, what can be outsourced within most educational contexts?
Educational institutions used to outsource the operation of bookstores, catering services, as well as maintenance services to private companies. However, nowadays there’s an increasing need for other outsourcing services too. Namely, health services, residence halls, IT services, air conditioning maintenance, car parking services, printing, transportation, building management, and so on are also being contracted out.
Allegedly, some of the most popular outsourced services are:
- food services (74.6%);
- vending (63.2%);
- bookstore operations (45.7%);
- custodial services (45%);
- maintenance (35.9%);
- security (24.2%);
- and laundry services (20.6%).
What’s more, some of the most frequently outsourced are directly related to teaching. This is what higher education refers to as adjuncts, or part-time lecturers. For instance, the University of Maryland - College Park is said to have a low percentage of part-time lecturers, only 28%.
Here’s the thing - adjunct professors aren’t paid as much as full-time professors are. They aren’t eligible for tenure either. This means that hiring adjuncts is very attractive for colleges because they make sure there are professors to teach students, however, some have doubts regarding the quality of those lessons, but also concerns about the future of those adjuncts.
Also, it’s worth saying that most of the titles lecturers get in academia are just that - titles. It doesn’t necessarily mean that a full-time professor teaches better than an assistant or an adjunct. It all depends on each person’s individual knowledge, teaching commitment, and overall devotion.
There have been many discussions about this in academia, and of course, we’re not going to solve this in several paragraphs (plus, it’s not even the main purpose of our article). However, we simply wish to bring your awareness to the existence of adjuncts and their connection with the process of outsourcing, as it’s a fairly common practice (especially in the USA).
Reasons for outsourcing in education
Here are some of the most common reasons why educational institutions opt for outsourcing:
- Schools have to cut costs and comply with certain budgetary constraints;
- Institutions need to find a way to handle the lack of skilled employees;
- They might have some safety concerns (for instance, not having an IT professional and leaving some of the workers to handle certain IT tasks may result in cyber attacks, which later on leads to other problems within the institution);
- Some institutions can even have pressure from other peer institutions and they simply “have to” follow the outsourcing trends.
Pros of outsourcing in education
What about the benefits of using outsourcing in education? First of all, many feel that such an approach brings about an added expertise in the institution. In other words, people believe that bringing new workers in a school or on the uni campus can bring about a variety of new skills, experiences, and higher-level management without having to formally hire new staff.
We need to take variable service contracts into account too. So, think about activities such as lawn cutting or snow removal - these can be handled on an as-needed basis. This is important because it allows educational institutions to save a lot of money, and simply pay for a specific service instead of having to offer permanent employment.
Also, educational institutions can take advantage of economies of scale. What does this mean? Well, let’s imagine a school is using IT services from a specific company (things such as computer maintenance), but they also need to purchase an antivirus program for each educatee’s computer. So, the school may purchase that antivirus program at a much lower cost.
This is also linked with the concept of risk avoidance. In other words, if the school faces any technology-related issue (let’s say the Internet crashes all the time, a student’s computer is “attacked” by a virus although there’s a strong antivirus program, a lot of computers start slowing down although they’re new, and so on), the contracting company takes responsibility because it’s that specific company which provides these services, and not the school itself.
Cons of outsourcing in education
That said, there are shortcomings to outsourcing too. Namely, you can never be 100% sure you’ll be happy with the service you’ll receive. For instance, a school may sign a contract with a food company and may settle on certain nutritional conditions. However, if the food company ends up serving the institution’s educatees with other types of food, it means they didn’t comply with the contract’s specifications. So, If the service provider doesn’t fully understand the educational institution’s requirements and expectations, they probably shouldn’t collaborate in the future.
Also, there could be loss of continuity. In other words, if a certain outsourcee finds a job elsewhere or both parties decide to break up the contract, the period of transition may affect the overall educational institution. For instance, let’s say the food company isn’t happy with the school institution it collaborates with and decides to break up the contract (although they probably can’t do this overnight, depending on what kind of contract both parties have signed) - this means that the school may need some time before it finds an adequate replacement, and even when it does, the educatees might need some time to adjust to the new kind of food being served.
