Outsource vs In-house: Which is best for Small Businesses?
Many small businesses have wondered about these two choices: outsource or in-house. And who could blame them? Each has its pros and cons, and it can be challenging to test both if you have limited resources.
Remember that in the end, you have to pick the one that can work for your requirements, whether you decide to outsource to the Philippines or hire local staff in-house.
In this blog, we’ll take you one step closer to the best option for your small business. We’ll cover the difference between outsource and in-house hiring, the pros and cons, and when to consider them.
Overview of Outsource and In-House
When you outsource, you hire a contractor outside your business to perform a task or project for various reasons. Outsourcing involves hiring a Virtual Assistant (VA) or an agency like Outsource My Business that suits the skills and requirements you need to support your business. These outsourced Virtual Assistant services can range from general admin work and digital marketing to financial and web design.
As for in-house, instead of acquiring extra hands externally, you hire local talent(s) who will take over internal responsibilities and projects. These in-house team members can become indispensable assets that embrace company culture and grow with your business.
Outsourcing Pros & Cons
Let’s look over the advantages and disadvantages you can expect once you decide to outsource business responsibilities to a contractor:
Pros
1. Cost Efficient
When you hire a contractor, especially if you outsource to the Philippines, expect the cost to be lower than maintaining in-house teams. How so? Well, you no longer have to shell out resources for overhead costs on recruitment, salary, benefits, office space, and equipment,
With outsourcing, you only have to pay for the services you need – whether for long-term positions or short-term projects. You can get reasonable rates (significantly lower rates than your in-house staff) if you hire Virtual Assistants from the Philippines without sacrificing service quality and output.
2. Business Focus
Are you and your team juggling so many tasks that it’s preventing you from focusing on the important stuff? Outsourcing is a great option to lay off your redundant (yet essential) jobs to offshore staff so you can shift your focus to business initiatives instead.
Outsourcing allows small businesses to channel their resources to more strategic endeavours instead of wasting time on non-core tasks. VAs will take over those tasks while you do your magic in growing your business.
3. Scalable
Need a quick and effortless way to scale your operations? Outsourcing can easily make that a reality. Whether you decide to expand or downsize your outsourced staff, you can do so with no repercussions financially or business-wise.
Scaling at will gives you the flexibility to adapt to your ever-changing business needs without the headaches of managing it in-house.
4. Access Expert Talent
When you outsource, you can expect to meet professionals from all over the world and access a large talent pool of experts with skills (that may not be available in your local area) that you are looking for.
For OMB, we outsource to the Philippines. This way, you can work with a group of friendly and insightful remote experts who are ready to help your business grow.
5. Fewer Responsibilities
Outsourcing is helpful for small business owners who:
- don’t have the capacity for time-consuming (yet essential) responsibilities,
- don’t have the resources to hire full-time staff, or
- don’t have enough in-house staff to take on the extra work.
When you outsource responsibilities, you can start to focus on more pressing tasks. You no longer have to worry about responsibilities getting done on time. Think of it as an autonomous support system where you can focus on your growth initiatives without stressing about the little tasks that tie everything together.
Cons
1. Higher Security Risks
A critical risk for businesses that outsource is the possibility of a data leak. When you allow contractors access to your internal systems, they can be privy to your sensitive data and put your data at risk.
If you’re outsourcing, be careful who you work with. Go to a trusted VA outsourcing partner, like Outsource My Business that implements strict security policies to protect you and your customers.
You’ll need to set up internal security measures and policies if you’re managing financial and government information data. It’s also best to create additional security measures with your outsourcing provider to mutually establish well-built defences against cyber threats.
2. Less Control
When you get offshore help for a job or project, you tend to lose control over it compared to doing it in-house. Of course, you can impose your standards and expectations on your outsourcing provider, but it’s challenging to monitor them until you see the results or finished product.
Find a provider that shares the same values and service standards as you.
The more internal guidelines they have for their VAs working on client projects, the better. Understandably, you want to make the most of your limited resources and ensure you’re getting the best quality service that will become a stepping stone to your success.
3. Communication
Compared to managing your tasks and projects in-house, communication between progress can differ from what you’re used to.
Because you’ve offshored your responsibilities to a third-party outsourcing provider, you have less control over the production process, and communication would also be less. Depending on the responsibility, updates can be weekly, fortnightly, and monthly instead of just poking your team member on the table over.
Less communication can cause delays in development and efficiency. Establish a communication guideline with your outsourcing provider before signing any contract.
In-house Pros & Cons
Like outsourcing, in-house has its pros and cons that you can expect to face if you ever decide to take this route:
Pros
1. Better Security
Data security is always better if in-house teams manage projects. Suppose you’re handling ultra-sensitive customer data, like their financials or government information. In that case, it’s better to manage that in-house rather than put them at additional risk because the fewer people with access to it, the lesser its data risk.
