Strategic Outsourcing for Startups

Most startups are built upon good intentions and a better idea, but no founder can be an expert at everything. Trying to do everything on your own is a recipe for burnout and a skills gap that expands with time. This isn’t an ideal situation for startups that are trying to stay above the competition and make an impact that’s felt in their chosen industry.

This is where strategic outsourcing comes in. In simple terms, outsourcing is the business practice of employing a third party to perform processes, from customer support to back-office tasks. It’s typically done to help cut costs, but it’s now a business strategy that can also address skills gaps and location-based issues with global companies.

The global outsourcing market has grown to over $90 billion in 2019 from $76.9 billion in 2016, which shows that companies are seeing the benefit of outsourcing not only on the bottomline but also on an organization’s growth. Outsourcing is now part of the arsenal of companies looking to grow their business beyond borders and expand their teams with talent from diverse backgrounds.

What is Strategic Outsourcing?

The first question that comes to mind when discussing outsourcing is: How do you outsource strategically?

Outsourcing can simply be a means to delegate work and cut costs, but it can also be a business strategy that can help your startup get a foothold in your chosen niche. Leveraging the many benefits of outsourcing and making it a part of your overall strategy will ensure that you get the help you need in whatever aspect of your business while you focus on the business itself—closing deals and ensuring your startup grows at your desired pace.

Strategic outsourcing involves building a relationship with a startup outsourcing company, which is responsible for the success of certain areas of your business. Despite being a third party, you and the outsourcing company should work as a team with a common goal. Their technical skills and know-how should complement your business and fill the gaps that hinder the growth of your business.

For most startups and small to medium-sized companies, the following are the commonly outsourced tasks.

Repetitive tasks

Repetitive tasks are the easiest ones to outsource because of their relative simplicity. You can find offshore skilled workers that cost less and are as good as those you can hire locally.

Highly specialized tasks

There are times when you need people with special skills and the advice of experts, and there are times that you don’t. As such, there’s no need to keep highly skilled people on the payroll if you won’t be utilizing their expertise on a fulltime basis. Outsourcing highly specialized tasks is significantly cheaper than hiring specialists or experts as fulltime staff.

Infrastructure-related tasks

As you accumulate data, you will need to think about your infrastructure: moving data to the cloud, digitalization of processes, maintenance of your digital systems, and the like. Data has become the lifeblood of businesses today, and it would be a huge misstep to not have a plan when it comes to their backup and storage. It can be overwhelming to keep track of all the systems and platforms your company uses. Outsourcing tasks related to infrastructure can save you money and help you ensure that you pay only for the infrastructure you use.

Enterprise resource planning (ERP)

ERP is a process used to manage the important components of a business by integrating them into a single, standardized system. ERP software helps companies run processes and plan resources using a single software or application, making it simpler, quicker, and more efficient. These software applications require specialized skills however, but not on a fulltime basis.

Strategic Outsourcing for Enhanced Flexibility

In the fast-paced startup landscape, getting a product to market quickly is often crucial to capturing market share and gaining a competitive edge. Outsourcing plays a pivotal role in enhancing both flexibility and speed to market.

Accelerated Timelines

Outsourcing enables startups to leverage specialized teams that are ready to hit the ground running. These experts, whether focusing on software development or digital marketing, bring a wealth of experience which allows them to progress through projects more swiftly than an in-house team building expertise from scratch.

• Specialized Expertise: External teams are highly skilled in specific areas, making them more efficient in executing tasks compared to multi-tasking in-house teams.

• Reduced Setup Time: No need for prolonged hiring processes or training periods required for new internal staff.

Enhanced Adaptability

Startups often face rapidly changing market demands. Outsourcing provides the flexibility to scale operations up or down as required, without the need for significant internal restructuring.

• Scalable Resources: Outsourcing partners can quickly adjust their operations, ramping up production or scaling back, based on the startup’s current needs.

• Responsive Adjustments: Quickly deploy new strategies or pivot when unexpected changes arise, ensuring that the startup is always aligned with market demands.

In essence, outsourcing not only speeds up development cycles but also allows startups to remain agile and responsive in a dynamic market environment. This adaptability is crucial for thriving in the competitive world of startups.

How to Outsource Strategically

Startup outsourcing is not simply hiring a third party to do certain tasks and then forgetting about them. This will only lead to bad service and dissatisfaction. To do it strategically, it should be an ongoing conversation between your key people and the outsourcing company. You should provide relevant technical information that will help increase the quality of service and avoid business disruption.

