Over 50% of all companies worldwide hire third-party teams to connect with customers. It is also expected that the global IT outsourcing market will grow by $98 million from 2020 to 2024. However, outsourced solutions have their own advantages and disadvantages for companies across all industries. Just like the classic, in-house production has its benefits and downsides.
Your choice between the two depends on a wide range of factors. In this article, we decided to unpack the fundamental principles of each method and help you choose the one that fits you best.
Which camp are you in?
Classic production or in-house production is an activity that is conducted within the same business. You are able to perform the task using the time and effort of your own employees and any other assets that the company already has.
In-House Production – Advantages
Basically, the whole team works ‘under one roof’ and it is easier for the members to maintain strong communication, especially when a project involves several stages. For example, if you have a question, you can always ask your colleague and receive an answer straight away.
This makes the whole process of communication not only faster but also more effective. Of course, this point has become less valuable in 2020 and WFH. Still, the in-house team members know each other’s work schedules and are familiar with the project’s fundamentals which saves valuable time for work.
It’s easier to control the quality of the product
With an in-house production team, it is easier to keep an eye on the quality of the product. The tasks conducted by every member of the team can be assessed and calibrated on-spot. Moreover, it is more convenient to ensure that everyone is meeting the deadlines and that the planned workflow is running smoothly.
In-house hires are less of a flight risk
Ideally, a person would like to find a job that he or she enjoys and devote quite a few years (or even decades) to this company. According to the Harvard Business Review, employees like the feeling of stability at work, and the fact that they have health insurance, paid vacation days, and other perks helps as well. Some employees are ready to work towards promotion and more benefits. That’s why the chances of someone suddenly leaving the team are relatively small.
In-House Production – Disadvantages
Finding and training employees is a long process that requires funding
Training is one of the most important elements in the process of onboarding and nurturing the employees. As a result, you will have a strong staff capable of developing more effective and innovative solutions. However, the training process is time-consuming and costly. According to Statista, larger companies in the United States, for example, spent over 100 training hours per employee in 2020.
The cost of training programs would depend on a lot of factors – the cost of training materials, the cost-per-hour of invited experts, and loss of productivity (every hour spent on training is, basically, an hour of income generated by the employee lost). That’s why not every company can afford long-term employee training. Ensure that you set aside the budget for such programs to make them more effective in the long-run.
In-house employees need both financial and non-financial benefits
Sick leave, holiday leave, life insurance, retirement and savings, social security and medicare. When it comes to classic production, the employer has to take care of all these expenses. Office perks (board games, nap rooms, free food, and beverages), wellness programs (weight-loss competitions, smoking cessation), and company parties are also objects of expenditure.
On the bright side, happy employees are much more productive than stressed ones. So make sure to take care of them by providing both financial benefits, promotions, and non-financial perks.
It can be difficult to find the top talents in the labor market
Some of the professionals you might need are already employed. On top of that, if your office is located in a small city, there might simply not exist any professionals in a certain area. “Brain drain” is a widespread phenomenon that describes the inability of small cities to save their own talents or attract outside professionals.
Senators invest thousands of dollars in various programs (like the Remote Worker Grant Program, for example). But the truth is that local companies and businesses cannot afford to make similar proposals. Thanks to the internet, you can hire workers remotely and work from different parts of the world.
But a remote team comes with its downsides (time zones, registration of foreign employees in the staff, etc.). We’ll talk about them in more detail later on.
In a nutshell, outsourcing is a process when a company hires a third-party to cover a set of tasks or operations. It can be a single freelancer or a whole agency. Nowadays, companies are outsourcing a wide range of different tasks and services. Some might outsource entire divisions, like the IT department, for example, to let the internal team focus on other aspects of business development.
Outsourced Solutions – Advantages
You can hire a professional from anywhere in the world
Outsourcing provides you with a unique opportunity to hire a person or an agency from anywhere in the world. Your region doesn’t have enough specialists in a certain niche? With outsourcing, that’s no longer a problem. As they will work more independently, you won’t have to check on them daily and just receive the preliminary and final results. The world is your oyster 😉
Outsourcing is great for short-term projects and targeted disciplines
If you need to finish a small task but your whole team is busy with another assignment at the moment, you can outsource this short-term project and get it completed as quickly as possible. Moreover, outsourcing allows you to avoid bringing a new employee into the company, in case you need to take care of a task unique for your company that requires a particular specialist.
There are plenty of resources that will help you find the right person in the shortest terms
Thankfully, nowadays there are a lot of websites that will help you find the right freelancer or agency for your specific task. For example, Upwork.com is one of the largest freelancing marketplaces. Choose the area of expertise, the expected length of the project, whether you need an entry-level or an expert-level freelancer. You can post a job offer or propose a contract directly to someone with whom you would like to work. PeoplePerHour has a wide range of categories (practically anything you can think of, from web design to sales & marketing).
You might be looking for an agency that will take care of your project instead of a single freelancer (agencies can usually afford the latest equipment and have better quality control). The great news is that there are plenty of highly professional agencies at the tips of your fingers. Anything from construction planning and 3D visualization to handcrafted video ads that will be done in less than a day.
Perfomante, for example, specializes in handcrafted video ads that are delivered in only 24 hours. You wouldn't need to take care of the production on your own or create a new department for that. The team will handle the whole process and tackle the existing tasks on a larger scale. By the way, the professionals can even generate some cool video ad ideas for you! Perfomante also offers fixed prices on their services and that's a huge plus, right? Check it out for yourself and don't forget to flick through the details of some cases for inspiration ;)
Outsourced Solutions – Disadvantages
Some freelancers and agencies create profiles (websites) that exaggerate their talents
With outsourcing, the chances are high that you won’t have a face-to-face meeting to get to know a person close enough. You would have to spend some time reading the reviews and doing your own research. Unfortunately, even ratings can be forged. So you have to do in-depth research of candidates before hiring outsourced professionals which takes extra time.
The highest-rated freelancers and agencies are expensive
In case you decide to hire a top-rated freelancer or agency, you might have to splurge on their services. And even if you can afford to spend a little more on professionals, that does not always guarantee a perfect final result (see the arguments).
You might have to provide confidential data to an external organization
Trust is a huge issue when it comes to outsourcing. Sometimes, in order to get the best possible result, a company has to provide organizational data to the freelancer or agency.
Disclosure of sensitive employee and management information can lead to the loss of employee trust, clients, and profit. The safety of your unique developments might also be at risk. Don’t forget to send an NDA to each freelancer you work with if the nature of their work lies in the area of confidential data.
Cultural differences may be an issue
People’s perception of our world and their values might differ from one country to the other. This, lingual and other barriers can become an issue when hiring an agency or a freelancer from a different part of the world.
You might be working in different time zones
You are just starting your day, while your outsourced employer is preparing to go to sleep. Of course, it’s not a tragedy, but such situations would require you to spend more time organizing the whole process which also reflects on the overall project’s timelines.
So, what do you prefer: classic production or outsourced solutions?
There’s no need to choose only one. Both options have their upsides and downsides, and both of them are perfect for some projects. Classic production is more ‘trustworthy’, and, at the same time, more resource-intensive. Hires are less of a flight risk, but the employees expect certain benefits, and to strengthen the team you have to put the effort into their training.
Outsourced solutions are a great way to save time – marketplaces are full of professionals that are ready to finish the task in the shortest time frame. But the access to talent from anywhere on our planet leads to several difficulties – the time difference and international law nuances, for example.
If you manage to create the perfect ‘mix’ of in-house production and outsourced solutions, you will be getting the best of both worlds.