Team Management

How to make the most of modern outsourcing

Comparative advantages have existed ever since people first engaged in trade. It is the reason people, groups and even countries trade. Comparatively, some countries are better at producing products than others and vice-versa, therefore there are gains to be made by engaging in trade with each other.

Division and specialization of labour can further help achieve a more substantial comparative advantage, as it is the case in most trading scenarios.

The comparative of modern business 

Businesses however, tend to diminish their own comparative, and thus competitive advantages by making their specialized labour force do tasks outside of their specific field of expertise. A survey of 420 Danish business professionals suggests that they, on average, use around 12 hours per week on activities that can either done completely or partly by someone less qualified.

In other words, productive hours and energy from highly skilled individuals are either wasted or misused on other tasks. Even engaging in multitasking at work takes a huge toll on productivity, no matter how small or complex the task is. Why should the CFO of a company use time on optimizing how the financial data is presented on an excel sheet? Alternatively, why should the head of sales use time on preparing PowerPoint presentations when he or she should be focusing on the actual pitch of the sale?

Transactions costs keeps us from reaching our productivity potential 

Outsourcing small to medium tasks is a potential solution to this problem. However, transaction cost associated with traditional outsourcing are often prohibiting small and medium sized businesses from realizing this potential. These costs vary widely, but common examples are the time spent looking for the right option, planning the scope, negotiating fees, determining the right SLA interfaces, and implementing the setup.

Since traditional outsourcing is not an option, employees are tasked with work that is often either time-consuming and/or beyond the scope of the expertise of an employee. Far from an ideal scenario in any company that relies on “selling” the productivity of their employees.

The emerging of a new business model

However, a new business model emerging seems to tackle both the imminent need of outsourcing without engaging in high transaction costs.

Freelancing and Shared/Sharing Economics, these terms come to the same basic principle: The borrowing or temporary access of a specialised service or skill. The temporary access of such Sharing Economy models are generally enabled via a digital platform on which the services and products are exchanged. The platforms limit the need for a middleman and let supply and demand meet in a world where brands are replaced by ratings.

A low cost and flexible approach 

Freelancers and specialist are embracing these models and have proven widely successful. Such successful examples include Uber, TaskRabbit, AirBnB among others. The main reason? They offer more specialized services, at a lower cost combined with a personalized and direct approach.

Businesses are starting to use the same models for outsourcing tasks and projects e.g. hiring specialist for short periods of times on an “as needed basis”. Due to their independence, most freelancers can offer the same service as a stablished firms, at a much-reduced cost and with a faster response time.

Firms and businesses can greatly benefit from correctly applying these models to their own business model. Therefore, they should be encouraged into exploring new ways to reap the huge benefits of this business model still relatively in its infancy, as it has the potential to completely change how firms see and interact with specialized, independent labour.

Good employees are hard to come by, especially when we are referring to highly skilled ones. Therefore, their potential should be maximized, not hindered or squandered. These rising business models can enable a firm complement their high skilled employees with specialist with a completely different set of skills, freeing them to do what they were hired to do in the first place.

On the same note, the other tasks previously done by the firm’s employees are now the responsibility of another different type of specialist. A win-win situation, both for the firm, its skilled labour and the freelancers/specialists.

Carl T.F. Blechingberg
Published by Carl T.F. Blechingberg

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