Outsourcing Vs. Offshoring
Before we get right into this definitive guide to outsourcing for startups, let’s get something out of the way: the difference between outsourcing vs. offshoring.
These two terms are often used interchangeably nowadays, but there are actually marked differences between the two. Outsourcing, in its broadest term, is moving internal operations or a portion of the workforce (in some companies, often a large portion of the workforce) to a third party—in most cases, through the help of a reputable and trusted outsourcing provider. In outsourcing, geographic barriers actually pose no problem, because while the workforce hired by the client company through the outsourcing provider might be located many miles away—most probably in Europe or Asia—there won’t be any disruption to the work because of the technological advancements being enjoyed today that allows effective remote work.
On the other hand, offshoring is a geographical activity, primarily. For instance, a company can decide to relocate its factories to a location where the labor costs are cheaper, so that the business can save money. This act of moving factories to another country, though, does not involve tapping a third-party outsourcing provider because the business will engage potential employees of that target country directly.
Why Consider Outsourcing Your Startup Tasks?
These days, it’s not only the multinational corporations that are looking at outsourcing to save a significant amount of money for their business. More and more small and medium-sized businesses are taking to outsourcing and, not surprisingly, startup companies as well.
So how can startups reduce costs by outsourcing? Make no mistake: it is more crucial than ever for startups to focus on their core business early on and aggressively take on clients, investors, and venture capitalists because, unlike more established companies, startups do not have an unlimited amount of budget and resources. In fact, the earlier startups can outsource relatively unessential tasks that don’t affect the core business, the better. Startups would do well to make it a priority to shop around for reputable outsourcing providers as early as they can to save money.
The Pros of Outsourcing Your Startup Tasks
There are a lot of pros for startups if and when they decide to outsource tasks, especially early in the company’s entry into whatever industry or business they are in. Here are just some of the few examples of these pros:
- Startups Can Enjoy Lower Costs
This is one of the more obvious pros of outsourcing your startup tasks. When startups decide to outsource, they enjoy substantially less overhead and utility costs as well as relatively minimal expenses when it comes to both hardware and software. In addition, startup companies will realize that through outsourcing, they won’t need to make large capital investments in both infrastructure and office space, thereby saving them even more money.
- Startups Will Benefit from Higher Expertise
More often than not, a startup has one core expertise that it wants to take advantage of in the market and earn profit from. But how about the other important positions that a company needs to hire, but which the startup owner does not have any expertise on? For instance, virtual assistants, HR staff, or bookkeepers? Needless to say, through outsourcing, startups will benefit from higher expertise, a better talent fit, and an increased quality of work.
- Startups Will Benefit from Better Focus
This is also one of the more obvious pros of outsourcing your startup tasks—you can focus more on your core business and pour more time and effort into its growth and development.
The Cons of Outsourcing Your Startup Tasks
- Cultural differences can prove to be challenging
When you decide to outsource, even though your company is still essentially a startup, you are going to be working with people from other countries, people who are used to a workplace culture and ideals that are substantially different from yours. As a result, this might lead to some misunderstandings or conflicts, and that’s why it’s always a good idea to acclimatize your outsourced colleagues with your organizational culture at the start to avoid any issues.
- There might be reduced day-to-day control
One big advantage of a startup compared to a large multinational company is that there’s more direct control in the organization and less red tape—which is good. This is actually one of the factors that pull in people to work for startups, and this day and age, there are more professionals who prefer the relative flexibility of a startup compared to the bigger companies.
However, when you decide to outsource, the flip side to this is that the professionals you outsource won’t usually be under your direct control. And this means that you won’t have as much influence over them as you would if they were working in-house. What you can do about this is to choose an experienced and reputable outsourcing provider that will make sure to keep your outsourced colleagues accountable for the work that they’re doing; that way even if there’s a reduced control, the work will remain top-notch.
