Outsourcing fills the start-up skills gap

17 Sep, 2012

Nick Green founded printed.com in 2011. He had estimated the cost of entering the digital printing market at anywhere between £200,000 to £600,000, "a huge investment for start-ups", he says. The solution? Outsourcing – a factor that is becoming a common denominator in the successful launch of many new small businesses.

At the outset, Green explains, "we decided it was essential to outsource some activity to promote business growth, without the expense of early recruitment". Even today, the company still relies on two consultancy services, which provide database insight and media planning and buying, and remains "a keen advocate of outsourcing as a way to facilitate early growth".

At the beginning, outsourcing was vital. It allowed him to build up the business without the enormous overheads of permanent staff, and allowed the company to grow rapidly.

Printed.com is not unusual. Outsourcing has moved on enormously from the days of simply relocating the IT department to India. Starting a business with little money, but outsourcing on tap, has become a reality.

Neil Asher has a record of founding successful businesses, but wanted to expand his latest – The Advanced Child Academy, which provides parents with learning materials – quickly and from a small initial investment. That precluded him from going on a hiring spree.

Instead, he tapped into the services of Elance, a company that provides a "human cloud" of freelancers. "Suddenly we had access to a very powerful resource that would allow us to hire the right people for the job, no matter where they were in the world," he says. "We could now hire and manage a virtual workforce all through the Elance platform, which gave us incredible control over costs and the work itself."

The results speak for themselves: "By building our business model entirely around Elance, we have reduced our costs by 80 per cent," says Asher. "This not only meant that the creation of the business was financially viable, it freed up investment that could be used in other areas of the business."

Obviously, the nature of the start-up will determine what can and cannot be outsourced, but typically companies look to hive off their IT, HR and finance departments, without ceding too much overall control of the company. And here lies the central complaint about outsourcing – that there are few effective ways of overseeing every detail of the process.

Along with questions about quality, ceding control remains one of the greatest fears for many entrepreneurs. When you've started your own company, knowing when to let go can be difficult.

"The art is to keep a very tight rein from the centre," explains Lief Schneider, managing partner at Schneider Bartosch Communications. "To provide a good service, you don't need to be an expert in everything – in fact no one can be, or should claim to be – but you do need to have access to the best experts and you do need to know how to manage them." His company outsources "most non-core functions – accounts, billing, database management, IT support and office maintenance.

"We effectively outsource any work that is not senior managerial activity," he says.

Howard Flint, managing director at Omni RMS, a recruitment outsourcer, believes outsourcing is the opposite of relinquishing control. "In fact, [it] can afford SMEs and start-ups more control, giving a business access to expertise and knowledge they would otherwise be unable to either afford or attract," he argues.

"Outsourcing in any form can give small businesses the capabilities of much larger organisations early in their life cycle, enabling them to compete with bigger players on a more even playing field."

It is a question of deciding which bits are best run by other – more expert – people. Some companies have sought to outsource large swathes of their in-house operations. Along with HR functions, IT departments and finance and accounting centres, employment law, sales and marketing and health and safety have also been targets. "Even engineering and manufacturing can be suitable for outsourcing if a contract cannot be completed in-house," notes Chris Harland, director at Pierce, the chartered accountants.

But with such a large extent of the day-to-day business being conducted by external parties, maintaining quality becomes a prime concern. "When outsourcing work, there can be problems in terms of management and resourcing, especially when you outsource as much as we do," says TACA's Asher. He praises the service he receives from Elance, but acknowledges "you're only as good as your weakest link".

The business owner still needs to take an active interest in controlling the quality and output of the process, says Pierce's Harland. "To put it bluntly, they will only get out what they put in."

For printed.com's Green, outsourcing has ultimately proved invaluable. Its importance, he says, "lies in its ability to help get new businesses off the ground and up and running. In these times of economic uncertainty, outsourcing has a crucial role to play for SMEs, providing entrepreneurs with the opportunity to make their ideas a reality."

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