Examples Of Outsourcing In Practice

As the gig economy grows, so does the reliance on outsourcing companies.

I’ve seen countless companies shift their focus from building huge internal teams to relying more on a core team that is backed by a wide range of outsourced resources.

Example 1: Outsourced Data Entry

I recently spoke with a friend who was frustrated that his full-time data entry staff were collectively asking for raises every three months or so and then threatening to quit if they weren’t granted their requests.

This was despite the fact that they were earning well above market rates for their position, their productivity was declining month over month, and they were a bit of a pain to work with.

After analyzing the market for this type of work, I suggested that my friend explore the option of outsourcing it to India, one of the best low-cost countries for outsourcing monotonous and repetitive work.

In recent years, aspiring entrepreneurs in India have refined the process of building and scaling huge teams that American companies can outsource repetitive tasks to. The rate for doing so is usually 1/2 – 1/3 of the cost of an American worker doing the same.

After around a week of work, we seamlessly transitioned his data entry tasks from the expensive American workers to the outsourced team. When the problematic workers came to ask for yet another raise, he let them go.

But because he transitioned during this time, his team morale has greatly increased, and the team is more productive than it’s ever been.

And on top of that? He is saving roughly 50% of what he was spending, which allows him to increase his monthly salary and take more from the company that he would have never been able to take before.

Example 2: Virtual Assistant

I run a portfolio of websites, so I am usually in strategy meetings with my team, deep in research mode trying to figure out answers to big problems, or in some other way distracted from monotonous work.

That’s why a few years back, I made the decision to outsource the most repeatable, time-consuming tasks that were greatly hindering my productivity.

I first started looking at hiring a local assistant in the city where I live. However, as I started running the numbers, I realized that I couldn’t afford a local assistant because the prices were outside of my budget.

However, when I started looking at full-time virtual assistants in Kenya, I realized that I could get an experienced assistant for a fraction of the cost of one I could find one locally.

So I made the jump and hired a great virtual assistant. After about a month of hands-on training (and offering small tips as tasks were delivered), my virtual assistant became not only aware of my needs, but practically able to predict them.

Other Examples of Outsourcing in Practice

As you can see from my examples above, outsourcing can greatly reduce the cost and quality of delivered work – especially online tasks.

However, it is not limited to digital marketing alone. Outsourcing can encompass a wide range of services and business functions. Here are some common examples.

1. Information Technology (IT) Outsourcing

Companies often outsource IT functions to access specialized skills, reduce costs, and improve service quality. This includes the outsourcing of development, maintenance, and support of IT systems and infrastructure.

Common IT outsourcing services include software development, website hosting, and data storage. These types of outsourcing services typically rely on scale and specialization to offer low prices to complex services.

• Typical Outsourcing Type: Outsourcing or Cloudsourcing
• Typical Outsourcing Location: India

2. Customer Service and Call Centers

Many businesses outsource their customer service operations to external service providers. This allows them to offer 24/7 support without maintaining a large in-house team.

Services include phone support, email and chat services, and social media management. These types of services are typically very scalable and can meet the demands of organizations seeing even the most aggressive growth.

• Typical Outsourcing Type: Outsourcing
• Typical Outsourcing Location: India or Philippines

3. Content Creation and Marketing

Outsourcing content creation, digital marketing, and social media management allows companies to enhance their online presence and marketing efforts without the overhead of a large creative team.

Because of outsourcing, content is essentially become a commodity. While quality still reigns over speed, the cost of producing high-quality content really comes down to how much a freelancer cares about the task.

• Typical Outsourcing Type: Outsourcing
• Typical Outsourcing Location: Freelancers – Online

4. Manufacturing Outsourcing

Companies in industries such as electronics, automotive, and textiles often outsource part of their manufacturing processes to external factories, sometimes located in countries with lower labor costs. This helps reduce production costs and focus on core competencies like design and R&D.

I once manufactured magnetic baby locks in China. It was roughly 1/5 the cost of doing so domestically, so to me, it was a no-brainer.

• Typical Outsourcing Type: Outsourcing
• Typical Outsourcing Location: China or Mexico

5. Human Resources (HR) Outsourcing

HR is a very complex and complicated business function, so businesses will oftentimes hire somebody to ensure they are compliant. However, this is expensive to do and oftentimes not achievable for small businesses with limited budgets.

Luckily, companies can instead opt for HR outsourcing to reduce costs and access expertise in managing complex HR tasks. These functions can include payroll processing, benefits administration, recruiting, training, and compliance management.

Usually, I recommend outsourcing these to a Professional Employer Organization (PEO). Individual freelancers can handle these types of tasks, but there’s a lot of legal paperwork and compliance that PEO companies do a better job of keeping up with.

I’m in an networking organization specifically for entrepreneurs and the majority of my friends in the organization use PEOs for their HR needs.

• Typical Outsourcing Type: Domestic Outsourcing – Professional Employer Organization (PEO)
• Typical Outsourcing Location: United States

6. Financial Services Outsourcing

Another up-and-coming business function to outsource is financial services, especially among small businesses who have finance needs but aren’t large enough to carry the overhead of an entire finance team.

Financial tasks such as accounting, bookkeeping, tax preparation, and auditing can be outsourced to specialized firms. These are fairly standard services that have been around for a while and are almost commoditized.

Taking that to another level, however, is most complicated financial services like strategy and CFO-type planning. This is what we call the “fractional” model – essentially renting a financial professional for a long-term consulting agreement over an extended period of time.

• Typical Outsourcing Type: Domestic Outsourcing – Fractional Services
• Typical Outsourcing Location: United States, Philippines

7. Legal Services Outsourcing

I will almost always suggest seeking a standard law firm for legal needs. They oftentimes offer hourly or flat-rate billing which makes budgeting fairly simple.

Legal process outsourcing (LPO) provides access to legal support services, including document review, legal research, and drafting of legal documents, without the need for a large in-house legal department.

However, the gig economy has allowed for a hybrid approach, where a legal expert who sells their time on outsourcing platforms like Upwork will take a first look at your issue or document and then you can send it to another higher-priced attorney for final approval.

• Typical Outsourcing Type: Domestic Outsourcing – Fractional Services
• Typical Outsourcing Location: United States, Philippines

8. Research and Development (R&D) Outsourcing

Some companies outsource R&D activities to specialized firms or academic institutions to tap into cutting-edge technologies and expertise, speeding up innovation and reducing time to market for new products.

These examples illustrate the breadth of outsourcing across different industries and functions, showing how businesses leverage external expertise and resources to enhance efficiency, reduce costs, and stay competitive.

• Typical Outsourcing Type: Outsourcing
• Typical Outsourcing Location: Philippines