FAQs: General Business Process Outsourcing For Small Business

Not quite. As people, we do a lot of outsourcing every day.

Every time we climb into a cab, a train, or even a plane, we are outsourcing transportation to someone else. 

We may not be conscious of the process but outsourcing, it is. 

Now think of plumbing, electricals, roofing and other activities at your home where you outsource activities to specialists.

In business too, there are a lot of activities that are outsourced as a rule. For eg, in small businesses, advertising, digital marketing, market research and many such functions are usually outsourced.

Outsourcing traditional activities such as Finance, Legal and Admin and IT has also become the norm now with large and small businesses. 

Outsourcing allows businesses to focus on their core skills and stick to it.

Outsourcing today has become a necessity for business survival.   

Businesses that wish to scale, reduce costs, tackle competitive pressures, and redeploy existing resources for more productive work use outsourcing to achieve big benefits.

There are typical business processes which can be outsourced.

Any business process that can be

1. Done on/ using a computer 
2. Broken into precise steps for execution
3. Trained on or learned by others

Usually, these processes are internal and external to an organization.

Internal services that can be outsourced:

1. Administration: Payroll, Employee Management
2. Finance: Accounting, Tax, Reporting
3. Legal: Compliance and Reporting
4. IT: Network and Infrastructure Management, Security, and Reporting

External services that are outsourced include:

1. Marketing Strategy
2. Branding: Identity & Positioning
3. Advertising: Print, TV, POP Collateral design and placement
4. Market Research: Motivation and Customer Research
5. Digital Marketing Communications: Social Media Services, Website Builds and Development, Creation of Landing Pages, Influencer Outreach, Online PR, PPC, Ads Management, Analytics and Reporting

Spectrum currently specializes exclusively in internal business process outsourcing and re-engineering services, limited to Admin, Finance and Legal functions.

Here are 5 common reasons why outsourcing fails.

1. Outsourcing any process requires an investment of time in training and monitoring, both from the provider and the business.
2. Most SMEs with limited manpower and resources do not have the surplus bandwidth to do this effectively
3. Even when businesses make this investment, it is difficult to find service providers who take on small businesses, with low volumes of work, seriously
4. Most outsourcing entities hire dedicated human resources as part of their service. Then try and leverage businesses to use these resources fully. The onus of training and monitoring these resources is also left to the business.
5. If the resource leaves, you are back to square one and all your investment is rendered worthless

To illustrate this, here is a typical story of small business process outsourcing that went sour

A small business decides to outsource. It searches the internet and finds a service provider. 

After the sales talk and negotiation, a contract is signed.

The service provider identifies resources and allocates them to the business. 

The business invests time and money into the training of these resources. It then finds that it also needs to spend time and money supervising and monitoring these resources.

What happens: There are communication gaps. Delivered productivity falls below expectations.

After struggling through all this, just when things begin to work right, the trained resource leaves the job.

The service providers give a replacement but the business is back to square one. 

This is not worth the trouble. The business gives up.

What failed here: Outsourcing or the business process?

The process of implementing outsourcing failed.

Reasons why outsourcing attempts by SMEs fail

1. High staff attrition leading to breaks in continuity and headaches for businesses
2. Minimal to zero supervision or ownership of the process by the provider
3. Poor implementation of processes - no planning or documentation, which leads to quality issues
4. Unclear expectations of both the provider and the business on the roles and responsibilities of each

Primarily outsourcing aims for three advantages for your business

1. Reduce costs
2. Gain competitive advantage 
3. Scale and grow quickly

While you may initially look at cost benefits to justify outsourcing, we strongly recommend that you seriously consider outsourcing as a flexible means of growing or scaling your business.

The main concern small businesses have concerns with outsourcing is reliable, stable services. 

This is where Spectrum Consulting shines through its unique Learn, Onboard and Deploy Model of business.

Is business process outsourcing for me?

Yes, if any of the following statements resonate with you.

1. I don’t have the time to look at outsourcing
2. I am worried that outsourcing will have a negative impact on quality
3. Outsourcing is very complicated and confusing
4. I don’t need outsourcing, my business is running fine
5. I want to outsource but don’t know how
6. My customers won’t like it if I outsource
7. Outsourcing will be risky for my business
8. I am worried about the security of my data
9. I don’t have the IT skills to set it up
10. Where do I start

It is critical that you, the business owner, at the highest level, commits 100% to the process of outsourcing and its clear benefits to your company.