How to approach this?
If you’re an educator:
- How does your school handle outsourcing? What are your views about it?
- Do you think that the use of outsourcing in schools will increase or decrease over the next 5 years?
- What is your educational institution concerned the most about when it comes to finding outsourcees?
- Do you think there’s too much outsourcing or too little outsourcing in your school? How can you tell?
- How does your educational institution handle IT outsourcing?
- Have you ever had any negative experience with an outsourcee within your school? What was it about?
- What’s the scope of outsourcing in the educational sector in your country? Is there a mutual agreement among schools regarding what to outsource? Or perhaps each institution is allowed to make choices on their own?
- According to you, what school functions can be outsourced?
- What are the general perceptions of educatees, staff, faculty, and management about outsourcing?
- What are some negative effects of outsourcing in your institution?
- How do you feel about universities outsourcing their staff? Here we refer to adjunct professors, such as the ones we mentioned in the example with the University of Maryland above. How do you personally feel about it? Do you think such professors provide the same quality as those eligible for tenure? Do you think universities are after quality or they’re simply trying to reduce their costs? Are adjunct lectures less motivated than those with full-time employment? After all, even if this is true, are they to be blamed? Also, are there any benefits when it comes to being an adjunct professor? For instance, adjunct professors are not required to conduct research, publish papers, or even attend staff meetings.
- Would you agree that schools across the world are in some “budget crisis” and that’s why they’re opting for outsourcing? Why? Why not?
- Do you think there are schools that are genuinely convinced that they provide better quality and expertise when they decide on outsourcing rather than having their employees handle some of the functions?
- How do you feel about outsourcing psychologists and speech therapists in education? For instance, what could happen if several psychologists or speech therapists get hired by different schools, resulting in no continuity within a single institution? In other words, what if children might have to work with several therapists instead of getting used to working with a single one? How can this affect the child’s development? How might lack of consistency impact the overall class? Do you think this is something that should be addressed prior to hiring psychologists and speech therapists? Who should be responsible for this?
If you’re an educatee:
- Have you ever wondered whether the educators and the other employees you encounter in your educational institution are permanently employed or they’re on a contractual basis? Would knowing this somehow change the way you perceive this institution or the people working there? If yes, in what way?
- Have you ever had adjuncts throughout your university studies? Can you compare their lectures to those of full-time professors? Are there any drastic differences? If yes, in what way? Also, have you ever found your professors titles to be significant when it came to how they delivered their lectures?
- Looking at things from an educatee’s perspective - how do you perceive outsourcing in education? Does it bring more advantages than disadvantages? Support your claim(s) with facts.
- It’s well known that besides the professors educatees have at school, a lot of them have private tutors. Would you classify hiring those tutors as outsourcing services? Why? Why not? How does outsourcing private tutors differ from outsourcing done within a larger educational setting?
- Some teachers or professors might hold permanent positions within your school, however, they may provide extra teaching services aside too. What this means is that they could be guest lecturers at another university, or they may be tutors to educatees from other institutions, and so on. Do you feel they will offer the same quality regardless of the context they teach in? In other words, do you think there could be an environment which may motivate them more - if yes, which one will it be?
- It’s fairly common for university students to start working before they finish their studies. It may not be a permanent job or an internship, but they may offer some freelancing services (for instance, if they study English language and literature, they can provide translation services for various companies, agencies, and organizations, or even tutor individuals and help them learn English). Is this an example of an educatee becoming an outsourcee? What do you think? Do you think having such experiences will help educatees understand their own educators more? Why? Why not?
- How do you feel about students outsourcing their assignments? For example, students have their colleagues prepare their projects, they hire freelance writers to write their thesis or paper, and so on. What does this tell us about work ethics? Are both parties to be blamed or only the students? Perhaps none?