2. Better Quality Control
When you manage projects and responsibilities in-house, you can expect better quality control. You can monitor your progress in real time and correct any errors/inefficiencies while still in production.
One downside of outsourcing is projects and outputs are challenging to monitor in real-time. This approach can be costly if you include additional hours or manpower just to meet business standards.
3. Better Communication
With in-house projects, communication thrives and influences better progress. When everyone has a unified understanding of their respective responsibilities and scopes, the project gets done with little to no delays. And with extra time on your hands, you have additional time to improve the project and add more features that will bring it to new heights.
4. Nurture Company Culture
In-house teams can easily live and thrive on the company culture, whereas outsourced staff might have difficulties embodying because of their remote situation. There are instances where projects came out better because team members practised the company’s mission and vision, creating a good-natured professional environment.
Cons
1. Higher Costs
Maintaining in-house teams can be costly. It is an investment that requires long-term resources. You’d have to take care of salaries, training, employee benefits, recruitment, office space, equipment, and other office perks. Hiring one or two in-house employees is manageable. But expenses can mount up quickly if you’re growing exponentially or require highly specialised roles – and this cost can be unattainable for small businesses.
Outsourcing relieves small business owners of this pressure. You will be able to access expert talent without draining your budget. This way, you can scale your operations without draining your resources on local hiring.
When you outsource, you can expect to only pay for the job you need at a fixed monthly or hourly rate. You will no longer have to train anyone as they’re already well-versed in your industry. Just provide them with your standard operating procedures and expected key performance indicators, and grow from there.
2. High Exit Rate
Exit rates have consistently been higher in in-house teams compared to offshore ones. This unfortunate circumstance could be a problem, especially if you’re in the middle of a crucial project and are already short-staffed. If that happens, you may need to extend the project and hire the necessary internal staff to finish it, which can put you out of budget. You’ll also have to consider the incurred employee training and benefits costs.
If you’re experiencing the situation above, it’s best to outsource now to get your projects back on track without the considerable inconvenience of a quitting team member and recruiting (and training) a new replacement.
3. Possible Delays
When you manage your projects in-house, you can expect possible procedure delays. In an in-house team, time is limited and the responsibilities seem endless. This problem can result in team members taking overtime work and getting burnt out, which will add more delays as they must recuperate and decompress.
When your team focuses on too many things and gets held back from their actual responsibilities, outsourcing can help alleviate those pressures.
This way, your team can focus on their tasks while getting other essential (and time-consuming) tasks done by a reliable offshore staff. Talk about hitting two birds with one stone.
When to Outsource Projects?
So you’ve decided to outsource over in-house hiring.
When outsourcing to the Philippines, you want to ensure it’s at the right time for the right reasons. We have a couple of scenario-based reasons that would make it a perfect time to outsource.
If you’re a start-up juggling clients and need extra help but can’t afford an in-house team, maybe it’s time to outsource some of your responsibilities – like administrative tasks – to an offshore team.
Another is if your team are struggling to accomplish a project on their own, it’s time to outsource to experts in the field you’re working on. Outsourcing is ideal for contract-based projects because it can help you with whatever task/responsibility is needed during a certain period. You can also retain them until the project gets finished or you no longer need further help.
So, if you need help for a short period and don’t want to spend that much on a local contractor, it may be the best time to outsource to a virtual assistant. These professionals get the job done without the costly rates of local hires.
When to Do Projects In-House?
When you outsource to a Virtual Assistant, there will be times when you should solely consider handling responsibilities in-house.
If your business has grown enough to require resource availability 24/7, hiring an in-house team might be the best option. Although in-house teams require considerable investments to maintain, they pay for their own in the long run – especially if you hire the right people to handle your projects.
Another reason to hire in-house rather than outsource is to maintain data security and confidentiality as much as possible. If you’re handling confidential information that only certain people in the business should have access to, keep those kinds of projects in-house to maintain data integrity as outsourcing can sometimes lead to leaks and cause quite some damage to your reputation and customers’ data privacy.
So, which is Best for Small Businesses? Outsource or In-house?
Whether you choose to outsource vs in-house, always note that both options have pros and cons. It’s best not to choose one exclusively but to keep an open mind to all options available and maybe test it out periodically with different responsibilities to see which option is better. The key is to evaluate which responsibilities to outsource and which requirements to keep in-house so you can scale up (or down) effectively according to your goals.
Balance both your outsource and in-house capabilities so you can enjoy both sides of the coin simultaneously while reaching for business objectives and optimising resource use. Although it would take a while to find that balance, it will be worthwhile once you do.
If you have some in-house responsibilities to get off your back, Outsource My Business can be your partner in scaling up your business. We work specifically with small and growing businesses and provide them with innovative outsourcing solutions tailored to their requirement – no more, no less. Supercharge your business capabilities with OMB today.
