What entrepreneurs need to consider before outsourcing overseas
One of the big challenges for small businesses is that they are small — they don't always have the resources and skills to meet their customers' demands.
January 19, 2016 at 5:33AM
The freelance economy is giving small business owners access to talent from across the world. What are your thoughts on entrepreneurs outsourcing business processes overseas, and what advice would you give to an international agency to help establish trust and compete with similar companies the world over?
Travis Bennett
Managing director, Studio Digita
Answer
One of the big challenges for small businesses is that they are small — they don't always have the resources and skills to meet their customers' demands. The business may offer a great product or service, but running a business also requires knowing logistics, accounting, legal issues, website development, human resources and other activities to serve their customers.
Outsourcing some of those activities can be an effective strategy because the entrepreneur cannot justify having an expert in each activity on staff. The key to the outsourcing question is to identify the business functions that can be outsourced.
The guiding principle is if it can be done more efficiently by someone else, outsource it, unless the function or activity is mission-critical for the business. If it is, keep it in-house, because you can't rely on someone else to provide this critical function. For example, if you are running a fully online business, outsourcing all your Web development is a risky strategy. If you can't write code or understand webpage functionality, hire an employee or find a business partner who can. It's too critical to your success to leave it to an outsider.
As to the last part of your question — how you build trust with outsourcing partners — the essential issue is whether your partner believes you will deliver on your promise. There is risk in letting go of an activity that is part of the promise you make to your customers. Anything you can do to give your outsourcing partner confidence in your commitment to perform will help. Testimonials, guarantees, sharing valuable information with them and establishing personal relationships beyond e-mails and legal contracts are some of the ways companies start and maintain these types of partnerships.
About the author
Mark Spriggs is a professor of entrepreneurship at the University of St. Thomas Opus College of Business.
about the writer
The two companies announced the agreement Friday evening. The terms are effective immediately.