- Regardless of what degree you’re pursuing, there’s a lot of stress on finding a permanent job, choosing a specific career, and entering a well-known company. However, do you think universities should also focus on informing their students more about freelancing, outsourcing, and so on? In other words, should they explain the wide scope of possibilities that prospective students have instead of “presenting” permanent employment as the highest professional option one should strive to obtain?
Do you know that according to a market study, the healthcare outsourcing market was valued at $52.9 billion in 2020 and is expected to reach $66.3 billion by 2025?
Don’t worry - we didn’t know it either! In fact, talking about hospitals and healthcare and the people working there resembles the explanation we gave at the beginning of the Education section - it feels like the staff working there is permanent, and it’s just the patients that change.
However, practice shows otherwise. There are many healthcare outsourcing services. The most common one seems to be IT, however, other clinical services, such as the following ones, are gaining a lot of popularity too:
- laboratory (microbiology and pathology);
- nuclear medicine;
- mental health services;
- magnetic resonance imaging;
- physiotherapy and rehabilitation;
- speech and language therapy;
- occupational health therapy;
- medical tourism, and home-delivered healthcare.
Apart from clinical services, significant non-clinical services are being outsourced too, such as meals, procurement, security, sterilization, patient transport, facility management, and so on.
Reasons for outsourcing in healthcare
Healthcare outsourcing allows you to see things from a higher perspective. And there are many reasons to consider it as part of your medical practice.
First and foremost, having outsourcees helps you set your priorities straight. For instance, if you outsource HR services you don’t have to worry about the whole human resources administration and the benefits assistance. It will simply be the outsourced team’s responsibility to look after those matters. What’s more, the outsourced HR team can provide you with other things such as preparation of a detailed employee manual, a software to help you track your employees’ files, certain handbooks, training employees, hiring employees, and so on. However, the biggest benefit is that you won’t have the cost of hiring an in-house human resources team.
Another reason why medical outsourcing is so popular is because it provides highly effective payroll management. Having full-time payroll staff can be highly expensive, and you can have the same work done by collaborating with an outsourcing agency. Outsourcing payroll management activities oftentimes include timely payments to all of your employees.
This goes hand in hand with medical billing too. Every hospital deals with hundreds of medical records and payments each day. However, medical billing is not as straightforward as booking a hotel room, or paying for a shirt. It’s much more complex (and expensive!), and requires a lot of time and proper knowledge. Apart from the billing itself, the patient’s insurance needs to be properly analyzed too. This further complicates things. Outsourcing such services will equip you with a highly skilled team capable of dealing with these records and billings.
We need to consider data processing services as well. So, apart from the medical billing, healthcare workers are faced with tests and lab reports, drug inventory, and prescriptions. Getting rid of those tasks (in other words, outsourcing them), allows you to free time for core medical activities and responsibilities.
Finally, it’s worth considering outsourcing for reasons related to hospital infrastructure management. Here we refer to services such as procurement, maintenance, pest control, cleaning services and sterilization, waste management, security (some of which we already mentioned above), and so on.
Pros of outsourcing in healthcare
Much can be gained through medical outsourcing. Here are some of the most noticeable benefits:
- Medical outsourcing has the power to lower costs. This is probably one of the most important reasons as to why physicians are being outsourced. Hospital-employed physicians get salaries and extra benefits, whereas outsourced physicians are only paid for the work they do.
- It can provide a much greater access to a wide range of specialists, which greatly benefits patients. What’s more, outsourced physicians are said to be much more transparent and objective, as it’s far easier for them to remain neutral compared to those who are employed.
- It helps improve overall patient care by maximizing staff efficiency (this is especially true about institutions which decide to outsource non-core services and functions, because then employees can fully dedicate themselves to the core ones without any extra distractions);
- Medical outsourcing can also allow healthcare providers to offer more clinical services than they currently do.
Cons of outsourcing in healthcare
Medical outsourcing isn’t all sunshine and rainbows. It does come with its cons too. Here are some of the most frequent ones:
- There could be quality issues and this might apply to both clinical and non-clinical services. What does this mean? Well, there could be issues with the costs of those services - for instance, the hospitals expect a lot more than what the outsourcing agencies may provide (which may result in poor task execution). To prevent this from happening, both parties should explicitly state their expectations, the standards, as well as the objectives through which the work can be measured. In other words, proper communication is more than essential.
