In an environment of rapid business development and great competition, it is necessary to always stay afloat, using various resources and the latest technologies. Everyone is looking for tools that help to effectively scale, attract new customers, save costs, and delegate most of the company’s tasks. For this, corporations and local services use CRM systems, AI-driven automation, cloud services, and outsourcing, including onshore, offshore, and nearshore outsourcing companies.
So, what is behind the concept of outsourcing, and how is it classified? You will probably be interested in seeing why this concept is gaining so much popularity.
What Is Outsourcing?
Outsourcing is the delegation of certain processes and tasks of a company to external agencies or third parties. In this way, you allow your team to focus on what is really important: product development, marketing, customer communication, etc. The company focuses on core business processes, reduces resource use, and uses the experience of experts in a particular industry.
Outsourcing is actively used in modern business companies. By transferring a list of responsibilities, companies develop and scale. It is used in a wide variety of areas: IT, marketing, production, finance, etc. For outsourcing to work well, you need to take into account several basic principles:
- A quality agreement — the contract prescribes the main conditions and scope of work.
- Time frame — usually, the term of cooperation is at least a year.
- Transfer of secondary functions — the main processes remain within the company, and auxiliary ones are transferred to the outsourcer.
- Delegation of some business processes — for instance, marketing campaigns, recruitment, etc.
Classification of Outsourcing by Function
Business Process Outsourcing (BPO)
This is the most common type of outsourcing. It is used to delegate simple business processes to external experts. Companies use BPO to transfer customer support, human resources management, accounting, etc. While experts are engaged in these functions, companies can do what they do best.
The most common industries where this type of outsourcing is used:
- customer service;
- human resources;
- finance;
- supply chain management.
Information Technology Outsourcing (ITO)
This kind of outsourcing includes hiring external experts to perform IT tasks. Many companies outsource software development to third parties, a practice that is quite common. They also delegate customer support, cybersecurity, and even IT infrastructure management. Executing IT processes, companies like N-iX enable corporations to focus on important business goals while receiving qualified IT services without the need to maintain an in-house team.
What industries use IT outsourcing:
- systems security;
- interface development and support;
- technical support;
- managed IT services;
- cloud services.
Knowledge Process Outsourcing (KPO)
KPO involves outsourcing tasks that require a high level of knowledge, analytical skills, and expertise. For example, companies hire experts in legal, financial research, and data analytics. By trusting professionals, you can be sure of quality work and do things that are beyond the capabilities of internal employees.
KPO is most often used in the following industries:
- finance and investments;
- medicine and pharmaceuticals;
- marketing research;
- legal services;
- Information Technology.
Outsourcing of Production
This is when a company contracts out the manufacturing of a particular product or specific components to a third-party enterprise. This enables the company to speed up production, make use of new technologies, reduce costs, and focus on marketing and sales.
Outsourcing of production is common in the following industries:
- automotive industry;
- food industry;
- textile industry.
Multi-Source Outsourcing
This is the practice of a corporation using several types of outsourcing, assigning a project or its stages to different third-party contractors. This approach often delivers the best results in each area and reduces the risk if one of the contractors fails to complete the work. However, multi-sourcing requires a careful approach to organising all stages and processes of the business.
How to Separately Outsource by the Location of Partners
Onshore Outsourcing
This type involves partners within the country where your company operates. Onshore outsourcing thus ensures easy communication and understanding of your business processes. It has a number of pros and cons.
Pros:
- Legal security. You can take advantage of the strong law of protection within the same country.
- Absence of cultural barriers. A common language and cultural values lead to a better understanding of your business processes.
- Easier cooperation. You don’t need to travel far to discuss the terms of cooperation.
Cons:
- Limited choice of specialists. When involving partners from your own country, the problem arises because there are fewer experts in a particular field.
- Higher costs. Compared to other types of outsourcing, this type will cost more.
Nearshore Outsourcing
Nearshore outsourcing is the delegation of business processes to neighbouring or geographically close countries. This type of outsourcing is gaining increasing popularity due to the minimal difference in time zones and convenient communication. In this regard, new nearshore outsourcing firms are emerging. If you decide to involve one of these partners, I advise you to read the N-iX article. It shows the top 25 nearshore outsourcing companies in the world. Just like onshore outsourcing, nearshore outsourcing has its advantages and disadvantages.
Pros:
- Cultural compatibility. Usually, neighbouring countries have similar cultural values — this facilitates cooperation.
- Saving money. This type of outsourcing requires significantly less cost than onshore outsourcing.
- Effective cooperation. Due to the lack of a large difference in time zones, communication takes place in real time and ensures a high-quality discussion of the necessary issues.
