Back Office Outsourcing Do's and Don'ts - airisX (2023)

In managing your business, there are some tasks that might be time consuming and drain your resources. Tasks such as data entry, payroll & accounting, admin work, and others are back office functions that could be taking much of your time and money. As a business owner, you ought to be focusing on your core competencies. While back office functions are also important, you need to focus your efforts on growing your business. You can save yourself time and resources with back office outsourcing.

By outsourcing, you delegate non-core back office tasks to a third party provider. As a result, you can focus on your core activities, improve efficiency, and reduce expenses. This could lead to positive growth and leverage your company’s full potential. Outsourcing your back office can also save you numerous back office expenses that could be sucking up your capital. According to a survey by the Human Capital Institute, 90% of US companies outsource some aspects of their business.

However, when outsourcing your back office, you might become prone to make a few common mistakes. While there are benefits, outsourcing may not always be the best option. There are some aspects of your business that you should outsource but there are also those that are best left to your in-house team. If you are planning to outsource back office activities, here are some do’s and don’ts to consider.

  • When Do You Need To Outsource Back Office?
  • Do’s of Back Office Outsourcing
  • Don’ts of Back Office Outsourcing

When Do You Need To Outsource Back Office?

Timing is vital in outsourcing. Maybe your team is growing or your business needs to scale. Another reason could be your team is already overwhelmed with too many back office tasks. Whatever is your reason for deciding to outsource, you need to determine whether it’s the right time to do so. Here are the reasons you should consider back office outsourcing.

1. You Need To Lower Costs

One of the top reasons businesses outsource is to cut down on costs. According to the Outsource Accelerator, outsourcing can help businesses save 70% to 90% in wage payouts. With outsourcing, you can divert the savings to other areas that will have the most impact on your business.

By outsourcing, you save on operational costs like office rental, utilities, and others. In addition, you don’t have to worry about paying for the benefits like medical and social security because it will be the outsourcing provider who will shoulder them. Furthermore, they will be the one to handle the training of the team.

2. Your Focus Is On Business-Critical Tasks

Time consuming back office tasks can limit your business growth. Hiring a third-party provider for your non-core competencies allows you to utilize valuable resources for business critical functions. Most companies outsource back office tasks like accounting, digital marketing, and others in order to focus on what they do best.

Outsourcing makes sense if you want to focus on what your business truly offers. It will allow you to scale your operations, add more products and services, or expand your business. With your non-core activities handled by the outsourcing firm, you can focus on creating strategies for growth.

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3. Your Company Is Growing Fast

When your company is growing fast, it can start to become overwhelming for your team. It means your production has picked up and your customer base is increasing. Business growth carries with it certain challenges which your team may not be able to cope up with when they are overwhelmed.

An outsourcing provider will help scale your business. Whether you need a team that will augment your current team’s capabilities or an entirely new department, the outsourced firm will serve as your partner for scaling your business.

Do’s Of Back Office Outsourcing

The success of outsourcing lies in being able to do things right. Handing over back office tasks to a third-party provider is a huge decision so you need to approach it with caution. Here are some do’s you need to keep in mind when outsourcing.

1. Think Of Outsourcing As A Leaner Way To Grow

The outsourced provider will serve as your business partner. They are an extension of your company and as such you need to ensure that their goal is aligned with yours. As your partner, they will allow you to leverage their available talent pool and technology. By outsourcing, you will be able to provide your business with a higher degree of flexibility.

By outsourcing, you can scale your business according to your needs. You could scale down or discontinue the terms depending on the demands of your business. Back office outsourcing provides a leaner way of starting and growing a company with a lot less overhead.

2. Research Contractors Well

When hiring employees, you want to make sure that you hire only the best. In the same way, you would only hire the best outsourcing provider. There are many potential partners out there but you would want to hire the best. When hiring an outsourcing provider, you want to ensure optimum quality. So take your time when deciding on an outsourcing partner.

Look at their portfolio of work and see what the provider can offer you. Compare prices and search for providers who have experience in your line of business. If possible, ask previous clients about their experience with the outsourcing firm. Also, you can ask for referrals or recommendations from colleagues.

3. Define Your Scope of Work

First things first, you need to know your requirements. Before everything else, you need to identify the tasks you want to outsource. Also, you need to be clear with how much you are willing to spend. In addition, you should lay down your quality standards and expectations. You can break them down through a scope of work (SOW).

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The SOW will provide you with a clear roadmap for outsourcing your back office functions. Keep in mind that outsourcing isn’t plug and play and your potential partner will not have the same familiarity with your tasks. For this reason, you also need to clear this out with the provider.

4. Consider Expertise

When it comes to outsourcing, not all providers are created equal. Look for an outsourcing firm that suits your business needs. Come up with a criteria for evaluating your potential partner and list down three to five firms based on factors like technical competence, talents and skills, available technology, and experience with complex projects.

