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Outsourcing and Freelancers: Is it wise to put your company's future in freelancers' hands?
Freelancing and outsourcing are two terms that are frequently used interchangeably. However, in terms of meaning and function, these two words are diametrically opposed. Because they are unfamiliar with the meanings of these two words, many people use them interchangeably. Let us take a closer look at the differences between these two concepts. Outsourcing is getting a job done by a freelancer by paying him/her without employing him/her, whereas freelancing is earning money by working independently without any obligations. An outside source (outsource contractor) provides a task and payment to a freelancer, whereas an outsource contractor provides the task and payment to the freelancer. A freelancer is paid according to the work he or she completes. They receive payment but not a salary, whereas an outsource contractor compensates freelancers based on the work they complete. They do not have to give salary to individual who does the task. Why companies outsource? Following fundamental economic notions, a lack of local experts and professionals is followed with rising wages, making it harder for certain businesses to acquire and keep talented in-house staff. Another argument is that outsourcing is a costeffective and smart way to improve team performance and increase profit margins. Simply said, it is a cost-effective approach that allows organizations to reduce resources while maintaining product quality.
Here is a summary of the reasons why small businesses and organizations continue to outsource: 1. They get the ability to minimize or manage expenditures. 2. They acquire access to labor and resources that are not available in their own country. 3. Internal resources and the in-house team are freed up to focus on essential activities. 4. They gain the opportunity to increase their business or client focus. 5. They execute jobs and projects more quickly.
Pros of Outsourcing Businesses benefit from outsourcing since it allows them to significantly lower their labor expenditures. When a firm uses the services of a third party, it enlists the assistance of specialists to fulfil activities that are performed better than the firm's in-house skills. Aside from cost savings, outsourcing allows firms to plan their time and use their resources properly, allowing them to focus on the key elements of their business, resulting in further development and progress. Finally, firms enhance their efficiency and productivity, particularly when noncore processes and tasks are outsourced. Because it is their area of expertise, professionals with experience and specialized abilities in these non-core activities may be more suited and more effective to do the assignment than the in-house team.
Cons of Outsourcing While there are several advantages to outsourcing for organizations, there are a few drawbacks as well. This, however, is only conceivable if one does not work with a reputable outsourcing firm. One downside is the concern that businesses would lose control over portions of outsourced work or services. Businesses may encounter this in situations such as customer service quality or project development monitoring. When compared to an in-house team member with the same activities or activities, it is far more difficult to enforce quality and even address rectification in these circumstances. Another drawback that organizations face is the likelihood of security threats when using third-party IT services. If a third-party supplier is not cautious, an enterprise's private information or sensitive data may be exploited, mismanaged, or mistakenly revealed. One last drawback would be a lack of communication. Companies believe that outsourcing exposes them to challenges and impediments caused by the distance between the outsourced workforce and the in-house staff. They believe it will be tough to communicate and collaborate while fixing problems.
Why companies hire Freelancers. A freelancer varies from an outsourcing company in that they are not employees of a corporation, but rather operate as a one-man operation and are free to accomplish several assignments concurrently for a wide clientele of people and businesses. Individual freelancers provide a variety of services, however most of them often do the following: 1. Rewriting 2. Copywriting 3. Editing and proofreading 4. Journalism in Marketing 5. Video production and editing 6. Consultation 7. Website creation 8. Programming is a type of computer programming. They are persons who are available to be employed for as long as their clients require their skills, hence they are typically contracted for temporary labor. Jobs for freelancers can be found through classified advertising (both offline and online) or temporary employment agencies. It is vital to highlight that the freelance economy, also known as the gig economy, has experienced a surge in recent years, which is directly tied to technological improvements. Today, everybody may freelance in some capacity if their time and finances allow. Popular examples include online platforms like Upwork, businesses like Airbnb, and transportation applications like Uber and Grab.
Pros of Freelancing Some companies choose to hire freelancers since they can devote more time and resources to the client's duties because they can work from home. Because of the flexibility in their work schedule and the convenience of their location, freelancers may work in their ideal working environment, allowing them to be more successful and efficient with their jobs. Another benefit that businesses enjoy is the transient nature of their labor. Companies can engage freelancers for a set period to do certain activities or duties and pay their fees directly to the individual. This implies that no resources are wasted as compared to recruiting for an in-house role with the same role or duties.
Cons of Freelancing Freelancers are free to accept tasks and duties from a wide range of clients, both people and businesses, and to do so concurrently. Because freelancers are responsible for a variety of contractual activities, the quality of their work may fall short of the client's expectations. Regarding this, because freelancers can work on many projects concurrently, organizations that exchange proprietary information or sensitive data face security issues. If a freelancer is not cautious, something might be exploited, mismanaged, or mistakenly disclosed.
