Outsourcing functions and talent is still uncommon among startups.
Founders, wary of giving up control of their product, teams and customer relationships, often face three main constraints: time, talent and money. Doing all this while needing to stay flexible and agile around unexpected bumps in the road can lead to problems.
Yet done well, outsourcing functions like customer service, sales or human resources to boost growth, optimise time to market and even let you deploy in new regions faster — while allowing you to focus on your core business and people.
As business philosopher Peter Drucker famously said: “Do what you do best and outsource the rest.” Here’s how to know if it’s right for your business.
When to outsource
Some of tech’s biggest companies have used outsourcing to grow or pivot. In 2019, Google had more outsourced, temporary employees than in-house staff. Github’s own website backend was built by an outsourced consultant and Slack’s app design and logo was created by Canadian design agency MetaLab, which also worked with Coinbase.
But despite these success stories, outsourcing isn’t right for every startup. So how do you decide when to stick in-house and when to look for external support?
“There are a lot of functions that can be outsourced and at different times in the life of a startup,” says Andréa-Lou Laffitte, group programme manager at The Nest by Webhelp, an outsourcing provider for scaling startups. “If I look at our partnerships, we often step in when the flow of activity has become too difficult for a startup to manage expansion, performance and customer satisfaction with their current internal resources.”
The Nest provides startups with talent support in customer experience, sales support, digital services and other functions, with customers including delivery unicorn Gorillas, mobile gaming company Dream Games and French fintechs Lydia and Swile. While each startup has its own reasons for considering outsourcing, there are some common themes — with scaling key amongst them, says Laffitte.
Covid-19 has been a moment when all companies need to reduce spending. Outsourcing provides a good solution
“We wanted to create a programme that is simple, scalable and quick to implement to support startup development. Most of the time, the startups we work with have limited team size and design but rapid growth and great ambitions,” she adds.
For example, a startup looking to launch into a new country or market might require B2B or B2C sales support to work on lead generation, customer retention and development. A fintech might need access to the latest technology and regulations around verifying customer identities or managing payments. And almost every scaling company will need a flexible and agile way to manage headcount without having to constantly recruit or train new employees through peaks of activity or for specialised roles.
“Covid-19 has been a moment when all companies need to reduce spending. Outsourcing provides a good solution for flexibility and can help to absorb demand shocks during such periods,” says Laffitte.
At the same time, outsourcing can also help a startup optimise their time to market — with international teams operational on day one — and focus on its core proposition. Without the need to focus on the details and daily management of a resource-intensive function like customer service, a scaleup can focus on its strategic aims.
One company that chose to go down the outsourcing route is Munich-based air up, which produces interchangeable air pods that add scented air to flavour water. It outsourced part of its customer service to The Nest by Webhelp, so its employees don’t have to spend time answering initial online customer queries. If the engagement becomes more complex, the outsourced team hands over to air up’s internal customer engagement team.
Air up’s head of customer engagement Thomas Staudte says the thought process behind outsourcing began with a need for efficiency.
We want to engage with our community to provide fast reply times on all channels, professional support in all languages and an in-brand tone of voice
“We want to engage with our community to provide fast reply times on all channels, professional support in all languages and an in-brand tone of voice. As a fast-growing business, this can be a challenge,” he says.
Air up wanted customers to engage with humans who could build a relationship with them rather than just using automated chatbots, but had a short go-to-market time. It also needed additional support to cover high volume sales times like Christmas. Consequently, the flexibility outsourcing provides seemed like a smart solution.
Keep a constant culture
When choosing an outsourcing partner, Staudte says brand fit and integration is vital.
“For us, the onboarding process was key. The agents we use need to be totally integrated into the air up way of thinking and share our common mission and values. We had an extended internal onboarding process and agents have regular check-ins with our core team. That way we can ensure that every support agent acts the way we would act ourselves,” he adds.
Laffitte agrees that culture is important, but it’s not the only thing. How a partner works with you in partnership, how they improve customer experience and their customer feedback mechanisms are all things you need to be aware of — alongside getting the right type of talent.
We had an extended internal onboarding process and agents have regular check-ins with our core team. That way we can ensure that every support agent acts the way we would act ourselves
“We found that delivering services for startups required a specific profile of person, slightly different from those usually working for traditional outsourcing companies. They need to be super-reactive and agile, able to work in a fast-paced environment and to understand the organisation’s brand identity,” she says.
The idea is to create an "extended team" that feels like part of a startup’s project. However, creating this synergy requires continuous collaboration between business and outsourcing provider.
“One mistake that startups often make is to outsource too early. You need to have an internal team that can continuously build with the service provider. Startups need to train outsourced employees on their culture, product and where they’re going as a business, not just provide a script. It’s the key to a successful partnership,” she adds.
Questions to ask
From scaling teams internationally to building new products, the choice between outsourcing and insourcing is a delicate one for founders, so it’s important to ask the right questions. For Laffitte and Staudte, this boils down to three basic considerations.
- Is the function a core one in your organisation? If so, no amount of outsourcing will mask the need to have some internal capabilities to lead and manage the department. However, outsourcing can help you expand, particularly in areas that require rare skills or significant overheads, such as digital marketing, web development and customer services.
- Will it help me cut costs? Yes and no. Outsourcing isn’t always the best way to cut costs and remember that you’ll have to invest in training, resourcing and development. However, any ROI calculation of outsourcing needs to take into account the expected level of service, the cost of in-house management (including recruitment, training and development) and the criticality of the service to the startup.
- Will it save me time and lead to quicker operational outcomes? Outsourcing can help you speed up expansion plans and allow your senior team to focus on more strategic goals. But remember that in order to deliver the best services to your customer, the partner should be guided by your internal teams.
“Sometimes, your team is too small or isn’t ready to give up the processes they’re working on. But, if you want to scale faster and develop more flexibility, it can be right for you,” says Laffitte.
Visit here to find out how The Nest by Webhelp supports startups to improve their performance and scale-up their dream team.