One of the most important factors you should consider when outsourcing is technical expertise. In today’s digital age, partnering with an outsourcing firm that is only knowledgeable with a few technologies can be a huge mistake.

5. Check Their Track Record

The market reputation of the outsourcing firm you plan to work with is another important consideration. Surely, you wouldn’t want to work with a partner who misses deadlines, is rude to your staff, or worse yet, your customers. That is why it is important to check their track record before signing any contract with them.

In an internet-connected world, there are many tools that you can use to check on the reputation of the provider. Platforms like GoodFirms and Clutch will help you get an overview of what previous clients say about the company. You can also contact them and ask about their experience with the outsourcing firm.

6. Outsource Infrequently Used Skills/Expertise

When outsourcing, divide the tasks into core and non-core. The former stays in-house while the latter can be outsourced. When outsourcing, don’t outsource the tasks that you or your employees have the required skill set to complete a task. If you are considering outsourcing, make sure to outsource the tasks where your employees are lacking in terms of skills.

While outsourcing offers a wide range of benefits, it is highly recommended that you keep the essential tasks in-house. Relying on the third party provider to complete essential processes can be detrimental to your company. It is best to outsource those functions that you do not frequently use and keep the essential ones within your team.

Don’ts of Back Office Outsourcing

In your rush to hire an outsourcing provider, you may become tempted to make mistakes that could be detrimental to your business in the long run. Outsourcing may be the perfect solution in many instances but it also has a lot of pitfalls which you should be aware of.

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1. Hiring Without A Plan

Having a detailed plan can make a huge difference in ensuring the success of outsourcing. When done correctly, outsourcing can be helpful in achieving business growth and generating savings needed for strengthening your internal infrastructure. A detailed plan is vital when working with an outsourcing firm.

When outsourcing, keep in mind that the team you are building does not have an idea of your back office process. Your outsourcing plan should describe your key targets and main steps that need to be taken. If necessary, you should be clear with the tasks to avoid any confusion. Make sure that you have a complete plan already before meeting with the prospective provider.

2. Outsource Your Core Functions

As a business owner, you have competencies and functions that make you stand out from the competition. These tasks are what drives revenue to your company and will lead your business to growth. As such, these activities are best left in-house and should never be outsourced. After all, the purpose of outsourcing is to allow your team to become experts at what they do.

So how do you know which tasks to outsource? Look for the time consuming activities that are keeping your team members from working on more specialized projects. In addition, you don’t want to have the outsourced team handle your strategic projects.

3. Rush The Hiring Process

In your desire to have the outsourced team join your company as soon as possible, you may be tempted to hire the first provider you come across which could compromise quality control. Consider this: Would you hire the first person wearing a nice outfit for a job you are filling up? Probably not. Most likely, you would screen the applicants first and then shortlist the most qualified ones.

In the same way, you wouldn’t rush your choice of outsourcing provider. Don’t be fooled by the flashy commercials with outlandish claims. Stick with your priorities and look for a company that meets your business needs. Check customer reviews and make sure that the provider is compatible with your company culture.

4. Think of Outsourcing As A Quick Fix

One mistake that most businesses mistake is thinking of outsourcing as a quick fix for cutting costs. It is not a short-term strategy but should be integrated as a long term solution for your business. In fact, many businesses have redefined outsourcing as a permanent part of their organization.

Quality should never be compromised for the sake of affordability. The outsourcing provider will be your partner whether you want to expand or downgrade your team. You should think of outsourcing as a permanent solution that will help improve the quality of your life and service.

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5. Cut The Outsourcing Firm From The Process

Some businesses think of outsourcing as additional workers who will not show any initiative. Such a mindset may deprive you of brilliant ideas and suggestions from the outsourced firm. Allow the outsourcing firm to feel important and give them the chance to have a part in fulfilling tasks.

When hiring an outsourcing provider, give them an opportunity to grow as this would be beneficial to both parties. Keep in mind that the provider is a business partner so they will definitely show concern for your company. You’ll never know how brilliant their ideas are for your company if you don’t give them a try.

6. Provide Undefined Expectations

In order to provide the best solution, the outsourcing company needs to understand your expectations. Discuss important topics such as deadlines, expected quality, method of communication with customers, processes, and others. You can outline these expectations in the scope of work as well as in the contract.

Clearly define the expectations as well as the next steps to take in case expectations are not met by both parties. Having defined expectations will allow the outsourcing company to meet or even exceed desired expectations.

Understanding the do’s and don’ts of back office outsourcing will help you come up with the right decision when choosing a provider to help you with your time consuming tasks.