Conclusion Freelancers are free to accept tasks and duties from a wide range of clients, both people and businesses, and to do so concurrently. Because freelancers are responsible for a variety of contractual activities, the quality of their work may fall short of the client's expectations. Regarding this, because freelancers can work on many projects concurrently, organizations that exchange proprietary information or sensitive data face security issues. If a freelancer is not cautious, something might be exploited, mismanaged, or mistakenly disclosed. Both outsourcing and freelancing as third-party services have advantages and downsides. Companies can benefit greatly from both services since they provide an efficient and effective alternative to hiring local labor. The main distinction is that an outsourcing business allows an organization to expand their outsourcing staff in accordance with their real demands, whereas freelancing simply requires one individual. Nonetheless, being well-informed about the potential benefits and hazards associated with any of these services can assist businesses in selecting the best business approach to increase their team, enhance their processes, and eventually expand their organization.
My views With so many individuals freelancing for a variety of reasons ranging from repaying student loans to saving for a new house to making ends meet, it is only natural to look at the other side and discover when and why firms choose to recruit freelancers. When a firm is growing, there are times when there is a lot of work and others when there is almost none. It is common in organizations that work on a project basis, such as marketing and public relations firms or software outsourcing firms. Hiring freelancers and depending on a pool of freelancers with whom they frequently work helps these businesses to decrease expenses while increasing profit margins. To avoid dilution or to have a more flexible and quick decision-making process in place, some firms prefer to raise no investment early on. However, the lack of an external source of finance necessitates strict cost management and complete use. Hiring underused employees because the firm is still not growing quickly enough or attempting to wear several jobs without the necessary abilities, is a formula for disaster. When a firm is self-funded, it is unusual to be able to recruit full-time personnel to complete all jobs. Hiring freelancers allows you to have all your abilities while also maximizing your use. Assume your organization is building an ERP system and you want someone with experience in the same sector. The project is projected to be completed in six months, therefore the individual you recruit will not be required after that. What are your options? To recruit a full-time employee and then try to find them a different employment once the project is completed? Or should the project be outsourced to a consultancy firm? Often, hiring a highly experienced freelancer on a project basis is the best option.
There is a reason why freelancers are so popular. Indeed, an increasing number of businesses are beginning to rely significantly on these sorts of personnel. To begin with, hiring a freelancer usually results in a lesser cost and less financial risk. You may engage a freelancer for a few hours of work each week, such as if you need someone to monitor your social media platforms.
This is also beneficial if you want someone to work longer hours than a normal part-time employee but complete less than full-time job. Furthermore, many freelancers are prepared to work on an as-needed basis with erratic timetables. If you and your freelancer are clear about your needs from the start, you and your freelancer may create whatever form of arrangement works best for both of you. Finally, freelancers are ideal if you want a particular skill set. When hiring a full-time employee, you are generally searching for someone who is well-rounded and capable of handling several jobs. You may also invest in someone who lacks crucial talents now but has the potential to develop them in the future. But what if you require a programmer who knows a certain language, a blog content writer, or someone with exceptional graphic design skills? That is when the benefits of hiring a freelancer become clear. You should be able to identify someone who specializes in the specific talents you want with a little Googling - this means they will be ready to hit the ground running with little to no training. If your present crew is failing to keep up with the workload of your company, it may be time to grow. Freelancers may be an especially appealing alternative for internet businesses. At the same time, they are not without hazards. Hiring a freelancer has several advantages; it is a wise choice if you want a flexible, remote worker with a particular skill set. However, if you need someone you can teach and develop over time and you want them to be totally devoted to your company, a more traditional employee relationship may be preferred. The good thing is that if you decide to attempt hiring a freelancer, you may easily locate fantastic possibilities online.
Srishti Ranjan, Bennett University
Outsourcing and Freelancers: Is it wise to put your company's future in freelancers' hands?
Imagine living alone in a new city. To avoid the hassle you join a mess to have lunch and utilise the extra time in sleeping or pursuing other activities instead of cooking. What you are doing here is outsourcing. After some days, while chatting with your neighbour going down the elevator, you discover that he is enjoying a variety of food options at different costs from the tiffin providers in the surrounding area. Now, what your neighbour does is outsourcing from freelancers. Nowadays, due to the Covid-19 pandemic, online education companies are soaring. They need people with skills to get the customers’ attention from the competitors. With social media gaining prominence, they need to build creative content, publicize it and follow it up with cold calls. These are broadly three skills required for one function among many others. The company has two options: either they could recruit a social media manager and a content developer full time or they could search for experts in the field and freelance it to them. Does this sound familiar? Yes, it's the same choice as Make vs Buy. We have been hearing about it for decades. As every coin has two sides, their merits and drawbacks exist which makes it harder for the managers to decide. We can very well understand this from the lunch example. We know about the expense that will incur if the company chooses the first option. There is hiring cost, acquisition cost, the management, resources etc. But, the company may get better control over the work and timely delivery of the project can be ensured. For companies which run on data and private information of customers, confidentiality will be preserved. Also, communication gaps can be minimised and resolved easily as people can interact directly. Last but not the least, there are arguments from some upcoming entrepreneurs that being in the same office culture can help sort out the differences and for a new company to grow the culture is the root. This helps in highly decreasing the turnover ratio.
