How to Outsource

Outsourcing tasks is one of the strategies that companies can use to keep costs of essential functions as low as possible. When the right outsourcing partners are chosen, the end result is that those tasks are performed efficiently and the business benefits from the expertise of those partners. Choosing the right partners requires understanding what needs the outsourcing will meet, how the partners go about accomplishing those tasks, and determining if those policies and procedures are in harmony with the corporate culture your company.

Part 1

Part 1 of 3:

Determining Which Tasks to Outsource

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Figure out which tasks could be outsourced and save the company money. Identifying what tasks to outsource, as well as the outsourcing benefits the company will reap, sets the stage for finding the right outsourcing partners. There are a variety of reasons to outsource, including cost savings, a lack of in-house skills, shorter-duration tasks or projects, and expansion into new markets.
- Outsourcing can be useful for one-time needs, such as the creation of a logo.^{[1]XResearch source}
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Consider outsourcing tasks that involve a specialized skill set or equipment. The best tasks to outsource are those that require specialized equipment or skill sets that your company or your employees do not possess.

For example, you may need an experienced website designer to update your website, but do not do so frequently enough to hire a full-time web developer. Alternately, you may want to outsource repetitive tasks like data entry or shipping products that require infrastructure and simple training to complete.^{[2]XResearch source}
- For another example, many companies find that outsourcing payroll tasks helps to reduce accounting expenses significantly.
- Similarly, companies also tend to find that outsourcing customer service and support makes it possible to still help clients with questions and concerns without maintaining a full time customer service staff.^{[3]XResearch source}
3
Avoid outsourcing key business processes. The tasks you outsource should be those that can be done equally well by someone outside of your company. That is, don't outsource any of your primary business strategies.^{[4]XResearch source}

For example, a small business that designs and manufactures phone accessories should not outsource any of their design processes, but might think about outsourcing manufacturing if and only if their partner could manufacture the product as well as the business could in-house.
- Do not outsource functions that cannot be measured; if you can't measure an activity, you can't manage it.
- The example business should, however, look into outsourcing other essential business processes, like shipping and payroll, assuming the cost savings are there.
It can be beneficial to start with a relatively small task for your outsourcing partner. This will allow you to see the quality of their work without taking on too much risk.

Another way to do this is to give a trial period of a month or so. This works for tasks that cannot necessarily be broken down into smaller parts.^{[5]XResearch source}
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Part 2

Part 2 of 3:

Locating an Outsourcing Partner

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Set the qualifications for the outsource partner. The idea is to secure a partner who is capable of performing the assigned tasks in a manner that will enhance your business, not to place limitations on the company's productivity. You should also set clear expectations for the timeframe in which the tasks are to be completed.^{[6]XResearch source}
- For example, payroll services should be able to manage all withholding and deliver payroll to employees without delays, while customer service providers should be able to follow your guidelines for interacting with customers.
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Consider using an outsourcing agency. If you're planning to outsource overseas, it can be beneficial to use an outsourcing agency. These organizations match up domestic businesses with international outsourcing partners, provide quality guarantees, and can work to simplify processes like communication and billing. Search online for outsourcing agencies to get started. Some of the larger players are:
- Odesk.
- Elance.^{[7]XResearch source}
Gather names of possible partners from your business connections, local chambers of commerce, business associations, and even internet searches.

Limit the list of partners to those who seem to provide the benefits you have in mind and have a reputation for providing a high level of support to their clientele. Look for ratings of the best partners and try to find examples of their previous to see if it meets your quality standards.^{[8]XResearch source}
Take the time to contact each one individually and discuss your needs. All prospects that provide responses that are direct, clear, and indicate they understand what you need and can meet those needs remain on the list. Any contacts that seem vague or evasive in their responses should be eliminated from the list. A physical visit should be made if the work being done is significant. Also, if you are outsourcing overseas, need to be sure that the outsourcer conforms to US labor standards or be prepared for bad publicity.
An RFP will include a request for a price estimate and a description of the services they are able to provide, along with examples of their previous work.

Doing so allows you to review information about each prospect side-by-side, ultimately narrowing the selection down to one partner who is highly likely to meet your needs.
Always work towards working with the partner that can provide the best combination of quality and value. That is, don't just search for the lowest price. Only choose the lowest bidder if their quality is on par with your own and/or what you expect from your outsourcing partner.^{[9]XResearch source}
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Part 3

Part 3 of 3:

Working With an Outsourcing Partner

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Create a statement of work contract. Your contract with your partner will be defined by a statement of work that lays out the specifics of your business relationship. It will specify the services that will be provided, the timeline for the provision of those services, and payment for the services.
- Write out in clear terms exactly what the partner needs to provide and when the work, or pieces of work, is due. This may includes milestones, a timeline, and specific deliverables.
- Use this as an opportunity to arrange contact as well. For example, consider setting up a weekly or monthly call to assess progress.
- You should also negotiate payment and payment terms, like how much is due at each stage and what payment is contingent upon.^{[10]XResearch source}
- If possible, establish a financial penalty in the event the outsourcer fails to meet their commitment. Bringing tasks in-house or finding another outsourcer can be expensive.
After reviewing the terms of the contract to make sure the pricing and other key components within the agreement are in harmony with the information provided in the proposal, finalize the partnership and begin enjoying the benefits that come with outsourcing essential tasks to the right partner.

It can be difficult to relinquish control of the task to an outside party, but try not to check over their work every time. This will quickly drain the time you've gained from outsourcing the work.^{[11]XResearch source}
Regardless of how far away your partner is, you'll have to find a way to establish effective communication with them so that you can communicate plans and performance objectives clearly. Establish points of contact with their organization immediately so that you can begin building a relationship with them.

Then, establish communication protocols, like exactly what certain words or phrases in your contract mean in the context of the contract. Be sure to explain any company or industry-specific terms used that the partner may not be familiar with. Doing so can help avoid confusion down the road.^{[12]XResearch source}
After the first milestone or reached or the first products or services are delivered, take time to assess the quality and expediency of the partner's work. Did they live up to their promises?

This is when you can decide whether or not to continue your relationship with this partner. If they've done very well, you can then choose to escalate your involvement with them.^{[13]XResearch source}
Examples abound of outsourcing partners failing to hold up their end of the contract. For example, a manufacturing outsource partner might use substandard materials that fall outside of the contract terms. Alternately, a friendship may form between the outsource partner and the entrepreneur, causing difficulties in maintaining the outsourcer-business owner relationship.

In either case, it's important that the business owner remember to trust the outsource partner, but still perform regular, objective assessments to ensure that they are performing as stated in the contract.
When communicating with an overseas outsourcing partner, be sure to take cultural differences into account. For example, negotiation, critical comments, and, in some cases, direct statements may be perceived differently by other cultures. Take the time to research business practices for your partner's culture before entering into negotiations with them. This will make your cooperation simpler and more efficient.^{[14]XResearch source}
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Tips

Always keep the proposals on hand for at least a year or so. In the event that some difficulty develops with the partner of choice, you can always review the others and possibly identify a viable replacement.
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Take your time when choosing an outsourcing partner. Doing so increases the chances of making the right choice the first time, rather than overlooking something important and having to start over at a later date with a new partner.
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