Founders Revealed Why Do Companies Choose to Outsource Work?
Discover why companies around the world are embracing outsourcing as a strategic imperative with the help of Insights from 9 real founders.
Did you know that Google spends several hundred million dollars on outsourcing? Not just Google; in fact, almost every big company outsources some form of work and thus creates an industry that could spend $730 billion dollars in 2023.
Have you ever wondered why companies choose to outsource work even when they already have a lot of employees? If you search about this topic, you’ll find many statistics explaining why.
But the truth is, each business has its own unique reasons for outsourcing. So, we reached out to different companies and asked the founders and leaders why they did it. Here’s what they shared with us:
Insights from 9 Business Leaders Sharing Their Outsourcing Experiences
We received responses from business leaders around the world. To increase diversity, we choose companies from various industries, such as health and wellness, manufacturing and retail, legal services, and, of course, technology.
We also identified their pain points and accessed how outsourcing helped them overcome those pain points.
1. Lisa Richards, CEO and Creator of the “Candida Diet”
I choose to outsource because I don’t have the bandwidth, and sometimes even the expertise, to supervise certain work tasks. By outsourcing to individuals who’ve specialized in these tasks, I’m handing the work over to capable talent that requires minimal supervision.
As a result, I’m able to focus on more pressing core objectives that require my full attention as a business owner. Also, I avoid the risk of micromanaging the people working for me, which in my experience, leads to faster task completion and higher quality work.
Pain Points
- Lack of Bandwidth and Expertise
How Outsourcing Healped
- Outsourcing specialized tasks to capable talent with minimal supervision
- Allowed focus on pressing core objectives as a business owner
2. Kevin Wang, Co-owner of Inyouths LED Mirrors
The burden of managing every single aspect of the business was proving to be non-productive. It neither allowed me to focus on my core competencies nor to guide my core team effectively.
This, in turn, was negatively affecting our growth rate as well as the quality of our output. It was then that I decided to outsource the mentioned functions to experts outside the team who could handle these tasks more effectively.
Outsourcing provided us with the advantage of accessing a vast pool of talent with specialized skills that were lacking within our organization. It not only proved cost-effective but also allowed us to focus more on enhancing our strong suites – designing and building LED mirrors.
Perhaps uniquely in our case, we were also looking for ways to manage our online returns and complaints better. Outsourcing presented an opportunity to solve this issue as we could partner with a provider that has both the knowledge and resources necessary to streamline our after-sales process.
Pain Points
- Burden of Managing Every Aspect of Business.
- Lack of Specialized Skills in Organization.
How Outsourcing Healped
- Outsourcing to experts allowed focus on core competencies.
- Improved growth rate and quality of output.
- Access to a vast pool of specialized talent through outsourcing.
- Proved to be cost-effective.
3. Riva Jeane May Caburog, PR/Media Coordinator at Nadrich & Cohen
Sometimes, we would experience a sudden surge in caseloads due to high-profile cases and significant legal developments. Our existing capacity couldn’t keep up with the increased demand, leading to overwhelmed resources and potential delays. That’s why we decided to outsource certain tasks.
Partnering with trusted legal support service providers has allowed us to scale up quickly during busy periods. These providers specialize in document review, legal research, and administrative support. They have helped us handle the unpredictable demands without sacrificing the overall quality of our legal services.
Pain Points
- Overwhelmed with demands.
How Outsourcing Healped
- Enabled quick scaling during high-demand periods.
- Maintained overall quality of legal services despite increased demand.
4. Young Pham, Project Manager, Bizreport
Limited Budget
As a start-up that was just getting on its feet, we did not have deep pockets to finance our growth as other big-money companies. We had to find a way to make the small amount of money we had work for us. We tried to find some employees in the US to help us build the foundations of BizReport, but sadly, we couldn’t afford to pay for that kind of talent.
So, we decided to look for talent elsewhere, and the good thing is that we managed to find reliable folks overseas who helped us with the tasks we wanted done within our budget. In fact, the reason why we have maintained a strong culture of outsourcing work is based on the need to keep our operational spending as low as possible so that we can use that surplus capital to improve our processes and expand the business further.
Need for Diversity
Our company has also committed to creating the most diverse team we can. We believe that cultural diversity brings a lot of value to any organization, and as such, we felt that by outsourcing work, we would be able to access a global pool of diverse talents drawn from a wide range of cultural backgrounds around the planet.