- You will most probably be locked into a contract
Some outsourcing providers require clients to sign long-term contracts with them. Others require clients to spend a fixed amount of money to use their services. And this is understandable, honestly, because these outsourcing companies are fully aware that they are saving your startup a ton of money in the long run. So—and this might sound like stating the obvious—before committing to an outsourcing company, make sure that you pick one that won’t tie you to a disadvantageous long-term contract. Better yet, consult a corporate lawyer before signing a contract.
The Best Countries for Outsourcing Your Startup Tasks
Right now, Eastern Europe and Asia are the top destinations that are currently offering motivated, skilled, experienced, and highly talented professionals for startup outsourcing. In Eastern Europe, for instance, economies offer lower upfront costs than in more developed economies, in addition to a large pool of outsourcing-ready professionals with in-demand skills.
For instance, countries like Romania, Bulgaria, Poland, Ukraine, or Latvia have recently been attracting both British and US startup companies looking for IT professionals, as these countries have a large talent pool of IT experts well-versed in programming languages that include Perl, Java, PHP, .Net, and many others.
In Asia, on the other hand, there are a lot of technical-proficient experts that are waiting to be tapped for outsourced startup work.
The following are the three most popular countries for startup outsourcing.
The Philippines is one of the best countries for startup outsourcing. Consider this: the outsourcing sector in the Philippines makes up about 8% of the GDP of the country. So is there still any doubt that more and more companies are choosing to outsource to the Philippines?
And we’re not just talking about large companies here; we’re specifically talking about startups. An example: in the past few years, the Philippines has seen a boom in technology-powered startups. In fact, since 2012, the country has witnessed an unprecedented rise in the number of new and innovative startups, mostly led by ambitious young entrepreneurs. What does this all mean? That outsourcing companies in the Philippines, where local startups have been sprouting the past several years, know exactly how to deal with foreign startup companies based in other countries because of relevant experience.
Not only that, but Filipinos also adhere to an excellent work culture, which can be traced back to their history. Majority of Filipinos are Catholics, and they are raised to believe in hard work, integrity, and honesty. There are also many top-notch universities in the Philippines that produce countless industry-ready graduates every year. In fact, the Philippines has remained the top producer of some of the top mathematical, accounting, engineering, marketing, business, and IT minds in the world.
Speaking of experience with startups, India is also another option for startup companies looking to outsource. For instance, Bangalore has been dubbed the Indian Silicon Valley not just because of a large pool of tech and IT professionals, but also because it has been producing quite a number of startups in the past several years.
India has a substantial pool of experienced professionals, one of the fastest-developing infrastructures, and also has one of the fastest Internet connections in the world, which makes it an ideal destination for startup outsourcing.
Malaysia produces a relatively large pool of IT professionals as well as world-class accountants and bookkeepers, mostly from the nation’s capital Kuala Lumpur, as well as Selangor and Johor. Malaysia is also quite experienced in the outsourcing industry. In fact, according to the International Data Corporation or IDC, Malaysia’s business process outsourcing market is expected to grow at a compounded annual rate of 7.9% and reach US$1.4 billion by the end of 2021.
The Most Commonly Outsourced Roles for Startups
The most common roles that can be successfully outsourced for startups include virtual assistants, bookkeepers, marketing professionals, and HR professionals. Virtual assistants on the one hand because admin tasks mostly include tasks that are so-called repeatable and templated, which are therefore some of the easiest tasks that can readily be outsourced; bookkeepers, on the other hand, because daily tasks required to maintain financial records often fall to the bottom of an owner’s to-do list of priorities.
HR tasks because outsourcing HR functions actually create greater efficiency within human resources systems; for instance, advanced HR technology used by outsourcing vendors helps streamline common but important HR functions, which include payroll, benefits administration, and compliance management.
And last but not the least, marketing tasks because when marketing functions are outsourced, it’s less time consuming than hiring an actual marketing team from scratch; anyone who’s had to hire a fully functional in-house marketing team can vouch how time-consuming it is—there are different components of a marketing team, and even getting the different members to be able to work together seamlessly can be a challenge. An outsourced marketing team can solve this problem. Learn more why outsourcing your marketing tasks for startups is a good idea.