Outsourcing Back Office Functions with airisX

Outsourcing time consuming administrative and backend tasks such as data entry, cold calling, bookkeeping, HR, recruiting, etc. save you time (and money!) during your day, so you can focus on working “on” your business instead of working “in” your business. That’s where airisX comes in. Our back office team is carefully screened and selected to ensure that they are equipped with the necessary skills to perform their functions.

Our services are flexible and contracts are based on your specific needs. Whether you only need a one time project, additional skills for just a few hours a week, or you may need a multi-year contract for long term support and scalability. Whatever your requirements, your Solutions Architect can work with you to find the right solution.


What should you not do when outsourcing? ›

What you shouldn't do when outsourcing
  1. Going on cost savings alone. ...
  2. Not creating proper strategies. ...
  3. Outsourcing too many roles at one time. ...
  4. Letting your team on their own. ...
  5. Leaving out your backup plan. ...
  6. Analyze your company structure. ...
  7. Guide your outsourced team along the way. ...
  8. Get your in-house team on board with outsourcing.
24 Oct 2021

What are 3 disadvantages of outsourcing? ›

So, what are the disadvantages of outsourcing?
  • loss of control.
  • negative impact on staff.
  • data protection and confidentiality risks.
  • lack of consistency.
  • financial and reputation risks.
  • less flexibility.
3 Feb 2022

What are three negative effects of outsourcing for an employee? ›

Outsourcing has caused high unemployment, loss of income and loss of competitive advantage, leaving people without financial support and employment.

What are the best practices for outsourcing? ›

6 Best Practices in Outsourcing
  • Define your outsourcing goals early. ...
  • Select the right outsourcing engagement model. ...
  • Work with the right outsourcing service provider. ...
  • Start with teams as small as one to two. ...
  • Establish a clear communication process. ...
  • Provide the right training materials and tools.
31 May 2022

What are the most common mistakes of outsourcing? ›

Here are some of the most common and costly outsourcing mistakes to look out for:
  • Outsourcing Without Assessing your Needs and Budget. ...
  • Prioritizing Cheaper Labor over Quality. ...
  • Choosing an Outsourcing Partner Without Thorough Research. ...
  • Skipping the Interview Process. ...
  • Not Setting Clear Expectations for the Outsourcing Partner.
10 May 2022

What are the six outsourcing considerations? ›

In fact, the considerations are not unique to software development – they apply almost as well to any product or service you have:
  • Control of core competency. Don't outsource your core competency. ...
  • Intellectual property content. ...
  • Technology level. ...
  • Cost factors. ...
  • Product or services. ...
  • Creative or operational.
17 Apr 2011

What are the 4 types of outsourcing? ›

A few of the main categories include:
  • Professional outsourcing.
  • IT outsourcing.
  • Manufacturing outsourcing.
  • Project outsourcing.
  • Process outsourcing.
  • Operational outsourcing.

What are 5 benefits of outsourcing? ›

Advantages of outsourcing
  • Improved focus on core business activities. ...
  • Increased efficiency. ...
  • Controlled costs. ...
  • Increased reach. ...
  • Greater competitive advantage. ...
  • Offshore outsourcing issues.

What is good and bad about outsourcing? ›

So by outsourcing some tasks and services, organizations can cut costs and increase their profits and the quality of products at the same time. However, many employees in outsourcing companies complain about poor working conditions. Often, they receive low salaries and work more than eight hours a day.

What are the risk in outsourcing? ›

More formally, risks associated with outsourcing typically fall into four general categories: loss of control, loss of innovation, loss of organizational trust, and higher-than-expected transaction costs.

Is outsourcing good or bad for employees? ›

Outsourcing is the simplest way to get work done and save cost while you're at it. The best part about outsourcing is the fact that you do not have to stress about how the work will be done and you can focus your energy on other tasks that might be higher on the priority list.

When should you not Outsource? ›

3 Things You Should Never Outsource for Your Small Business
  • Core Competencies. Your core competencies are the capabilities or traits that make your company stand out from the competition. ...
  • Customer Service. Another area of your business that you should avoid outsourcing is customer service. ...
  • Human Resources.
10 Jun 2021

What are the three 3 form of outsourcing? ›

Types of outsourcing
  • Onshoring. Relocating work or services to lower-cost location in the company's own country.
  • Offshoring. Relocating work or services to third-party providers overseas.
  • Nearshoring. Relocating work or services to people in nearby, often bordering regions and countries.

What is a outsourcing strategy? ›

What is Outsourcing? Outsourcing is a strategic decision by a company to reduce costs and increase efficiency by hiring another individual or company to perform tasks, provide services, or handle operations that were previously done by employees within the company.

What are three benefits of outsourcing? ›

Outsourcing benefits and costs

lower costs (due to economies of scale or lower labor rates) increased efficiency. variable capacity. increased focus on strategy/core competencies.

