Automation vs outsourcing: important things to consider before choosing

It’s no secret these days that you can save a lot of money if you automate and or outsource. Both of them are viable options but not at the same time or for the same situations. That’s why automation vs outsourcing is a thing.

In certain situations, it may clearly be better to outsource and in other situations, it may be better to automate. Oftentimes, there are a lot of grey areas where it’s not clear which option is better.

In this guide, we’ll look at what automation is, the nuances of outsourcing, and the things to consider when trying to make a choice between the two.

What is outsourcing

Outsourcing is the practice of delegating certain tasks and processes to external third-party service providers. This is done to reduce costs, increase efficiency, and allow companies to focus on their core competencies.

Outsourcing can involve anything from customer service to software development to manufacturing. By outsourcing, businesses can save time and money while also receiving high-quality services.

Over the last few years, the outsourcing industry has grown. It’s estimated that the global outsourcing market will grow to 280.6 billion in 2023 – up from 261.9 billion in 2022. By 2030, it’s expected to be a $500 billion industry.

There are multiple types of outsourcing:

• Offshore Outsourcing: This is the practice of assigning tasks or projects to individuals or organizations located in another country. The goal of this type of outsourcing is usually to get work done cheaper.
• Nearshore Outsourcing: This is the practice of assigning tasks or projects to individuals or organizations located in a neighboring country. It has the same goal as offshore outsourcing but oversight is easier.
• Onshore Outsourcing: This is the practice of assigning tasks or projects to individuals or organizations located in the same country as the business. This type of outsourcing is usually done to tap into expertise not present in your organization. For example, hiring a marketing agency.
• Horizontal Outsourcing: This is the practice of assigning tasks or projects to individuals or organizations that specialize in a certain industry or field. This may be onshore or offshore outsourcing.
• Vertical Outsourcing: This is the practice of assigning tasks or projects to individuals or organizations that specialize in a certain field or level of expertise.

Outsourcing has both advantages and disadvantages, and it’s important to understand both sides before making a decision.

The main pros of outsourcing include:

• Cost Reduction: Outsourcing can save money by reducing overhead costs, like salaries, benefits, and taxes.
• Innovative Solutions: Companies are able to benefit from the experience and specialized skills of outsourcing providers without developing those competencies in-house. With that being said, it’s not a good idea to outsource your core competency.
• Scalability: Outsourcing provides flexibility, allowing companies to quickly scale up or down based on customer demand.
• Time Savings: Companies no longer have to spend time and resources on recruiting and training staff.

The main cons of outsourcing include:

• Loss of Control: Outsourcing often means giving up, to a certain extent, control over the quality of the work or the timeline of the project. Of course, this can be mitigated by proper communication and choosing the right provider.
• Security Risks: Companies must be aware of the security risks associated with outsourcing, especially when it involves sensitive data.
• Language and Cultural Barriers: These can cause communication difficulties and make it difficult to provide feedback or share ideas. This can happen with onshore and offshore outsourcing to different extents.
• High Turnover Rates: Outsourcing often involves high turnover rates, as providers may not be motivated to stay on the job for a long time.

Ultimately, the decision to outsource should be based on your individual needs. By weighing the pros and cons, you can decide which outsourcing solutions are the best fit for their needs.

What is business process automation?

Business process automation (BPA) is a method of using technology to streamline and simplify complex tasks and operations. It involves the use of software and hardware to automate tasks such as accounting, customer service, human resources management, etc.

BPA can help companies save time, money, and resources, as well as reduce human error and increase efficiency. With BPA, you can focus on the core functions of your organization, such as product development and marketing, and minimize administrative tasks. BPA can also help to identify inefficient steps in processes and design better ones.

In 2022, the estimated market size of BPA tools and services was $12 billion and is expected to reach $14 billion in 2023. By 2030, it’s expected to reach a market value of over 50 billion.

Note: business process automation, robotic process automation, document automation, and intelligent process automation are often lumped together and just as often separated.

For our purposes, we’re talking about all of the variations of business process automation. 

Business process automation can be an incredibly powerful tool for businesses. It can streamline processes, eliminate manual labor and data entry, and save time and money. However, there are a few potential cons to consider.

Pros of business process automation

• Automated processes are more efficient and cost-effective: By automating processes, you can reduce labor costs and increase the accuracy and speed of operations. Automation also eliminates the need for manual data entry, allowing you to focus on more high-value tasks.
• Automation can free up resources: Automating repetitive tasks frees up time and resources that can be used to focus on more strategic initiatives. This can help you remain competitive and better measure ROI.
• Automation increases accuracy and eliminates errors: Human error is expensive. Automation eliminates the need for manual data entry and other manual processes, which can lead to errors. Automation also eliminates the need to double-check data, as it is already accurate.