Strategic outsourcing is a commitment between two companies to work together toward achieving set business goals. Below are a few tips on how you can make outsourcing an effective component of your overall business strategy.

Find the Right Outsourcing Partner

More than finding a capable outsourcing company, you should ensure that it’s also a good fit to your organization. Your mission, vision, and company values are vital to the way you work and do business. As such, your partner outsourcing company should have similar values.

The outsourcing company’s physical location is also a consideration because it will determine how accessible they are and if they will be readily available in case of challenges or emergencies.

Know Where to Focus

Prioritization is key when it comes to building and scaling startups smart and fast. Know what works for your business and double down on that. Invest in processes and systems that help optimize your processes and resources and improve overall business efficiency.

On the flipside, what isn’t working and see if processes can be improved or if taking a new approach is required. Whatever processes fall outside your focus area should be considered candidates for outsourcing.

Set Realistic and Measurable Goals

As with any business venture, strategic outsourcing needs SMART goals to help you monitor its progress and see if anything needs to be modified or replaced. Setting specific milestones and deadlines will also help you determine the rate of your growth and allow you to forecast if deadlines will be met at the rate your currently going and prepare if plans aren’t turning out the way you expected.

Maintain Balance in Your Relationship

Any long-term business relationship needs balance to survive. The startup outsourcing company you choose will be your partner in achieving your goals. This means that you need to be firm with the goals you set but also understanding of circumstances beyond control.

Hiring “yes men” isn’t ideal because this removes the checks and balances that prevent you and your stakeholders from making impulsive, uninformed business decisions. Find an outsourcing partner that will fight for your business but also knows when to push back when needed.

Manage Limited Resources Effectively Through Outsourcing

Outsourcing can be a game-changer for startups working with tight budgets and minimal staff. By turning to external experts, startups can transform challenges, like insufficient capital and lack of manpower, into opportunities for growth.

Concentrate on Core Operations

With outsourcing, startups can shift their focus to critical business areas by handing off secondary tasks. This allows the in-house team to concentrate on what they do best, rather than getting bogged down by peripheral duties.

Access to Expertise and Technology

By outsourcing, startups gain access to skilled professionals and cutting-edge technology that they couldn’t otherwise afford. This not only enhances productivity but also ensures that startups remain competitive without bearing the costs associated with full-time staff or expensive equipment.

Cost-efficiency

Opting for outsourcing means that startups can avoid the hefty overhead costs linked to hiring permanent employees or investing in infrastructure. Instead, they can pay only for services rendered, making it a more flexible and economical option.

Scalability and Flexibility

Startups can quickly scale operations up or down based on demand without the usual risks involved in staffing changes. This adaptability is crucial for growth and surviving fluctuations in the business environment.

By tapping into the vast pool of outsourced talent and resources, startups effectively manage their limited funds and workforce, setting the stage for sustainable growth and success.

Factors Startups Should Consider When Deciding to Outsource

Outsourcing can be a strategic move for startups aiming to grow efficiently, but it’s crucial to weigh several factors before diving in. Here’s what you should keep in mind:

• Cost efficiency: Start by evaluating whether outsourcing will truly reduce costs compared to developing capabilities in-house. Consider expenses such as onboarding, training, and potential for scaling.
• Expertise and innovation: Look for outsourcing partners who offer specialized skills and innovative solutions that align with your business goals. The ability to enhance your current offerings or operations through external expertise can provide a significant market advantage.
• Clear scope and expectations: Clearly define the scope of work and set transparent expectations from the outset. This involves drafting detailed contracts and service level agreements (SLAs) to ensure alignment and avoid misunderstandings.
• Cultural fit and communication: Choose partners with a compatible company culture and strong communication practices. Effective collaboration relies on understanding and aligning with your startup’s values and work styles.
• Data security and compliance: Assess how potential partners handle data protection and compliance with relevant legal standards, especially if your startup handles sensitive or regulatory-intensive information.
• Scalability and flexibility: Ensure the outsourcing relationship offers flexibility to scale operations as your startup grows. This adaptability can be crucial during periods of rapid expansion or changing business landscapes.

By focusing on these factors, startups can make well-informed outsourcing decisions that propel growth while circumventing common pitfalls.

Building a Partnership for the Future

One of the main reasons why most startups fail to make outsourcing work for them is the notion that it requires less work. Strategic outsourcing is a partnership, and a partnership requires work to maintain and keep profitable. It’s a boon for startups and businesses looking to scale, but implemented haphazardly, it could have the opposite effect.

Talk with us today and see how the right startup outsourcing partner can help put your business on the right track to scaling smart!