One of the biggest draws of outsourcing is that it can help your startup company cut down on costs. But there is more to it than just lowering your operating expenses. To get the most out of it, you need to be more efficient in using the strategy. So, how do you pull that off? Let’s take a closer look.
Why Outsourcing Should Go Beyond Cost Cutting
You might wonder why you need to go beyond cost-cutting when it comes to outsourcing. The biggest drivers here are changing business attitudes. As competition grows in different industries, startup companies look for strategies to overcome the competition and thrive further.
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This view extends to their outsourcing efforts. More than just saving on costs, they want something that helps them effectively achieve those goals. Three main factors drive their decision here.
- Agility: Companies need to respond immediately to changing customer needs, new market opportunities, and market conditions.
- Speed: Startups need something to fast-track the changes they want to implement internally.
- Investment: Companies also want to access all the best tools and top talents to bolster their efforts.
In all of these, startups have to contend with a smaller resource pool, unlike more established companies. As such, they need to accomplish these three areas within those constraints. While outsourcing, by its nature can already fulfill that, startups believe they can get more from it through more efficient utilization strategies.
Where Your Startup Company Needs To Begin
Of course, making outsourcing more cost-efficient requires some effort on your part. Everything begins the moment that you decide to use the method. The first step here is deciding what you would want to outsource. For this, you need to answer three main questions.
Is This Task Going To Keep Me From Making Money?
The main goal of your startup company is to make a profit. If doing a task yourself would keep you away from that goal, then you end up expending resources without getting any gains. Outsourcing such tasks will free you to return to the money-making business and focus on improving its efficiency.
Am I Slightly Competent In This Task?
Doing tasks that you are not highly competent in will result in more resources spent to accomplish them. And you will often find your results less than satisfactory. Outsourcing lets you access a competent team who can complete the task much better and at a lower cost.
Is Doing The Task Going To Be A Complete Waste Of Time?
This question comes as a consequence of the above two. Remember that time can be an even more invaluable resource than money. Taking too long doing a particular task means that you can’t use your time wisely. By outsourcing, you can use your time on more vital tasks.
As you answer these three questions for each of the functions you wish to outsource, you will also see the general efficiency of your overall workflows. You can use this knowledge to further flesh out the role outsourcing will play in improving the work.
Choosing The Right Outsourcing Strategies For Your Startup Company
Once you have outlined the tasks you want to outsource, the next step is choosing the right outsourcing strategy. Your choice of strategy will depend on how well it can bring all these tasks into a more effective workflow. There are four strategies that you can typically employ here.
Comprehensive Business Process Outsourcing
If you plan to outsource a considerable portion of your startup company operations, this option will provide you with the greatest cost-efficiency. Here, you and the outsourcing partner agree to contribute resources in these areas over the outsourcing period. Through that agreement, your business can cover more ground.
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But for you to effectively manage such a comprehensive agreement, you should pay attention to crafting the various contracts that govern the work, including:
- Master Service Agreements: This is the main contract that governs every present and future activity you and your partner do under the agreement.
- Service level agreement: This contract dictates the level of service you expect from a provider for a particular work.
- Statement of work: The document defines the exact scope of a given work.
As you can see, each document covers a specific level of the outsourced project. To maintain cost efficiency, you need to ensure that these documents come together into an effective framework for the agreement.
Selective Business Process Outsourcing
This type of outsourcing is similar to the above. But instead of covering large project areas, you only choose particular sections to outsource. For instance, you can hire a third party to design a business process for you. However, your startup company is still the one to implement the process.
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Selective BPO is ideal if you want greater control of the outsourced work. Its contracts are also less complicated. But you need to be aware of how the outsourced work will affect the related in-house tasks and ensure continuity between the two groups of tasks.
Contracting
This form of outsourcing is the simplest one in that you hire the outsourcing provider to complete a specific task in a specific period. The option is well-suited for agile projects or if outsourcing only a small number of tasks.
Contracting also gives you the greatest flexibility, as you can quickly change the terms of the outsourcing agreement as needed. It is also the least risky. Nevertheless, you still need to be clear in the various terms of the purchase order. Weigh on whether the time frame you provide for each task completion is reasonable enough and would deliver your desired results.
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You can also use a combination of these types depending on your particular outsourcing needs. For instance, while you have a comprehensive BPO in place for major operations, you can also contract individual parties for intermittent tasks.
The key with this kind of setup is deciding how to bring the different types into a more efficient framework. Here, you need to think about which type each outsourcing task will fall under. From there, you can calculate the potential cost and benefits that the whole setup can bring.
Where Your Startup Company Needs To Head Next
Taking the above considerations into mind will help your startup company lay the groundwork for a more efficient outsourcing effort. But there is more that you need to do to get the best outcomes from your effort. And we at Virtua Outsourcing are ready to help you there. Connect with us today.