This does involve investment of time, particularly at the initial implementation stage. 

This commitment and push from you ensures that your team buys into the project. 

Once your team sees the benefits of outsourcing, you will find that they will start pushing to outsource more processes.

The following are common problems when you outsource business processes:

1. Learning curve for both sides: After outsourcing some business processes to a vendor, it is important to train your employees and the vendor's employees.
    
2. Cost of human resources and money: You need to spend money and time with your employees on new processes.
    
3. Clients and vendors: If you outsource the business processes of a client to a vendor, the vendor needs to respect the privacy and other rights of the client. Moreover, the vendor cannot share the client information with other clients.
    
4. Understanding the problem: A vendor who is going to provide services for you must understand your problem.
    
5. Quality and customer satisfaction: A vendor will provide services that are as per your requirements.

What are the key processes in outsourcing?

The four key processes in outsourcing include:

1. Financial realization: Do you save money with the process? Can you scale with the process?
2. Information realization: Do you get better, quicker reporting and information when you need/ ask for it?
3. Personnel realization: Are you able to redeploy?
4. Operational realization: Are you getting the results that you pay for?

Outsourcing is the highest level of business process management.

It is often used by small businesses because it allows them to focus on their core businesses, reduce costs, gain a competitive advantage and most importantly, scale the operations on demand.

When you outsource, you need to be sure that you are considering all the important factors:

1. What is the risk to my company if I outsource this process?
   Would I be violating privacy laws or state/ country regulations?
   Can I come clean and declare that I am outsourcing to my customers?
   Would it make a difference if I came clean with my customers?
    
2. How vital is the process that I outsource for my business?
   What would happen if the partner reneges on promises?
   How do I protect my interests from problems?
   What if I want to change my vendor?

Keep the following nine factors in mind while outsourcing: 

1. Long-term cost savings
2. 24x7 flexible staffing
3. Backups in case of staff attrition
4. SOPs for quality delivery and productivity benchmarks
5. Flexibility to scale
6. Fully transparent pricing
7. Shorter contract terms
8. Transparent service level agreements
9. Service delivery in any part of the world

To ensure quality control while outsourcing, you should look for a good management team to handle the business processes you want to outsource. 

You should also monitor and evaluate outsourced business processes on a regular basis.

You can use a number of techniques to ensure productivity.  

1. Use remote work, which lets your employees work from home or other remote locations.  
2. Use the Web, Skype, and other online tools.  
3. Manage expectations. Have them written down and tweaked as you go along
4. Ensure that objectives are stated clearly: To ensure productivity during outsourcing, it is important to make sure that the team's objectives are well-defined. 
5. Setup regular meetings: It is also important to set up regular meetings to keep in touch with team members and to evaluate performance.

Since outsourcing has many benefits, it is a smart decision so that businesses can focus on their core competencies. 

While outsourcing is a cost-effective method of business improvement for small businesses, you must consider both the pros and cons of outsourcing.

1. Businesses that wish to outsource can choose to outsource certain business processes to third parties, with this service, the third party will handle the business process which the business that wishes to outsource to them is lacking in.
2. You need to establish a work hierarchy. Identify the steps in your business process, then in each step decide what to outsource.
3. You should select a partner with the right specialized skill set to get the best results.

There are several options for pricing outsourcing, both fixed and variable, and several for paying. Your partner may have their own pricing policies. The solutions include: 

1. Cost plus
2. Lump-sum
3. Milestone payments
4. Guaranteed savings.

For any contract that could be used by a small business, you should include the following terms:

Who, What, When, Where, How

1. Two legal entities entering the contract, address, business
2. The roles of the two entities as per the contract
3. The scope of work by the partner
4. Timelines for the delivery of the work
5. The deliverables for the work
6. Conditions at which work can be done 
7. Who will train, supervise, monitor, benchmark quality and productivity and how
8. How privacy will be maintained and protected
9. Jurisdiction for legal recourse and arbitration

Termination

1. Reasons for which the contract can be terminated 
2. Notice required for termination
3. Force majeure conditions

Payment & Changes

1. Terms of payment
2. Conditions under which the contract may be changed 
3. Conditions under which the contract may be renegotiated