Starting a business from scratch, and especially with the high component of innovation that startups imply, isn’t an easy task. And we aren’t superhumans, so we’ll surely need support at some point. And one of the decisions we’ll face will be whether to outsource the work or hire someone in-house.
Throughout this post I’ll share with you the experiences, doubts and reflections of some entrepreneurs and agencies regarding the outsourcing of services. The goal isn’t to give a concrete answer to the question, since each project is a world, but rather to put on the table some aspects to consider when outsourcing.
Protect the core of the business
Any task can be outsourced, but we must pay special attention to the core of our business. I mean, those things which, in case of suffering a problem, could have a critical impact on the business. Even if we decide to outsource some core part, it’s best to invest in someone internal who has the knowledge and control over the core.
It is important to mention, of course, that sometimes we consider aspects that aren’t really core. We must do a reflection exercise to assess the risk of each part of the business to detect what is really core. For example: one of the cases that came up during the conversations was that of a bank. At first glance, we might think that security is a key part of the core of the business. But curiously, we talked about an organization in which the core was that money came out of the ATMs (due to the impact that this would have) while the security was outsourced.
Be clear about expectations
When it comes to outsourcing we can do it in many ways. Am I more interested in a long-term relationship and the provider joining my company or hiring a one-off job? Am I looking for people to just do the job or actively participate and make decisions?
Before starting to look for a provider, it would be interesting to spend some time to clarify what we really need. We’ll thus avoid unexpected situations and problems in the future for both parties.
Maintain knowledge internally
Even if we decide to outsource, it’s important that we find the best way for the knowledge to stay within the startup. Here we are presented with different alternatives that range from making a correct transfer of knowledge at the end of the work to requesting documentation of the most important. It would be great to discuss this with the provider beforehand to avoid surprises at the end of the job.
Manage rotation correctly
Another frequent concern, especially when working with agencies, is what happens if the people who were working with my team are suddenly replaced. Do I have to start over with someone new? Similarly, what happens if one of the parties does not feel comfortable?
Again, the ideal in this case is to discuss this in advance with the provider. Let’s minimize the risk by looking for people who are really motivated by the work they are going to do. Let’s talk about the possibility of changing the assigned person in case either party isn’t satisfied. Any of these changes will be an advantage both for the startup (better environment, better quality of work) and for the provider (higher employee satisfaction and lower turnover).
Time-and-material versus hiring contracts
While it’s true that outsourcing prices may seem higher at first glance, there are certain aspects of time-and-material contracts that we can take advantage of.
In the first place, the peace of mind that a defined scope is set in a time-and-material contract (not so in a hiring contract). In addition, the flexibility to switch between different peaks or workloads, especially if we outsource to an agency. Even at the cost level, we must take into account that a worker is more than his gross salary: social insurance, future compensation, occupational risks, etc.
As a note on this last point, I want to comment that social security, compensation, etc. are very necessary. The reflection focuses more on that, in certain situations, it may be better not to deal with these issues ourselves and delegate them to a third party (hence their apparent rate to be higher).
Adaptation to the startup’s day-to-day
Another concern when incorporating external profiles is how to incorporate them efficiently into our workflow. First of all, as obvious as it sounds, we need to make sure the provider is willing to do this. On the other hand, a good investment would be to prepare a small onboarding adapted to the provider and type of work that ensures a smooth integration. We can also focus on recurring providers who are more open to working with us again, thus avoiding continuous onboarding to different people.
Different time zones and language
Working with providers in other time zones can have advantages, such as price, but also disadvantages, such as the need to have an optimized work process for remote teams. We can also take advantage of these differences. For example: even if my company is in Europe, if one of my target markets is Japan, I could look for profiles there to help me achieve better integration in that country.
It is important to analyze the pros and cons of the different alternatives before you start looking for a provider.
The needs of a startup
A startup is a living entity that is constantly changing. It starts an idea, validates it, remodels it, and raises new cases. They are in a constant cycle of learning, change, and uncertainty.
That is why it’s important to have a provider who truly understands and shares this need for flexibility and adaptation. That is familiar with the concept of MVPs and iterations. That focuses on finding the best way to validate ideas at the lowest possible cost.
New ways of learning
One of the strategic advantages that we could take advantage of outsourcing is training. I mean: hiring an external specialist to support us while helping our internal team to improve and move to the next level.
One of the classic examples in technology-based startups is finding senior IT profiles. If that’s our situation, and in order to move forward, we could consider working with more junior profiles and seek support from more senior profiles in a more timely manner, even if they aren’t internal to the team.
To be able to count on the provider in the future
The entrepreneurship’s environment is marked by uncertainty. We never know what will happen in the future. It is possible that we have unexpected load peaks or even that a member of the team decides to abandon the project.
Being able to build a trusting long-term relationship with a provider can help us reduce these risks. And it’s a two-way job. From the provider, so that we are really satisfied with the work done; and from the startup, to ensure that the provider is comfortable and wants to continue working with us.
Ensure cultural fit
Getting a supplier that fits our values is really important. How we are and how we act is materialized in the service provided and the product created, which directly impacts our customers. If we are a startup with a strong component of social impact and the main focus of our provider is to earn money, surely that mentality is transferred to our service and does not fit with the image we want to convey.
And the first step to ensure that we fit in is, of course, to be clear about our vision and values. That is to say: what do we want to become and how are we going to do it. What behaviors we want and which ones we don’t want in our startup.
Doubts about the work to be done
It is common for us to find doubts when outsourcing a job whose domain is beyond our knowledge. What is the cost of such a project? How much does it usually take?
As a startup we have to continually learn. Luckily today the information is very accessible and we can always train a little before taking the plunge. Or, even better, take advantage of the collaborative ecosystem of entrepreneurship and rely on other people who shed a little more light on us. Even discuss this issue openly with our provider and ask them to explain their details about their proposal, considerations and decisions taken.
Ideally, we look for providers that make the effort to understand our needs and adapt to them. Let’s avoid the “the best thing is to do it again from scratch” without further ado. That they do not look for what is most comfortable for them but what makes the most sense for our startup. That they put themselves in our perspective when making decisions.
Find a trusted provider
As entrepreneurs we’ll go through an emotional path marked by ups and downs, frustration, worry, etc. We’ll face new challenges every day that will require our full attention.
And that is why it’s important to have a trusted provider. With someone who makes us feel confident. That we do not have to be pending for things to go ahead. That allows us to focus all our efforts on launching other aspects of the business.
And a good way to see what the relationship with a supplier could be like could be to have a coffee together. Having a relaxed conversation, as we do with a person we just met, can help us see details about whether or not we hit it off.
Some final words
I hope the information in this post can be helpful when considering certain aspects when outsourcing services. As you can see, as it happens when hiring a person for our team, we must do an initial work to clearly define what to outsource and under what conditions. And this small investment will help us get the most out of the collaboration.Finally, I would also like to thank Startup Galicia for their support in organizing the event as well as all the attendees for their participation, for sharing their experiences and for having contributed to such enjoyable sessions.