Outsourcing is a business practice where a company hires another company or an individual to perform tasks, handle operations, or provide services that are either difficult to manage or are outside of the hiring company’s core business processes.
The main reasons for outsourcing include reducing costs, accessing specialized skills, focusing on core business activities, improving service quality, and increasing flexibility.
Personally, I like outsourcing rather than hiring W-2 staff internally because it gives me the flexibility to rapidly scale up and down as needed without having a huge amount of overhead, or a long-term commitment to employees.
The prices are also usually very affordable. I hire from regions with low-cost living, meaning the rates I pay my contractors are typically far lower than those I would pay a full-time employee stateside.
It also gives me access to professionals who are experts in their field.
For example, if I were to hire a freelance link builder for my websites, that’s typically all that person would do. They would be a very good link builder, having worked on tons of different projects, allowing them do draw on that experience.
Different Types of Outsourcing
Outsourcing can take various forms, including:
- Offshoring: Moving business processes to another country, often to take advantage of lower labor costs, different time zones, or specific local expertise.
- Nearshoring: Outsourcing business processes to companies in nearby countries, often to reduce costs while still maintaining a relatively close geographical and cultural connection.
- Onshoring (or Domestic Outsourcing): Outsourcing business processes within the same country, either to save costs or to benefit from specific regional expertise.
- Cloudsourcing: Outsourcing services or IT functions to cloud-based services, leveraging the flexibility, scalability, and efficiency of cloud computing platforms.
While you can outsource nearly everything in the digital marketing industry because most all deliverables for those types of projects can be done online, standard businesses will usually outsource IT services, digital marketing campaigns like SEO and content production, HR functions, customer support, and financial services.
Outsourcing relationships can vary greatly in scope, size, and service level agreements, making it a versatile tool for businesses seeking operational efficiencies and strategic advantages.