One of the best countries for startups to outsource virtual assistants, bookkeepers, marketing professionals, and HR professionals, is the Philippines. Want to learn why this is so? The separate articles below take a more in-depth look at the reasons why.
Why should startups outsource HR functions to the Philippines?
Why should startups outsource marketing functions to the Philippines? How to Select a Good Outsourcing Partner for Startups
One of the most important aspects of outsourcing is choosing the right partner. The partner you choose as a startup can either help you grow your business or cause you to lose money and waste your time—and nobody wants that. So take your time, do your research, and think hard before selecting the right provider for your startup. Here are some tips to consider when choosing the right outsourcing partner for your startup.
Determine how much you are willing to pay
Pricing, as always, is a touchy factor—and this is more so when outsourcing. Finding the right price is key—not too costly for the startup owner, but one that the other party will find profitable for them, which they will readily accept. Also, try to keep in mind that the companies who ask for the lowest price are not necessarily the best, so try to strike a balance between cost and quality. In this case, it is best to define your initial budget at the outset, and then search for a provider that falls between that range that you set.
Look for an experienced provider
As a startup, you should always look for an experienced outsourcing partner. This cannot be stressed enough. Before contacting a partner, be sure to do some research and find out their previous work experience. You can also learn a lot during your meeting or interview with them. There are a lot of outsourcing partners out there that are experienced in dealing with startups, specifically, and you should not settle for less. Selecting an experienced and reputable outsourcing partner is one of the most important decisions that you will make for your startup, so do it right the first time.
Explain clearly what you want
It is important that you communicate well to your outsourcing partner what your expectations are. Explain to them at the outset what you need for your startup company and how it should be done. Define and outline specific goals, schedules, and roles to your outsourcing partner.
Look for excellent communication
Good communication is absolutely a must if you want your startup’s collaboration with any outsourcing vendor to be a success. A good outsourcing company must be efficient at communicating and keeping you constantly updated about progress and challenges. They must also be excellent at meeting deadlines.
How to Get Started with Outsourcing
One of the best ways for a startup to get started on the outsourcing track is to look at the current staff on hand and try to determine what additional role(s) would deliver the greatest benefits. Make a list of skills and roles that will help your startup the most, and then you can begin looking for the best providers that can source those skills for you.
Ideally, you should also:
- Set priorities for the roles you want to outsource
- Outline a detailed schedule for when and how you want to outsource these roles
- Calculate the money you save by outsourcing
- Calculate the time you save by outsourcing
- Start interviewing outsourcing providers—especially those that already have previous experience in working with startups—to fill the roles you have selected
Yempo—“Your Employees Offshore”—is a Western-owned outsourcing company, providing flexible and low-cost staffing solutions to organizations around the world, whether large multinational companies, small and medium-sized businesses, or startups. As such, we are confident that we can help you with your challenge of looking for the best outsourcing staff for your startup.
The top advantages that Yempo provides are:
- Flexible staffing solutions. Whether you are looking for a full-time or part-time staff or temporary or permanent solutions, we have your back.
- Low-cost, high-caliber staff selection. We source the most qualified staff for your company, at a fraction of the normal costs.
- Monthly billing in your currency. Our simple billing system is hassle-free, and there is no need to exchange currencies.
We take time to understand your requirements, source staff with the right skills, and present them to you for you to interview. If you decide to proceed to work with us, we guarantee that your staff will work under your direction in terms of workload; the good thing is, we manage all the day-to-day care, payroll, government compliance, etc. We at Yempo will essentially host your own staff and provide them with the best possible employee experience to ensure loyalty and commitment to your business.
Our staff works in the time zone required by your business, and we bill you in your currency. We only hire staff who speak fluent English and have experience working with Western colleagues and clients to ensure an understanding of Western business etiquette and work practices.