- Another issue could be lack of consistency. If hospitals deal with service interruptions (for instance, when contracts expire without having them renewed, or when contracts are broken before their expiration date), an unstable workforce may emerge. This can cause distrust and dissatisfaction not only among patients, but among the employees within that institution too. To prevent such uncomfortable events from taking place, it’s always useful to pre-plan and have alternative options at all times. That said, it’s normal for an issue to occur every now and then, however, the point is not to let things escalate and simply get out of control. This matters because it makes the medical institution come across as unprofessional.
- It may affect patient satisfaction levels - for instance, a patient may not be quite happy to come across different outsourced physicians each time they visit the hospital, so they might feel as though they can’t establish a closer relationship with a single physician.
- There could potentially be some misunderstanding around the scope of the work one needs to do, After all, healthcare institutions are very frequently faced with emergency cases and people have to act quickly, so it’s difficult to always pay attention to what tasks you were supposed to do, and which ones you weren’t supposed to - in essence, you need to improve and adjust, which may be difficult for outsourcees who aren’t fully familiar with all the aspects of the specific institution.
How to approach this?
If you’re a healthcare worker:
- How do you perceive healthcare outsourcing services on the whole? Do they bring more advantages than disadvantages? How can you tell?
- Where do you see the future of healthcare? Does this also depend on where outsourcing services are headed?
- How can outsourcees stay informed about the latest healthcare advancements?
- How did you realize you wanted to become a healthcare provider? What made you want to be part of the healthcare sector?
- Are you currently working? If you are, what is it that you do?
- Have you ever provided healthcare outsourcing services? If you have, what were they? Was it a positive experience? What did this teach you? Would you consider doing this again in the future?
- How much access should outsourced physicians have to the hospital’s medical records, policies, regulations, patients’ data, ongoing clinical trials, and so on?
- Is there a difference as to how elderly patients respond to healthcare workers compared to young adults? If yes, in what way?
- Why do you think the IT sector is the most outsourced IT area? Is it so that medical workers are allowed to fully devote themselves to practising medicine instead of getting “stuck” with technological issues? What would happen if IT wasn’t being outsourced? What complications might arise? Or there could potentially be some benefits as well?
- Could there be any other reasons for IT outsourcing? For instance, protecting patients’ personal information? Did you know that just in 2018, 15,085,302 patient records were breached? Do you think that such statistics may cause a lot of worry for patients? Are such worries justified taking into consideration the amount of patient records (mind you, we’re talking just about 2018, and such breaches occur each year)?
- Patients who have poor health or even individuals with chronic diseases are asked to frequently get checkups and receive corresponding therapy. This means they’re in much more frequent communication with their doctors than those who simply go down with the flu once a year (and even then, they may not show up in the hospital or visit their GP).
- Now, does it matter if these people have frequent contact with the same medical workers or with some of the current outsourcees? How can such changes impact their health? What if you need to communicate bad news to them? Or they’re trying to disclose important information to you? How can these situations be managed? What about establishing a closer doctor-patient relationship? Is this “endangered” by the process of outsourcing in any way?
If you’re a patient:
- How do medical workers usually ask you questions about your health? Are they strictly professional, neutral, or friendly? Have you ever felt a difference in how you were approached/treated by regular medical employees and medical outsourcees (provided you knew their work status)?
- What should outsourcees do to get to know patients better? How can they form a deeper connection with patients when they don’t have the same rights and benefits as the rest of the physicians?
- What do you think about hospitals with outsourced healthcare call centers? Have you ever come across this? Do you think this helps the rest of the hospital employees really focus on their tasks, that is, their patients, and leave such administrative matters in the hands of outsourcees?
- Have you ever had an appointment with a doctor you see regularly, and once you arrived you saw another doctor expecting you? How did you react? Did you receive a proper explanation? Did you reschedule or decided to proceed with the medical exam?