Cons of BPA

• Automation can be expensive to implement: Automation often requires a significant upfront investment, due to the technical know-how and resources to set up. This can be a major expense for businesses.
• Automation can be a double-edged sword: Automation can be beneficial for certain processes, but it can also lead to job losses if not handled properly. It’s important to ensure that automation is implemented ethically and that it does not replace or eliminate jobs. If it does then you may get a lot of pushback and set the automation initiative up for failure.

Automation vs Outsourcing things to consider when deciding on outsourcing or automation

Budget

One of the first things to consider is the budget you have for the work that needs to get done. Of course, outsourcing and automation are both designed to save you money but it’s not an overnight thing.

When you automate processes, you’ll first need to purchase the software and get yourself or your staff trained. That’s an initial outlay in cash that you need to absorb before the automation initiative starts to save you money.

The same can be said for outsourcing. You need to spend time and energy finding the right partner to outsource or maybe you go with a service that makes it easier. In both cases, you’re spending money. Once you bring on the individual or team, you’ll need to train them for a while before they become useful to your organization.

Because of this, you’ll need to decide on a budget beforehand (which should include more than a software subscription or the salary). Depending on what that budget is, you’ll know immediately if you can outsource or if you need to use automation software.

The sophistication of the process in question

Automation software has come a long way and can handle a lot of complex processes. Sometimes, it’s obvious what processes can be automated and at other times it’s not.

There’s nothing worse than trying out an automation tool only to realize that your most important process is too complex to be properly automated.

Take a long look at the main processes that you want to outsource or automate. Ask yourself whether or not this can be automated and what kind of features are necessary to make it happen.

For example, client onboarding may need document automation, data collection, and email notifications. That can be automated by many pieces of software.

On the other hand, blog post creation requires analysis, research, an outline, and creative writing to accomplish. This is ideal for outsourcing. Of course, these are simple examples and many things will be a bit more difficult to determine.

When in doubt, outsource first then attempt to automate second. This is especially true when the process is pressing and you’re getting overwhelmed with your current team.

Quality assurance

How will you ensure the quality of the final deliverable? Do your current QA processes lend themselves to an outsourced team member or automation? If not, how much effort will it take to integrate or change your current QA processes?

Is the effort worth it?

In some organizations, everything passes through multiple levels of quality assurance and change that would require restructuring a large portion of the organization. People don’t have the time or energy to make that happen – especially for an unproven opportunity like automation or outsourcing.

What I’d suggest is to start small. Whether you want to outsource or automate, start with smaller or less critical tasks and see how it plugs into your current QA workflow. There are two things to pay attention to:

• Is the output produced in a timeline manner?
• How much extra work is needed to get it up to your standards?

Impact on other processes and deliverables

This is a consideration that becomes even more obvious when you’re attempting to outsource important work. Humans need to be trained to do the work – no matter how simple you think it is.

The main thing you’re looking at is how will someone working in a different time zone or within a different culture impact the way you work. Will they be able to adapt to your company’s culture and processes?

For example, in some cultures, deadlines aren’t hard deadlines. They’re more like guideposts that let people know when things should get done but if they miss those deadlines, it’s still fine. In other cultures, deadlines must be met at all costs.

If you were to hire someone and train them, but they didn’t take deadlines seriously, how much would that impact your organization? How would it impact the other steps in the process that need to be done after they’ve sent over their deliverables?

Other angles to consider are time zone differences and communication. If you’re working but they’re sleeping and an emergency pops up, how will you be able to handle it? Are there any provisions that will need to be put in place to mitigate the risk of things spiraling out of control?

Of course, this can also happen if mission-critical automation software goes offline in the middle of the workday.

It’s always important to consider the worst-case scenario and if the negative impact is within a tolerable threshold.

Conclusion

Automation and outsourcing are viable solutions to doing more with less. Each one has its advantages and disadvantages. This guide has looked at what each one is, the advantages and disadvantages each one brings to the table, and things to consider before making a choice.

Start with a clear understanding of your end goal. Saying you want to be more efficient won’t cut it. Determine the specific processes you need help with then assess, based on the criteria we presented, which avenue will be best for you.

If you do decide to go with automation, be sure to check out UsefulPDF – our document automation platform.