On the other hand, if the latter one is chosen there is a possibility of miscommunication and security issues cannot be neglected. For instance, a big name in hospitality like Marriott wants to open a branch in Japan and outsourcing of various functions takes place. In such a case, the executive may find it difficult to explain the processes to the Japanese staff. It may so happen that a trade secret may get leaked if many freelancers are hired and may become complicated to establish who was responsible. A freelancer is hired by a company when either they have the domain expertise but dont have the time and resources or when they dont have both. The first case is a safe bet because a person is knowledgeable to understand the quality of the work done by the freelancer, ask for modifications and value it accordingly. In the second case, it's tough for the company or owner to find out if the task done is upto the mark because of a lack in his understanding. For example, you wish to take your baking business online via a website, you are in talks with a freelancer A. You happen to contact your friend from IT who says that the prices quoted by A are insane. You feel relieved that you just survived a financial theft. But you are determined and again courageously seek out a less expensive guy called B. You are happy and excited now. The website is ready and you consult with your IT friend for review. To your surprise, she finds ‘n’ number of flaws in the seemingly goodlooking website, which your eyes wouldn’t ever notice. Now you remember A and think of what a loss it would be if he behaved the same way or what a smooth work it would be had you loosened your pockets and spent a few more bucks on him. Moreover, you may find yourself yelling at him, “I needed the website yesterday”. And there goes the accountability down the drain of your bakery.
In spite of all this, the perks of freelancing overtake its negatives. It certainly requires less capital, meaning cost of hiring, training, reskilling, legal work, compensation etc. It gives faster output as the time in the managerial work is eliminated such as getting permissions about every little detail from the higher ups. It gives access to the top talents and domain experts who are passionate about their work and have a good experience. There is also reduced micromanagement & paperwork involved which makes it formality-free. The freelancers hired can be used for other projects in case of discrepancies giving the company more flexibility as opposed to regular employees. In short, outsourcing does make a person’s life easy! In the world of software development, the outsourcing is onshore if it's in the same country and offshore if out of the country, which is where it encounters problems because of time difference and language barriers. Through hybrid outsourcing both offshore and onshore companies get involved in an effort to bring in best of both worlds. Another one is nearshoring which has its advantages of consistent time and culture. Mostly, outsourcing is perceived as transactional which aims at reducing the operational costs or even cutting them. But this was practised until the 1990s. After this came until the end of the 20th century, resource-seeking outsourcing was practised, which primarily focused on acquiring resources that are insufficient or unavailable within a firm. The motive here is to acquire best practises and technology, improve service quality and have access to a flexible workforce. As the processes became more and more complicated, the ongoing form of outsourcing i.e., transformational outsourcing came into existence. This one focuses on their core competencies and activities. It is meant to bring in flexibility, bring in focus, and internal reorganization. Thus, it frees up the internal resources thereby accelerating the projects. It makes the organisation barrierless.
Until now, we considered coming to the office and spending 8 hours a day as a means of creating impact. But the ‘new normal’ as we call it consists mostly of remote working and it's high time it becomes the norm. Companies like Deloitte, Accenture, Amazon etc have been accepting this and adapting. Freelancing has helped especially the MSMEs and startups in many ways. They bring in specialized skills so that the business owners can focus on their core functions by doing tasks in an agile manner. This saves the firms’ time and parallely helps them grow by increasing productivity. Another aspect is with regards to employment generation. A person just has to be good at his/her job. There is no interference of religion, caste, colour or nationality. After the 2008-09 crisis, there was a huge rise in the gig economy and a need for jobs. According to a website called flexjobs, 73.78% of US women today are freelancers and 57.71% supplement their main income via freelancing. Many businesses in the B2B as well as B2C space are thriving solely on the model of providing outsourcing to companies. Hence, there is no dearth of people wanting to work hard for a project and in the process, help a company. In some cases, companies do not have a choice but to go for outsourcing even in critical matters like National Security. The DRDO (Defense Research & Development Organisation) procures equipment from Israel and Russia whereas the ISRO sometimes jointly works with NASA. Coming to the main question of the hour, is it wiser or not? It depends on too many factors. Data analytics comes into play to help a manager arrive at this decision along with his basic instinct. Companies ought to be careful while forming professional relations with the freelancers. Some pointers could be strictly followed. Firstly, a thorough background check and verification via references or testimonials from former clients served. Secondly, a commitment to complete the task within the deadline. Finally, a written contract stating regulations and limitations of access to company data and explicit declaration of prosecution in case confidentiality is breached.
India holds 65% of the International BPO (Business Process Outsourcing) market. Does it mean those international companies are throwing away their future in the hands of Indians? Certainly not. The managerial control and vision still remains in the hands of the board and they are prospering and going on entering the Fortune 500s. The companies of today must decide on how much percent of their work should be outsourced and what is the extent of the autonomy given to the freelancers. They should develop a hybrid model which can be done aptly by the company's human resources team in coordination with department heads. The future that we are talking about is a function of the present and in the present even babies must have learnt the words WFH (work from home) before uttering ‘maa’. So, companies must balance out the act since these are changing times. They must remember the saying, ‘extremes are easy, strive for balance.’
Pallavi Jichkar , IIM Rohtak