First-time outsourcing can be overwhelming, especially if you’re new to the market.
With $62 billion in revenue from large-scale outsourcing contracts (over $25 million), the Americas held the largest market share globally in 2019.
How do you ensure you’re getting the most value? How do you balance cost savings with quality?
How do you find a reliable outsourcing partner that delivers accurate results?
In this guide, we’ll break down everything you need to know about first-time outsourcing, including the actual cost of outsourcing, how to get the best return on investment, and how to avoid common pitfalls.
Understand the True Cost of Outsourcing
Some businesses usually start outsourcing, believing it’s all about cost savings.
While outsourcing does save money, it’s also essential to understand what you’re paying for and where your money goes.
The actual cost of outsourcing includes the following:
- Hourly rates or project-based pricing varies based on your outsourcing provider’s skill level, location, and expertise.
- Hidden costs such as onboarding, training, miscommunication, and quality control can add unexpected expenses.
To increase your return on investment (ROI), focus on long-term value, not just the cheapest option. A reliable outsourcing partner may cost a little more upfront, but they will provide consistency, efficiency, and quality results that save money in the long run.
How to Calculate ROI?
To calculate the ROI of outsourcing, use this simple formula:
ROI (%) = ((Outsourcing Savings – Outsourcing Costs) ÷ Outsourcing Costs) × 100
Example Calculation:
- Suppose your total outsourcing savings (such as reduced labor costs and increased efficiency) amount to $50,000.
- Your total outsourcing costs (including vendor fees, training, and management) are $20,000.
Now, applying the formula:
- ROI (%) = (($50,000 – $20,000) ÷ $20,000) × 100
- ROI (%) = (30,000 ÷ 20,000) × 100
- ROI (%) = 1.5 × 100 = 150%
For every $1 spent on outsourcing, you gain $1.50 in return.
Identify the Best Functions to Outsource First
If you’re new to outsourcing, you may be unsure which functions to outsource first. The key is to start with time-consuming tasks that don’t require deep in-house expertise.
Here are a few smart choices:
Core vs. Non-Core Tasks
- Core functions – Tasks central to your company’s competitive advantage should stay in-house.
- Non-core functions – Repetitive, administrative, or specialized tasks can be outsourced for efficiency.
High-impact, Low-Risk Tasks Ideal for First-Time Outsourcing
- Administrative tasks – Virtual assistants, data entry, and appointment scheduling free up internal resources.
- Customer support (BPO services) – A reliable outsourcing partner can handle customer inquiries efficiently.
- Marketing services – SEO, copywriting, content writing, and social media management can be outsourced to experts.
- IT & development – External teams can do web design, software development, and troubleshooting.
Balancing Quality and Costs of First-time Outsourcing
One of the biggest concerns for a first-time outsourcer is finding the right balance between affordability and quality.
Here’s how to ensure you’re getting the best value:
Avoid the “Cheapest” Trap
Going for the lowest price can backfire if it leads to poor service, customer dissatisfaction, and rework costs.
Look for Experience, Reviews, and Portfolios
Before deciding, always check a provider’s past work, client testimonials, and industry experience.
Check the Pricing Models
- Fixed-price contracts – Best for well-defined projects.
- Hourly rates – Good for ongoing tasks where flexibility is needed.
- Dedicated teams – Ideal for businesses needing a full-time outsourced workforce.
Negotiate a Fair Price
- Compare rates across different providers.
- Clearly define project scope to avoid unexpected costs.
- Start with a small project to assess performance before scaling up.
Find the Right First-Time Outsourcing Partner
Not all outsourcing providers offer equal service. Find a reputable outsourcing provider through Upwork, Fiverr, Toptal, or BPO agencies, or ask industry peers for referrals.
Screen providers by asking key questions, spotting red flags, and testing with a small pilot project. Ensure flexible hours and clear communication for smooth collaboration in different time zones.
Setting Up Communication & Management for FTOs
Once you’ve chosen an outsourcing partner, you should establish strong communication and management practices.
Here’s how you can do it:
- Provide detailed instructions and deadlines from the start.
- Outline key performance indicators (KPIs) to measure success.
- Establish a communication schedule for regular check-ins.
- Leverage platforms like Trello, Asana, Slack, or Monday.com to track progress and ensure accountability.
- Conduct periodic quality checks to ensure consistency.
- Encourage feedback from both sides to improve workflow.
- Keep a backup plan in case adjustments are needed.
You can ensure your outsourcing efforts run smoothly and effectively by staying proactive in management.
Avoiding Common First-Time Outsourcing Pitfalls
Even the best first-time outsourcing efforts can fail if you don’t plan properly.
Here are some mistakes to avoid:
- Over-reliance on outsourcing without internal oversight
- Miscommunication leading to project delays
- Not having a backup plan for provider failures
- Handling disputes professionally
- Looking at price rather than quality
Remember, saving doesn’t mean getting the cheapest in the market and sacrificing the quality of service. You should opt for a reliable yet affordable outsourcing partner that can provide the best offer without hurting your pocket.
Maximize Your Business Potential with ClearSource
Outsourcing doesn’t have to be complicated or risky. With the right strategy and a reliable outsourcing partner, you can save significantly while maintaining top-tier service quality.
Specializing in BPO services, ClearSource helps businesses like yours scale efficiently. Whether you need expert customer support, back-office solutions, or tech services, our team ensures you get the best return on investment.
Contact ClearSource today and discover how we can help you grow your business while saving costs.