- Let’s say you’re dealing with an illness, preparing for a surgery, or you’re having some weird symptoms. Which of the following questions would you feel comfortable asking a regular doctor, and which ones an outsourced physician:
- What exactly is this type of condition or illness?
- How serious is it? How will it affect my everyday life? Is it curable? Can I infect others? What exactly is the therapy and how expensive is it?
- What’s the short-term and the long-term prognosis for my illness?
- How can I learn more about this illness?
- Will you be the one to guide me through this illness?
- What are some of the treatment options? How do I know which one is the best option? Are there any risks linked to such treatments? How long does the treatment take? Are there any side effects?
- How will I know whether the treatment is working or not?
- What happens if I reject getting treatment? What about delaying it?
- What triggered my illness?
- What changes should I make in my life?
- How can I help alleviate some of the symptoms?
- What tests should I take in order to get an adequate diagnosis? How accurate are such tests? When will I get the tests’ results?
- How frequently should I come for checkups?
- Do I need a follow-up visit after this, and if so, when precisely?
- Why exactly do I need this surgery?
- What are your qualifications?
- What type of medical procedure are you suggesting at this point? Is there more than one way of performing this kind of procedure? How much does it cost? And how much does my insurance cover? How long will it take for me to fully recover?
- Do you have a lot of experience with such procedures?
- Do I have any other alternatives or getting surgery is the only possible option at this stage? Are there any risks in relation to this surgery?
- Can I get a second opinion?
- Is this the only hospital you’ve ever worked at? If not, what other types of work experiences have you had?
It’s not very common to see the term “outsourcing” be applied in a private context. In other words, we tend to give the term more business-like qualities.
However, it’s very much relevant to our private lives, and we hope this section will help explain why. In brief, applying outsourcing in our private lives means we have someone do most of the tasks we do on a daily basis for us (usually at some predetermined cost).
For instance, while you go to work or simply do your thing, someone else may be doing your taxes, shopping for the items you’ve ordered, walking your pet, and so on. Now, let’s discuss some further examples of what can be outsourced.
Take laundry, for instance. It’s something that can be easily outsourced. While many think that hotels and larger organizations are in need of laundry outsourcing, very few know that even “common” people make use of such services.
Grocery shopping is yet another example. And it may even mean that you have your groceries delivered. This is common practice for busy people who live in big cities and have no time to go grocery shopping themselves.
If you live in a house, you’ll probably decide to outsource your gardening activities at some point. You need someone to water the flowers, mow the lawn, and simply look after the garden in general. And while you may love your garden and want to learn how to do things on your own, you’ll probably find yourself being too busy to always do it. What’s more, you’ll probably end up having much more expenses trying to buy proper gardening equipment than if you opted for outsourcing.
Babysitting is a way of outsourcing too - you’re paying someone to look after your baby/child. Sometimes it doesn’t even have to be a professional babysitter. It can be your neighbor's child who wants to earn some pocket money, and they do it while you’re out on a Saturday night, for instance.
We need to mention services such as cooking and cleaning too. Many families have maids which either come once a week and clean the house, the windows, iron the clothes, and so on, or come everyday, cook for the family, and leave once the parents come back from work. Certain families can afford to have their maids live with them too (this is considered luxury for the majority of people though).
Finally, at times, parents even end up paying their kids to do some chores, such as going to the bank, picking up a package from the post office, returning a book to the library, and so on.
Outsourcing doesn’t always have to be professional in order to be beneficial.
How to approach this?
- How do you apply outsourcing in your private life? Is this something you’ve been aware of prior to reading this article or not? If you haven’t, has the way you perceive outsourcing changed? In what way? Has it maybe brought any negative perception?
- Is there a line to be drawn between outsourcing and doing things on your own? For instance, do you think that sometimes outsourcing may force people to rely on others way too much? Or do you think it’s practical and smart to have someone run errands for you?
- Have you ever lied to someone where you told that person that you’ve done something, but the truth is that you had it done for you? For instance, your babysitter may have knitted a jumper for your baby, and your girlfriends come over, see it, and they ask where it’s from, and you say that you did it. Or perhaps you have invited your partner’s colleagues at your place, you hire a chef or a catering service, and then say it was you who prepared all of it.