What are the seven major outsourcing errors that should be avoided? ›

Seven Painful Outsourcing Mistakes Companies Make
  • Outsourcing your core competence.
  • Hiring for technical skills over communication skills.
  • One-sided recruitment.
  • Ignoring the vendor's retention rate. ...
  • Outsourcing security or providing access to personal data. ...
  • Partnering with multiple providers.
8 Apr 2021

Why does outsourcing fail? ›

Outsourcing often fails due to conflicts between in-house and outsourced teams. This may be due to cultural differences, gaps in communication, and negative perceptions about the outsourced company. Also, keep your internal team in the loop at all times while communicating with the client and other teams.

What are the 4 primary considerations for the best outsourcing choices? ›

8 Factors to Consider Before Choosing an Outsourcing Company
  • Scope of Projects. The most crucial question to ask when a small firm is scaling up is the variety and scope of its projects. ...
  • Size of the Team. ...
  • Expertise and Quality Assurance. ...
  • Cost Efficiency. ...
  • Infrastructure. ...
  • Compliance. ...
  • Communication. ...
  • Culture.
31 Mar 2021

What are the key factors to outsourcing? ›

10 Factors to Consider for Outsourcing Decisions
  • 1) Cost Savings. ...
  • ​2) Pricing. ...
  • 3) The Resources and Technology. ...
  • 4) The Ability To Meet Deadlines. ...
  • 5) Minimal Supervision. ...
  • 7) Trustworthiness. ...
  • 9) The Service Level Agreement. ...
  • 10) Communication.

What are the two types of outsourcing? ›

The Two Most-Popular Types of Outsourcing in Software Development. IT Staff Augmentation and Dedicated Teams are the two types of outsourcing that have revolutionized software development.

Is BPO and outsourcing same? ›

The key difference between outsourcing and BPO is that outsourcing is the delegation of a company's non-core process to an external provider, while BPO is the delegation of a specific business function to an external provider.

How many stages are in outsourcing? ›

Training Business Process Outsourcing (BPO) consists of seven stages: assessment, proposal, due diligence, contracting, transition, governance and transfer. Each of the seven stages is described in chronological order below.

What are some of the negative effects of outsourcing? ›

But as with most things, outsourcing isn't all good; it does cause some unintended negative consequences.
  • Outsourcing Lowers Barriers to Entry and Increases Competition.
  • Outsourcing Erodes Company Loyalty.
  • Outsourcing Can Eliminate Jobs From the Domestic Workforce.
  • Outsourcing Affects Insourced Countries.
  • The Bottom Line.

What are the 2 main benefits of outsourcing HR? ›

There are four main advantages to outsourcing HR functions: 1) Ensure That Your Business Is in Compliance, 2) Improve Your Employee Experience, 3) Offer Better Benefits, and 4) Reduce Costs.

What are examples of outsourcing? ›

Some common outsourcing activities include: human resource management, facilities management, supply chain management, accounting, customer support and service, marketing, computer aided design, research, design, content writing, engineering, diagnostic services, and legal documentation.”

What is a benefit or benefits of outsourcing? ›

Cost advantages

The most obvious and visible benefit relates to the cost savings that outsourcing brings about. You can get your job done at a lower cost and at better quality as well.

What are the two most frequent causes of outsourcing problems? ›

The two most frequent causes of outsourcing problems include: poor service definition and cost over-runs.

What are two potential risks of outsourcing jobs? ›

Eleven Risks of Outsourcing
  • Possibility of Weak Management. ...
  • Inexperienced Staff. ...
  • Business Uncertainty. ...
  • Outdated Technology Skills. ...
  • Endemic Uncertainty. ...
  • Hidden Costs. ...
  • Lack of Organizational Learning. ...
  • Loss of Innovative Capacity.
15 Apr 1996

Is outsourcing a job legal? ›

While outsourcing employment is entirely legal, the question of whether an employee can be forced to train their replacement is a little more complicated. An employer should ensure that all its employees are properly trained for their roles, regardless of whether they are local or outsourced staff.

Does outsourcing benefit employees? ›

Having an employee is much more of a burden on your business than outsourcing staff would be. This is because you generally gain more benefits from outsourced staff at a significantly lower cost. Choosing to outsource a department of your business offers value for both you and your employees.

Which type of work is not suitable for outsourcing? ›

Executive and Administrative Leadership Roles – Never outsource roles that have a direct impact on the company's path to success. The vision and objectives should come from its own executives. If there are people who know the basic principles that keep the business moving, then it should be these people.

Does outsourcing cause job loss? ›

Key Takeaways. Job outsourcing can help American companies compete by keeping prices low, but it has a negative effect on U.S. employment. America has lost jobs to China, Mexico, India, and other countries with lower wage standards.


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