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Afira Waheed
April 11 2023
If you have been running a business since a decade, maybe outsourcing would be a new word for you. However, in today’s changed business landscape, businesses spend around $731 billion on outsourcing.
We all know that running a business is hard. But it is much harder for startups in their early five years. Like most people, if you think every startup opened in Silicon Valley turns into Microsoft, Uber, and Facebook, you need a reality check.
10% of startups fail in their first year, and the remaining 70% do during years two to five.
So, what can you do to maintain sustained growth and make your startup successful?
The number one reason for startup failure, around 42%, is negligence in understanding the market condition. The second most significant reason is that 29% of startups fail due to insufficient money.
So, running a startup takes more than just a passion, an idea, and… a bit more passion.
Passion without flexibility and far-sightedness becomes a noose for a startup that ends everything.
That’s why when it becomes difficult to juggle different jobs and starts choking your system, it is better to extend your arm and take the help of experts with a workforce that knows its work.
It is better to outsource your critical business processes to spend time doing something better than keeping an eye on your SDLC (Software Development Life Cycle) and doing team management.
What is Outsourcing?
The dictionary meanings of outsourcing pretty much explain the scenario:
So, you can say that:
“Outsourcing is the process of taking the services of outsource companies, or third-party companies, to accomplish a task that your workforce can’t achieve due to incapability or insufficient resources.”
That’s what can become a turning point for a startup.
The moment when you are trapped in the world of ‘Do it All Yourself,’ figuring out how processes work, dealing with various management hurdles, and raising funds for the startup – is the right time when an outsourced software development company can help you.
So, no wonder that 66% of businesses in the US outsource outsourcing companies for one of their needs.
Similarly, if startups feel that complex processes have become a hurdle in their progress, they can leverage the help of an outsourced company.
Life becomes a lot easier – PHEW!
What is an Outsourcing Company?
An outsourced company provides third-party services to another company helping:
- Complete tasks
- Run operations
- Deliver services
However, unlike the popular perception, an outsourced company isn’t always residing in another country.
There are four types of outsourcing:
- Offshore outsourcing
- Onshore outsourcing
- Nearshore outsourcing
- Backsourcing
Based on these types of outsourcing, here are a few kinds of outsourcing companies:
1. Offshore Company Outsourcing
An outsourcing company in another country that provides services or products to companies in other countries.
2. Onshore Company Outsourcing
This type of company offers services and products to companies in the same country.
3. Nearshore Company Outsourcing
Nearshore outsourcing company gives services to other businesses in neighboring countries.
Check out the pros and cons of hiring outsourced companies, then choose them based on what suits you the best.
Wait!
Did you say why you should outsource software companies when you can build your own company? Well, here is your answer.
Why Should Startups be Outsourcing Software Development Companies?
To:
- Cut the cost and avoid going bankrupt
- Hire experienced individuals
- Get high-quality products & services
- Save time for other essential works
- Satisfy customers with what they want
IT and accounting are the most outsourced works among small businesses.
Let’s admit that building a team is a headache alongside a burden on your pocket.
Hiring, maintaining, and keeping an eye on the team takes work, significantly when you are trapped in many other things. It can also be a significant blow to your pocket.
However, this cost (and a headache!) cuts to half when you hire people on demand from a software development outsourcing company because:
- They already have a team of fully-vetted engineers
- Experience is their fort because they have been doing it for years
- You have to hire outsourcing company, not pay them individually
That’s why the cost is the number one reason startups outsource services.
It helps them get some grip on overflowing cash flow that is always ready to run out of their hands due to the following reasons:
- Poor budgeting plan
- Making lousy investment decisions
- Inability to raise funds
- Inadequate financial undertakings
- Not having a robust marketing plan
These are just a few reasons that shake the cash flow of startups. So, outsourcing is the answer if you don’t know what to do with your startup’s critical process.
#2: Reduce Employee Hiring Headache
Getting into the race of running a startup means you are fighting for a piece of the pie that many others are craving. It is a do-and-die situation, and on top of that, your employees are slipping because of the turbulent condition. What will you do in this situation?
“Rates are rising, and money is no longer free, which has massive implications for valuations and fundraising.”
Sequoia Capital’s dire “Adapting to Endure” slide presentation
You have two solutions in this situation:
- Keep hiring one after the other (and get trapped in this vicious cycle!).