In fact, our team is built of professionals who are culturally diverse in every way possible. This has helped promote team cohesion, a culture of sharing and accommodation, and great morale.
Pain Points
- Limited budget.
- A less diverse team.
How Outsourcing Healped
- Found affordable talent overseas within budget constraints.
- Accessed a global pool of diverse talents from various cultural backgrounds through outsourcing.
- Promoted team cohesion, sharing, accommodation, and improved morale.
5. James Wilkinson, the CEO and co-founder of Balance One Supplements
Being able to tap into diverse talent pools has been the main pain point that continues to lead us to outsource work. We are a small business with few resources, which makes attracting and retaining qualified talent harder and cost-intensive.
By outsourcing, we are able to reach this talent when we need to at a lower cost, which is more sustainable for us than if we were to hire employees to do the work in-house.
Also, outsourcing allows us to remain flexible with our labor costs as we only pay for talent when we need to. As a result, we are able to compete effectively while also optimizing our labor costs, which continues to help boost our profitability.
Pain Points
- Difficulty Attracting and Retaining Qualified Talent.
How Outsourcing Healped
- Outsourcing provides access to diverse talent pools at a lower cost.
- Proved to be a sustainable solution for a small business with limited resources.
6. Amy Bos, Co-Founder & COO, Mediumchat Group
Too many hats!
As an SMB, each team member needs to wear many hats. I found some positions required such a broad set of skills we’d need to sacrifice quality.
Multiple hires were outside our budget, so outsourcing was a straightforward decision. Where an entry-level position included maintaining our socials and team admin duties, we opted to outsource the social aspect.
Benefit From Most Current Knowledge
Although my team and I work hard to stay current, we missed out on cutting-edge ideas that only consultants can offer. For us, working with an SEO consultant significantly improved our performance and made us rethink our overall strategy.
We kept our full marketing team, but outsourcing the SEO aspect freed them up to focus on what they do best. Everyone plays to their own skills.
Pain Points
- Too much to maintain.
- Need for Broad Skill Sets.
- Missed Out on Cutting-Edge ideas.
How Outsourcing Healped
- Outsourcing allowed for specialized skills without hiring multiple team members.
- Maintained quality of work within budget constraints.
7. Jake Kozloski, CEO of Keeper
We outsource a number of roles within the company, including engineering and operations work (virtual assistants in the Philippines). The main reason is simple – we get a level of talent for a cost that we could not in the US.
Our tech lead is based in Serbia, and he’s at a level that’s hard to find for a reasonable price in America. Our virtual assistants in the Philippines work incredibly hard and are able to afford a decent quality of life in their country for what they’re paid, which would be infeasible in America.
Pain Points
- Higher cost of in-house hiring.
How Outsourcing Healped
- Outsourcing provided access to highly skilled talent at a more affordable price.
Top 5 Reasons Why Do Companies Choose to Outsource Work?
Although we published only seven responses from business leaders, we had collected quite a few more. I guess, after reading the answers, you’ve got an idea of why companies actually outsource. However, we are summarizing the top five reasons we found in our survey and literature review.
1. Cost saving
Saving costs is the primary reason for outsourcing. A significant portion of the companies we talked to outsource for the financial benefit it provides. A 2023 study also mentioned that 59% of companies outsource to cut costs.
2. To focus on core business
Just like Lisa and Cavin, a wapping 57% of companies outsource because they want to focus on the core business. Outsourcing allows them to offload some of the non-core parts of the business like “IT management” to experts. This helps in optimizing time and attention.
3. Lack of expertise and capacity
We all know that it is impossible to be a master of all trades. That’s why smart business leaders outsource the part they’re not experts on.
4. To improve service quality
As Riva said, companies often see a surge in demand. In most cases, the increase in demand is temporary, so they can’t hire permanent employees. To keep their increased customers satisfied and loyal, they outsource to another expert.
5. To address specific business needs
Businesses often require specific problems they are not familiar with. Also, running a business requires thousands of external things. To fulfill these specific business needs, companies choose to outsource.
Footnote
Outsourcing is a great way to solve problems that a company faces. Business leaders now recognize the solution, and a significant number of them use it as a remedy.
Is outsourcing risk-free? Of course not. But if you prepare well and follow the ideal guidelines, it can be a great solution to many of your business problems.
