How And When Should SMEs Outsource

Regardless of whether the company is an SME or MNC, or whether it has a tall or flat organizational structure, outsourcing is something that is almost unavoidable. If you can do things more efficiently at a fraction of the cost, and you feel that your business is ready to take the step, it might be a sign to invest in business productivity through outsourcing.

About Outsourcing Decision Matrix (ODM)

The ODM helps in the assessment of strategic importance and contribution to operational performance to help firms decide if a task should be outsourced or otherwise. Here are two easy steps to using the matrix.

Evaluate task based on the axes

In order to know what to do with the task at hand, you will first need to identify it on two levels.

Strategic importance

Along the vertical axis lies the strategic importance of a task. If the task translates into a strong competitive advantage over a period of time, or if it is a Unique Selling Point (USP) that results in returning and loyal customers, it is of strategic importance.

Contribution to operational performance

If the task is fundamental to a friction-free day to day operation of your firm, and poor delivery of the task in question translates to bottlenecks, it contributes greatly to operational performance. Your employees are likely to be dependent on the completion of this task to move on to the next step.

Plot task

After knowing where your task stands, you will be able to indicate it on one of the four quadrants on the matrix itself. At this stage, you may also realise that your task may be bordering two quadrants. In that case, you will need to evaluate which quadrant is a more suitable one.

Many times, there is no one right answer to determining the treatment for a task and a mixture of solutions over a period of time can be done as well. For instance, you may choose to retain a task until the workflow is ironed out before outsourcing it.

Eliminate

While elimination is a difficult decision to make, especially if your firm has been doing the task for a long period of time, it is still something to consider seriously. If the task has been producing irrelevant and severely unimportant results and seems like a pointless chore, perhaps there is a need to relook at its relevance. Just because it has been done for an extended period of time does not mean that it should continue.

Form a strategic alliance

If the task is strategically important but does not have do much to your operational performance, it may be wise to form an alliance with a partner. This trusted partner will need to work together with your firm to produce actionable results while staying independent.

Outsource

For tasks that contribute to operational performance, but is not a core competency, they can be outsourced. This is all the more easy to do given the rise of the gig economy and the sprouting up of agencies.

Many startups and SMEs make the mistake of not outsourcing tasks for greater control and a perceived cost saving. In fact, outsourcing parts of the business is one thing that entrepreneurs wished they knew before starting a business.

To further evaluate the need to outsource, you can calculate the hourly costs of doing the work in-house. If it is cheaper to outsource it to a more qualified professional who can do it in a shorter time, go for it. However, bear in mind that there are intangible costs associated with vendor management such as the time needed to draft a workflow and discuss via meetings, e-mails and phone calls.

Retain

For strategically important tasks that are key to your operational performance, it is wise to retain them to maximise control and to prevent trade secrets from being leaked out. This also ensures that good quality standards are delivered to the areas in which your business depends on.

Types of tasks to outsource

The ODM is a great starting point to make a decision on what to do with a task. Outsourcing is fundamental in the growth of small businesses and can help you reduce overheads and improve productivity. After further examining the management of working capital and workflow complexities, firms can determine what tasks to outsource. Below are some examples of tasks that can be outsourced.

Content marketing

There are many agencies out there providing content marketing solutions at various price points. Creating a website and churning out daily articles can take a toll on team members. Doing up a comprehensive whitepaper or infographic about the industry in which the firm is operating in to increase consumer perception of the company as a thought leader can also be difficult. As such, outsourcing is a good measure to ensure quality content marketing.

Conversion Rate Optimization (CRO)

In CRO, the quality of web traffic triumphs over the quantity. The generation of warm leads for higher sales and profits is highly dependent on a good mix of content marketing, Search Engine Optimisation (SEO), review placements, sales funnel optimisation, sponsorship, Call To Action (CTA) insertion and targeted advertising. Outsourcing this to an expert will help you save a lot of time and money associated with experimenting on these yourself.

Customer support

Poor customer service can easily result in the loss of a customer. With competitors offering alternatives, it is not difficult for your customers to turn away. This is particularly so in the e-commerce industry in which competitors are only a mere click away. To improve on the existing customer support, added features may be outsourced to other vendors. For instance, live chat support or virtual chatbots can be helpful in sieving out requests that can be solved using a template of automated replies, versus those who require personalised attention. While the firm may lack the technical know-how on how to design, code and execute such features, a specialised vendor will be able to help.

Inventory

After forming a robust inventory system and guidelines in-house, firms can outsource it to fulfilment centres. By redirecting this task to professional companies, the risk of inventory being mishandled will be greatly reduced.

One-off tasks

One-off tasks such as the designing of an event-specific brochure or the seeking of legal advice for a short-term project can be outsourced. As with all other aforementioned tasks, there is a need to pay attention to contractual obligations and Non-Disclosure Agreements (NDAs).

How to outsource

Outsourcing needs to be done in a strategic manner, and it is bound to take time. Start by first sourcing for vendors. In the event that you do not know where to start, consider hiring an outsourcing agency.

There is a need to state the key project requirements, scope of work, timeline, deliverables, Service Level Agreement (SLA), as well as a rough budget range, preferably in a Request For Proposal (RFP). After shortlisting and selecting the candidate, you will need to craft a statement of contract. It will be wise to get a legal personnel to look through the terms and conditions at this stage to prevent any misunderstanding and to protect the firm.

Once the service starts, be sure to continuously communicate with your vendors. Setting up weekly or monthly meetings is one way of staying up to date. Be sure to monitor and assess their performance over time and see if there is a real change in your operations. Needless to say, maintaining strong relationships is key too.

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