- Does the example we gave cause any ethical concerns? What do you think? Can you draw a parallel between this example and a business one? For instance, if a company hires a graphic designer to work on a specific visual design, then that company might reserve the right to display that piece of work as theirs. Should the same apply to different contexts, such as ones within our private lives?
- In case this sounds a bit confusing - think about a much more common example. How many times have parents helped their children prepare a school presentation, or have painted something for their arts subject? What’s more, oftentimes some parents might even do EVERYTHING regarding that school presentation or the painting. In other words, they’re not even helping - they’re doing the whole work. And then the children present it as their work at school and get assessed for it. Would you also classify this as a type of outsourcing? Why? Why not?
- Do you think that people who outsource a lot in their private lives are extremely organized or on the contrary - they lack proper organizational skills and that’s why they need to outsource?
- Do you think that outsourcing has nothing to do with one’s organizational skills and has more to do with one’s capacity and talent to do something? For instance, if someone hires a maid or a cleaner, is it because they don’t have the time to do those things or because they don’t know how to do them properly?
- Would you classify things such as having your groceries delivered instead of going to buy them yourself as outsourcing? Why? Why not? How do you personally put a limit to outsourcing as a process and its meaning?
Famous Quotes About Outsourcing
“You think outsourcing is an advantage? WRONG. Everyone else is outsourcing already. It has stopped being a secret weapon known only to a few and has turned into a mainstream business solution that everyone routinely utilize. Outsourcing will not get you ahead -- it will enable you to keep up and not get left behind.”
“Outsourcing and globalization of manufacturing allows companies to reduce costs, benefits consumers with lower cost goods and services, causes economic expansion that reduces unemployment, and increases productivity and job creation.”
“If you deprive yourself of outsourcing and your competitors do not, you’re putting yourself out of business.”
“The other part of outsourcing is this: it simply says where the work can be done outside better than it can be done inside, we should do it.”
“American prisons have been outsourced. Much of education is outsourced. Much of the law is outsourced. Most of health is outsourced. Why not outsource Government?! Well, that’s our little joke, of course – it has already been outsourced. Corporations, the super rich, Wall Street and lobbyists run the Government. Elections are just a PR exercise to fool the sheeple that they have some sort of say in who governs them. They don’t.”
“Multitasking is a trap when it comes to running a business. Concentrate on the things that you do well, and outsource the rest.”
“The business world tells us to focus on what we're best at and delegate or outsource the rest. However, this doesn't work with all your roles, or in every situation you may find yourself in. For example, when applied to parenting, nobody can replace YOU as the parent, not even your spouse. You must act within that role, even if you aren't very good at it, because nobody else can truly take your place.”
“Outsourcing services should be fluid and flexible enough to accommodate the changing needs of clients from different industries.”
“Outsourcing was the bogeyman of the '90s. Protectionists portrayed it as an evil that would take American jobs away. Yes, some jobs did go offshore as people feared, but it made the global economic pie grow bigger.”
“If you rely too much on the people in other countries and other companies, in a sense that’s your brain and you are outsourcing your brain.”
“Could it be, I wonder, that there is such a thing as a wantologist, someone we can hire to figure out what we want? Have I arrived at some final telling moment in my research on outsourcing intimate parts of our lives, or at the absurdist edge of the market frontier?”
“Focus on the things that you’re good at and outsource your weaknesses. Stop blinding yourself. Start understanding who you are. A penguin cannot become a giraffe, so just be the best penguin you can be.”
Frequently Asked Questions (FAQ)
What are some challenges that come with outsourcing?
By now, you probably have a clear understanding of the cons of outsourcing, so you probably expect them to be closely related to the challenges that come with outsourcing.
In the Business section, we already wrote about how outsourcing may cause certain misunderstandings when it comes to a contractor’s time zone, internet connection, and so on. However, another very realistic challenge people need to consider is the contractor’s culture. Cultural barriers are one of the biggest challenges that may happen in every workplace.
