Outsourcing — what is it and how can a business work with it

«How to stop wasting time and resources on secondary tasks?» business owners might ask. Outsourcing is the key to effective business management in the modern world, where time is the most valuable resource. Let’s break down what outsourcing is, how to work with it, and what you need to consider.

The Strange Beast Called Outsourcing

Outsourcing is the transfer of certain responsibilities or work processes to external contractors. Essentially, it involves hiring workers who can fulfill certain obligations without being part of the core staff. Typically, non-core tasks are outsourced: recruitment, product cover design, creation of advertising catalogs, legal issues.

Outsourcing can solve three business problems at once:

1. Reduce employee costs – specific project tasks can be given to external specialists who are not needed on a permanent basis.
2. Improve work quality without increasing costs – hiring external professionals can help improve the product.
3. Avoid hiring issues – outsourcing saves you from paperwork and the costs of specialists without whom the company can function.

According to a report by B1, as cited by «Kommersant,» outsourcing is in demand: business owners outsource HR functions (67%), administrative payroll duties (63%), and legal support (52%) to external specialists.

Pros of Outsourcing

Outsourcing has the following advantages:

• Cost savings – no need to pay taxes, contributions, vacation pay, sick leave, or for workspaces and equipment.
• Less time spent on supervision – outsourced workers have their own manager who oversees all processes.
• Uninterrupted work – during the search for a permanent employee, the company can rely on external professionals to keep business processes running.
• Business optimization – some employees are only needed for major projects, not on a regular basis. Temporary cooperation can help with this.

Cons of Outsourcing

• Poor work quality – missed deadlines, irresponsible attitudes toward tasks can harm the company’s reputation.
• Communication difficulties – it can sometimes be challenging to align in-house and outsourced processes.
• Confidential information sharing – for certain tasks, like accounting, you may need to share important company information with the outsourcer. There is a risk of data leakage or sharing with third parties.

However, you can avoid these downsides by carefully choosing the right provider for your business tasks. Approach this process as responsibly as you would when hiring in-house employees.

Delegating Tasks Properly

Tasks that are not key to the company are most often outsourced. They support the work but are not central to it.

Tasks that can be outsourced include:

• Administrative tasks;
• Managing advertising campaigns;
• Delivery and shipping of goods;
• Other non-core business tasks.

For instance, the technologists at «Bohinya» created a formula for lightweight fabrics for dresses. Marketers predict high demand for such a product. The company assigns production to in-house employees to keep trade secrets safe, while outsourcing the client base development. All business processes are launched, the company won’t lose money, and it preserves its commercial secrecy.

There are groups of tasks that should not be outsourced, particularly if they are key, involve confidential information, or directly impact the company’s reputation.

For example, large companies may find it unprofitable to be distracted by administrative tasks—secretarial work, reception services, technical support. These processes can be handled by an outsourcing team. In small and medium-sized businesses, non-scalable business processes, like recruitment, consume a lot of resources, so external HR is hired.

To make it easier for you to understand what can be outsourced and what should stay «in-house,» we’ve created a scheme—use it!

Outstaffing, Freelancing, and Consulting

• Freelancing – hiring a private contractor. This could be an individual entrepreneur, a private person under a civil contract, or a team of people.

For example, a company hires an SMM specialist to promote a product, who might already have a team of Reels and Stories creators.

• Outstaffing – attracting an employee from another company. This situation usually arises when working with employment agencies. The company can invite an accountant, marketer, or other specialist for project work.

In this case, the performer receives a salary, sick leave, and vacation pay from the agency/company, not from the client.

• Consulting – hiring a specialist for consultation. The performer could be an individual or a legal entity. Consulting services are sought by companies looking to expand their business or change their development direction.

For example, a business sells shoes and wants to enter the accessories market. They then invite an expert to help restructure business processes and create a development strategy.

Outsourcing, unlike freelancing, outstaffing, and consulting, involves not only any specialist but also a company as a whole. Moreover, the work process with outsourcers differs.

Working with an Outsourcer

The process involves several stages:

1. Preparation for task transfer to the outsourcer. The client sets deadlines and provides a detailed specification outlining the business process, quality criteria, and acceptable deviations.
2. Selecting an outsourcer. Pay attention to expertise and experience: the former will give you confidence that the work will be done correctly, while the latter reassures you that even in an emergency, the task will be completed.
3. Contacting the outsourcing company. The organization will assign a manager who will communicate with the client and control the work process.The manager is also responsible for:
   • Personnel management – forming the team, training them, organizing work without delays, and forming a replacement algorithm;
   • Quality control – monitoring KPIs, addressing problems, and resolving them immediately;
   • Business process efficiency – ensuring tasks are completed correctly and according to the specification;
   • Preparing reports for the client – reflecting the work process and results.

The outsourcing company is also required to:

• Provide workers with the necessary resources to complete the work;
• Ensure safety and labor protection;
• Set tasks and supervise workers;
• Dismiss workers who violate labor laws;
• Investigate accidents.

All these details are documented to formalize agreements and protect both parties.

Signing the Contract

The outsourcing contract is a standard work or service agreement. You can also consider signing a contract for specific tasks with tangible outcomes (e.g., room repairs, clothing production, battery manufacturing).

The contract usually includes:

• Subject matter – the essence of the agreement;
• Obligations – specific tasks;
• Deadlines – the time frame for completing the work;
• Cost – either the total amount for all services or the monthly payment amount;
• Execution procedure – who does what, when, and how;
• Liability of the parties – what will happen if one party fails to fulfill or violates its obligations.

The contract is drawn up in two copies: one for the client and one for the contractor.