Outsourcing Company: 15 Factors to Consider Before Choosing

Your business has grown rapidly over the last few months, and suddenly you are faced with a decision. Do you continue to pour resources into non-core functions like human resources, IT, and customer service, or do you find an outsourcing company to take over?

It’s a conundrum that many businesses face as they try to scale. But with the right research, you can find an outsourcing company that is the perfect fit for your business.

Below, we’ll walk you through the 15 factors that you have to consider before selecting one of the thousands of companies that outsource in 2022 but first let’s work through some simple definitions so that everyone is on the same page.

What is outsourcing?

Outsourcing is the process of contracting with a third-party company to provide services or products that your business needs. It’s a popular way to save money, tapping into the economies of scale that business process outsourcing companies have access to.

As they provide the same services or products to multiple clients, they can do so at a lower cost than if you were to produce them in-house.

There are four primary types of outsourcing.

• IT outsourcing: This is when you contract with a company to manage your IT infrastructure or provide specific IT services.
• Manufacturing outsourcing: When you outsource manufacturing, you’re contracting with a company to produce goods for you.
• Business process outsourcing (BPO): This is when you contract with a company to handle non-core business functions like customer service, human resources, or accounting.
• Knowledge process outsourcing (KPO): In this type of outsourcing, you contract with a company to provide knowledge-based services like market research or legal advice.

Now that we’ve got the definitions out of the way, let’s dive into the 15 factors you have to consider before outsourcing any business function.

Finding the right partner

When you outsource, you’re effectively entering into a partnership with another company. And as with any partnership, it’s important to take the time to find a company that is the right fit for your business.

If you can find a good match, your company can expect:

• Improved quality: When you outsource to a company that specializes in a certain area, they will likely have staff with more expertise than you do internally.
• Increased efficiency: An outsourcing company can often do the same work as your internal team but in less time. This is because they have streamlined processes and access to the latest tools and technologies.
• Cost savings: In many cases, it’s cheaper to outsource than to maintain an internal team. This is especially true if you outsource to a country with a lower cost of living.

Here are 15 factors to keep in mind when conducting your search.

1. Location

One of the benefits of outsourcing is that you can tap into the talent and resources of another country. But this can also be a downside if there are cultural differences or language barriers. Consider the location of the company outsourcing and whether or not it makes sense for your business.

2. Cost

This is a key consideration when outsourcing any business function. But be careful to not make cost the sole deciding factor. It’s important to find a company that offers value for money, rather than just the cheapest option.

3. Services offered

Make sure that the company you’re considering can provide the services or products you need. Integration with your current systems is also important. If you’re outsourcing IT, for example, you’ll want to make sure that the company you choose can work with the software and hardware you already have in place.

Ask if they provide training for your staff so that they can use the new system effectively.

4. Reputation

Take the time to read reviews and talk to other businesses that have used the company you’re considering. This will give you a good sense of their reputation and whether or not they’re likely to be a good partner for your business.

Remember to check into their history in your industry too, as this will give you a good sense of whether they understand the specific challenges and opportunities that come with working in your field.

5. Scalability

As your business grows, you’ll need an outsourcing partner that can scale with you. The last thing you want are companies that outsource for solely small clients and have never experienced any growth themselves. This could lead to them being unable to handle your account when you need them the most.

Find out what kind of growth the company you’re considering has experienced in the past and whether or not they have the capacity to handle your future needs.

6. Flexibility

Things change quickly in business, so you need an outsourcing partner that is flexible and can adapt to your changing needs. Find out what kind of contract they require and whether or not they are willing to make changes down the line. More and more, companies are emphasizing business agility, so this is an important factor to consider.

7. Language

While it won’t matter for some business functions that don’t require much interaction, this is particularly important if you’re outsourcing customer service or another function that involves direct communication with your customers.

Make sure that the company you’re considering can communicate effectively in your customers’ language, or risk losing their business.

8. Time zone

Dealing with an outsourcing company that is on the other side of the world presents real challenges because of the time difference. It can make communication difficult and cause delays in getting things done.

This is another important consideration if you’re outsourcing a function that involves customer interactions. You’ll need to make sure that there is minimal disruption to your customers by aligning the time zones of your team and the outsourcing company.

9. Contract terms

Before signing on with an outsourcing company, be sure to carefully review the contract terms. Make sure you understand what is expected of both parties and that there are no hidden fees or clauses that could come back to bite you later. A good contract will protect both parties and set clear expectations from the outset.

Ask the following:

• What is the length of the contract?
• What are the terms of renewal?
• What are the cancellation terms?
• What is included in the price?
• Are there any hidden fees or clauses?

Don’t ever sign something without fully understanding the terms. If you have any questions, be sure to ask them before you put pen to paper.

10. Payment terms

Most outsourcing contracts are based on an hourly rate. But some companies may require a monthly or annual fee. The most effective ones are those that offer sliding scales as your business grows, with cheaper prices for additional services. Be sure to understand the payment terms before agreeing.

11. Termination clause

If things don’t work out with your outsourcing partner, it’s important to have a termination clause in your contract.

It should include:

• A set period of notice
• The conditions under which you can terminate the contract
• What will happen to your data once the contract is terminated

This will protect you from being locked into a long-term agreement with a company that isn’t meeting your needs.

12. Intellectual property

Speaking of data, if you’re outsourcing the development of a product or service, you’ll need to make sure that all intellectual property rights are transferred to your business.

All of your data, including communication between team members, should be stored on your servers and you should have full access to it at all times. Get it in writing as well, to make sure you are protected legally in case of any disputes.

13. Data security

For that matter, data security is of utmost importance when outsourcing. Make sure that your outsourcing company has robust security measures in place to protect your data, both in transit and at rest.

This includes encryption, physical security, access control measures, and backup procedures. It should be protected against theft, cyberattack, and natural disasters.

14. Service-level agreement

A service-level agreement (SLA) is a contract between you and your outsourcing partner that outlines the level of service you can expect. Be sure to include an SLA in your contract so that there are clear expectations from both sides.

Without one, you could find yourself in a situation where your outsourcing company doesn’t meet your expectations, and you’re left without recourse.

15. References

Always ask for references from companies you’re considering outsourcing to. They should be able to provide:

• The name and contact information of a current or recent client
• A description of the project they worked on
• An estimate of the project’s scope
• The client’s satisfaction level

Make sure to reach out to these companies yourself to get a sense of the company’s work and whether they would recommend them. This will give you a good sense of their past performance and whether or not they’re likely to be a good fit for your business.

Outsourcing can be a great way to save money and free up resources so that you can focus on your core business. But it’s important to take the time to find the right partner. Keep the above 15 factors in mind during your search, and you’ll be sure to find a company that is the perfect fit for your business.