In brief, many people find cultural differences to wreak chaos within their workspace. And if it’s the contractors causing the chaos, then it’s much more difficult to control it because they’re not part of your in-house employees. Now, what kind of “chaos” may happen? There could be a lot of issues regarding productivity, commitment, professionalism, overall interaction, interpretation of tasks and responsibilities, and so on.
There could be language barriers too (depending on where the outsources are). This then turns into a communication challenge. And sometimes it doesn't even have to be a major language difference - there could be other simple misnudertanidngs. For instance, let’s imagine a UK company having American outsourcees and they end up with a bunch of problems regarding dates. In other words, if they’re scheduling a meeting or preparing for an event, 3/4/2021 will have one meaning for the British, and another one for the Americans. It may be a silly example, but sometimes such silly mistakes are precisely what may cost one their business.
Finally, each company has its own set of individual challenges when it comes to outsourcing. And while there are many ways to overcome it, it’s definitely worth testing the waters first, and then making decisions which are in the highest good for everybody involved.
What are some useful tools that make outsourcing easy?
There’s no magic tool that can make outsourcing a piece of cake, however, there are some tools that can definitely make your professional life easier. Here are some suggestions:
- Liquid Planner
- Process Street
Suggestions for Further Reading
Outsourcing is all about being resourceful, finding the right people, and allocating adequate tasks. It requires having relevant experience too.
However, a lot of times we can’t rely only on our experiences. We need to get some answers much faster and make decisions accordingly. That’s when books step in.
Reading about what others have to say, suggest, and explain about outsourcing can help you make more informed decisions, and it may very well prevent you from making unnecessary mistakes.
So, here are some books we feel can assist you with this:
- Selling Outsourcing Services: How to Collaborate for Success When Negotiating Application, Infrastructure, and Business Process Outsourcing Services Agreements, by Grant S. Lange
- The Black Book of Outsourcing: How to Manage the Changes, Challenges, and Opportunities, by Douglas Brown and Scott Wilson
- Virtual Freedom: How to Work with Virtual Staff to Buy More Time, Become More Productive, and Build Your Dream Business, by Chris C. Ducker
- How to Manage Time: 7 Easy Steps to Master Time Management, Project Planning, Prioritization, Delegation & Outsourcing, by Miles Toole
- Transformational Outsourcing: Maximize Value From IT Outsourcing: Services Approach To Outsourcing Management, by Sanjay Chadha
- Vested Outsourcing: Five Rules That Will Transform Outsourcing, by Kate Vitasek, Mike Ledyard, and Karl B. Manrodt
- Multisourcing: Moving Beyond Outsourcing to Achieve Growth and Agility, by Linda Cohen
- Human Resources Business Process Outsourcing: Transforming How HR Gets Its Work Done, by Edward E. Lawler III, Dave Ulrich, Jac Fitz-enz, and James Madden, V
- The Vested Outsourcing Manual: A Guide for Creating Successful Business and Outsourcing Agreements, by Kate Vitasek
- Outsourcing and Management: Why the Market Benchmark Will Topple Old School Management Styles, by T. Tunstall
- A Guide to International Outsourcing: How to Achieve Success and Avoid Common Mistakes, by Alexey Goder, Svetlana Goder, and Tatiana Gromova
- The Outsourcing Revolution: Why it Makes Sense and How To Do it Right, by Michael F. Corbett
All in all, outsourcing is a very common business practice (and as we saw, a private one too). Although there could be some challenges that come with it, the advantages far outweigh the disadvantages.
If you feel like you want to go deeper with this, and explore the process of outsourcing even further, feel free to join our Principles of Outsourcing course. In it, we deal with:
- what outsourcing means and when it should be done;
- discussing about the differences between employing vs. outsourcing;
- what things should never be outsourced;
- managing timelines and expectations, testing competencies, and managing risks.
So - who’s ready to outsource?
Early Bird Signup
Signup for early bird access, exclusive discounts &
more when we launch new course.