- Outsource talent on demand to focus on other essential things.
What would you do in this situation? You might want to build a team, but the benefits of outsourcing out numbers hiring.
However, this is a two-way process. Besides employers, employees are also stepping forward to prioritize their likes and dislikes. Here are the dominating trends among employees:
That’s quite a turbulent situation. Nevertheless, outsourcing software development companies can cover this void by ensuring a better work environment and offering startups exceptional talent on-demand services.
#3: Get Better Quality Products
You don’t have a margin for any mistake when you have put everything at stake. With an entrepreneurial mind, you might think you are a genius and can do it all yourself. But this overconfidence can be the killer of your dreams.
Among eight reasons why companies outsource services, three reasons somehow touch the borders of getting better quality products, including:
- 47% to solve capability issues
- 31% to enhance service quality
- 28% to access to intellectual capital
All these reasons combine to help produce better quality products that capture the market and customers’ hearts.
In case you are drenched in the idea of being the one-man army and smitten by the bug of know-the-best, come out of this mindset.
Embrace flexibility and let the expert do their work to get the product of your dream without any lingering bugs.
#4: Save Your Precious Time
While living in a world where around 137,000 startups are launched every day, startups need to launch at the right time when they can get the most traction. Therefore, every second defines the fate of the startup.
So, your success story doesn’t just need an idea and talent; it also requires the right time for launching the product.
This can be a shallow well for your startup if you try to run all tasks in-house because many factors can delay the process. However, the story is different when you hire an outsourcing company.
They have sources, tools, an experienced workforce, and know-how.
While your competitors may be busy finding the right fit for their job, your hired outsourcing development company will already pull the correct string to mesh a smashing product for your market dominance.
#5: Customer Satisfaction
Customer retention is the ultimate goal of all businesses. Nobody begins a startup just to kill time. The ultimate goal is to run it successfully, enter the Fortune 500 game and earn big bucks.
That’s where customer satisfaction comes in.
Outsourcing plays a crucial role in customer satisfaction as well. Customer retention automatically becomes easier when you create the best quality product according to customer’s needs and offer it when they want it the most.
And when you can retain customers, which is very difficult in today’s world with so many options, customer satisfaction also comes in as a bonus because:
- Customers get what they were looking for
- Their expectations are fulfilled
- They don’t get attracted to other products
- People’s hard-earned money is spent on the right product
All these factors combine to enhance customer satisfaction and boost your business.
Frequently Asked Questions
- Why is outsourcing good for startups?
Running a startup is way tricky, so outsourcing gives you a lending hand. You can handle critical processes, keep your workforce busy in other growth-boosting areas, and save your money from getting down the drain.
2. What are the cons of outsourcing?
Where outsourcing is usually said to be beneficial for small companies, it is not always the case. Outsourcing has some cons, such as communication barriers, cultural differences, misalignment of time, quality control challenges, and slow response time.
3. Why is outsourcing important for your startup?
Outsourcing decisions can make or break your startup because the early-stage startup stage is very fragile, where managing operational functions, making hard decisions, and budgeting is essential. Outsourcing helps hire less headcount, saves money, and lets experts perform critical processes while you can perform other vital tasks for growth.
4. How can outsourcing stop employee turnover in startups?
Startups mostly hire a small workforce that can burn out due to the high workload. However, outsourcing processes and operations lessen the work pressure and prevent turnover, which is very common in startups due to overworking.
5. Why is outsourcing a good strategy?
Outsourcing is a good business strategy because it cuts costs, lessens the burden on the workforce, streamlines business processes, and lets businesses focus on growth essentials.
6. Who benefits from outsourcing?
Outsourcing helps all those startups and business owners who get trapped in critical business processes and overspend on the workforce. The outsourced companies allow them to come out of all these troubles and let them focus on their core competencies.
Final Words
Startups save around 66% of costs by outsourcing software development services. Saving such a considerable cost in the initial phase of the business gives you multiple benefits that start showing their results later.
If you don’t know where to begin things despite the outpouring of passion and energy, then take it as a red signal that you need the help of a third party to execute your tasks seamlessly.
You might feel reluctant because it was your dream project, and you wanted to do it all by yourself, but let the concept of one-man-army remain part of stories and dream. Be practical in reality!
Analyze your requirements and practical aspects and let the outsourcing goods wrap up your business for all the right reasons!
