When we use the term “outsourcing”, people typically only think of one kind. There are in fact two types of outsourcing (at least)!
In today’s podcast episode, we’re going to go over the two types of outsourcing, and why one is so much more expensive than the other. AND… why you need both to help run your business.
Here’s the podcast episode:
Or if you’d rather watch the video:
And here’s the transcript:
Hi, I’m Ruthie, owner of Defy The Status Quo, and you’re listening to an episode of The Defiant Business Podcast, your daily source for 10-minute shots of business knowledge. You don’t have a lot of time and I’m not going to waste it, so let’s get into it.
Today we’re going to talk about the two types of outsourcing. This is information every business owner needs. No matter what type of business you have, or even if you’re not technically the business owner. Let’s say you’re the chief marketing officer, or you’re in charge of the sales department. It doesn’t matter what department you’re in.
Outsourcing is something that most businesses have to consider because when you’re competing with enterprise-level organizations as a smaller or midsize business, one of your advantages is being lean and agile. And part of what that means is not taking on employees for tasks that you can affordably outsource. Why? Because your business has no obligation, beyond the contract when you outsource certain tasks.
Even large businesses outsource certain facets of their business. If they don’t have the necessary infrastructure to run operations for a particular segment of their business, then they’ll outsource it. In the supply chain industry, there is a whole segment of service providers called Third-Party Logistics (3PL) providers.
They work predominantly with ecommerce companies and handle operations like their order fulfillment, inventory management, and shipping.
For the longest, Amazon outsourced their shipping to UPS and FedEx until they could develop the infrastructure to ship their own orders. They turned their logistics infrastructure into a competitive advantage. Amazon “in-sourced” their shipping operations because they had the data to fulfill their orders from customer purchase to delivery better an anyone else.
There are many large companies that outsource marketing activities, especially activities that go beyond the normal day-to-day operations. Almost every single Superbowl ad campaign was developed externally by media companies.
Types of Outsourcing
So generally speaking, there are two types of outsourcing, and those are the two that we’re going to talk about today.
The First Type: Simple but Time-Consuming
The first type is what people typically think of when you talk about outsourcing. It’s the incredibly simple and time-consuming tasks that you shouldn’t necessarily be the one doing. If you’re a marketing officer or the content marketing director in a bigger organization, should you necessarily be the one entering in lead-gen information, or pulling the search engine optimization reports?
Should you be the one inputting the 50 business cards you got from the week-long conference that you just got back from? No, probably not.
And when I say that you shouldn’t be the one doing it, what I mean is: is it the best use of your time? So let’s say it takes an hour. What else could you accomplish in that hour that would generate revenue for your business?
For me, I could outline three or four blog posts, and I could record five or six podcast episodes. Those are outward-facing activities that could generate more business for me. So do I have to necessarily be the person who enters a business card information into my CRM? No, I don’t have to be that person.
The Second Type: Significantly Complex Tasks
The other type of outsourcing is the one that people don’t necessarily like to use the word “outsourcing” with, so it’s important to consider the connotation of the word. When we say “outsource”, people are typically thinking “Oh, you’re going to take my work and farm it out.” Maybe you’re expecting to not get great quality work back. And that is not always the case.
The second type of outsourcing includes complex tasks that you shouldn’t necessarily be the one learning and executing. My best example is the infographic design on one of my blog posts, done by my executive assistant. She is pretty awesome. We worked together to create an infographic to help people create great Linkedin profiles.
I was considering doing the infographic design myself on Canva. After playing around with a template for maybe a minute and a half before I was like “Nope, this is not something I should be spending my time on.”
I can come up with all the points and the content that we need to put in there, and I can help with the tweaking. I can give feedback so it looks exactly the way that I want it to, but this graphic design thing, is not the best use of my time.
In Comes My Expert!
Enter Sylvia, who is my executive assistant. She has awesome graphic design skills and she was able to put to use on this infographic.
We worked back-and-forth to tweak it, and that was a much better use of my time. It would have taken me forever to get everything just the way I wanted it to be in Canva. But because she’s good at what she does, I didn’t have to take the time to learn it, struggle with it, and then finally maybe get something done that I was proud of. It’s very possible that what I came up with at the end wouldn’t have been something that I would have been proud to put on my website.
That’s the other thing to consider. Not only are these tasks typically more complex and time-consuming, it’s because of someone else’s years of experience that they’re able to execute them better than you.
It’s not to say you couldn’t learn it. It’s not to say I couldn’t learn graphic design, because I could, but I don’t feel that’s the best use of my time. I wouldn’t be working in my area of brilliance. I try to spend as much time as possible working in my areas of brilliance because it makes me the happiest, and generally generates the most revenue for my business.
Key Differences Between the Two Types of Outsourcing: Costs and Qualifications
Simple Outsourcing Costs and Qualifications
The first type of outsourcing consists of simple tasks that are typically time-consuming, but easy to learn. They’re typically inexpensive. These are things like:
- inputting data from one spreadsheet or one type of information format into another
- pulling stats for something
- responding to very basic customer service inquiries
- sending out welcome emails and things like that
It’s all very basic stuff that’s easy to learn. They are typically inexpensive contractors on even the higher-end offering. These sorts of service provider typically have trouble justifying their fees, or they offer other services.
Maybe you put out a job post on Upwork, or you put out to your Linkedin network that you’re looking for some help with data entry work. A virtual assistant responds and she charges you $30 an hour. This is on the expensive side for a virtual assistant. But if she’s usually a virtual assistant for a writer like myself, she might also proofread. Maybe she helps, like how Sylvia goes over my stuff, helps me with drafting my blog posts, does the design for the graphics, and other activities.
She could charge more than somebody who just does data entry. If you’re looking to save money here, what you’re looking for is someone who just does data entry and likely doesn’t live in the United States. Then they would charge lower rates. Again, it’s those tasks that are usually easy to learn but they’re time-consuming, and so you don’t necessarily want to be the person doing them.
Complex Outsourcing Costs and Qualifications
The difference for the second type is that they’re more expensive. The tasks are more complex and excellent contractors in these fields are often hard to find. Or you know, ones that work well with you are hard to find. So maybe you talk to a lot of web designers, and there were some that looked really good, but they just didn’t mesh with you. You didn’t feel a connection, you didn’t feel like they’d handle your stuff the way that you wanted.
They’re professionals and you would potentially recommend them to other people after your interactions. However, you didn’t feel like they were the best fit for you.
Should You Save the Project?
The other thing to consider is these people might be too expensive. You have to decide whether you should learn how to do this so you can get this project done, or if it’s a project that you can save for when you have the funds to pay for an expert in this field?
Again, looking at something like web design or graphic design, “could I save this project for when I can afford to outsource it?” Maybe it’s something where you’re like “Yeah, I could learn how to do this, but what I would do wouldn’t be as good.” Then perhaps you put that as a goal for your business six months down the road.
“Six months down the road, I’m going to be able to pay a graphic designer to design x types of graphics or x number of graphics. Then we’ll be able to repurpose those on my website.”
Another thing to consider is that when you have the second type of outsourcing, you’re going to want to build relationships. If you do have to search for someone, you don’t want to do it in a rush. You will compromise your standards for what you want to get done, and then the project still won’t turn out the way that you want to.
When you’re ready to look for the more complex type of outsourcing for those harder projects, you want to make sure that you are taking your time and vetting your people. Finding someone for data entry is going to be a lot easier than finding just the right web designers, so that way your website looks exactly the way that you want it to.
This has been an episode of The Defiant Business Podcast. I’m Ruthie, your host, owner of Defy The Status Quo, and I look forward to seeing you again next time.