Cons:
- Communication barriers. Nearshore outsourcing can create legal or communication barriers, so you should carefully study the contract before cooperation.
- Higher costs than with offshore outsourcing. Usually, closer countries incur higher costs and vice versa.
Offshore Outsourcing
Offshore outsourcing is the transfer of business processes beyond the borders of your country. It is usually chosen to save costs, and when there is a shortage of qualified workers in a certain industry in your country or a neighbouring country. Just like onshore and nearshore, offshore outsourcing has its pros and cons.
Pros:
- Significant cost savings. Compared to other types, offshore outsourcing requires lower costs.
- Access to many specialists. Using this type of outsourcing, the company will definitely find an expert in any field.
- 24/7 productivity. Due to the time difference, an uninterrupted work process is ensured.
Cons:
- Data protection problem. There may be risks of losing the database, so it is necessary to provide reliable protection measures.
- Language and cultural differences. Due to differences in culture and language, there may be difficulties in communication and the efficiency of business processes.
- Long distance and time differences. This will become a problem in communication and quick decision-making.
Final Thoughts
Outsourcing is an effective tool for delegating business processes to reliable and qualified partners. By choosing a cooperation format that suits you, you will gain several advantages: reduced costs, access to a wide pool of specialists, the latest technologies, and the ability to focus on key development functions.
Having become acquainted with the major types of outsourcing, you probably have a question: which one will suit you? Each type has its advantages and disadvantages; however, the golden mean among them is nearshore outsourcing, which combines cost-effectiveness, convenient communication, and quality. With its growing popularity, the market is seeing an increasing number of nearshore outsourcing providers — partners who know their craft and lead businesses to the best results.
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More Recommended Ebike/Scooters
Check out these other ebikes and scooters I've reviewed:
- Urban Arrow Ebike – Last year, I made one of the largest purchases I’ve ever made – I bought a $9,000 electric cargo bike from Urban Arrow. In my Urban Arrow review, I will discuss what it is and why I decided to buy this bike, as well as discuss how impactful a bike like this can be on your journey to financial independence.
- Troxus Explorer Step-Thru Ebike – The Troxus Explorer Step-Thru is a fat-tire ebike that I’ve had the pleasure of riding for a while now. It has amazing power, great looks, and awesome range. If you’re looking for a great fat-tire ebike that offers a lot for the price, the Troxus Explorer Step-Thru is definitely one for you to consider. Check out my Troxus Explorer Step-Thru Review.
- Hovsco HovBeta Ebike – The HovBeta is a folding ebike with great specs and a lot of interesting features, and importantly, it’s sold at a good price point. I’ve had a blast commuting with it and using it to do deliveries with DoorDash, Uber Eats, and Grubhub. Check out my Hovsco HovBeta Ebike Review.
- Vanpowers Manidae Ebike – The Vanpowers Manidae is a fat tire ebike that I’ve been riding as my primary winter commuting bike and have also been using it to do food delivery with apps like DoorDash, Uber Eats, and Grubhub. After clocking in a decent number of miles with this ebike, I wanted to write a post sharing what my experience with the Vanpowers Manidae ebike has been like. Check out my Vanpowers Manidae Review.
- Sohamo S3 Step-Thru Folding EBike Review – A Great Value Folding Ebike – The Sohamo S3 Step-Thru Folding Ebike is an entry-level folding ebike that offers a lot of value for the price point. I’ve been riding the Sohamo S3 for a while now, putting the bike through its paces, and I have to say, this bike has exceeded all of my expectations. Check out my Sohamo Review.
- KBO Flip Ebike – The KBO Flip is an excellent bike. I’ve had a great time riding it and think it’s a versatile bike that can be used for a lot of purposes and can fit a variety of lifestyles. It’s worked out great for me as a general commuter bike and as a food delivery bike. Check out my KBO Flip Review.
- Hiboy P7 Commuter Ebike – The Hiboy P7 is an excellent electric commuter bike that’s offered at an affordable price point. The range and speed of this bike are both very good, so you won’t have any trouble getting anywhere you need to go with it. As a food delivery vehicle, this is also good – with how much range it offers, you’ll be able to work all day on a single charge. Check out my Hiboy P7 Commuter Electric Bike Review.
- Himiway Escape Ebike – The Himiway Escape is an interesting bike for anyone looking for a moped-style ebike. If you’re a gig economy worker, the Himiway Escape is particularly interesting and it’s possible to think of it as an investment, especially if you can opt to do deliveries with the Himiway versus using a car. It’s not cheap, but you can definitely make your money back when you compare the mileage you’ll put on your car versus using an ebike. Check out my Himiway Escape Bike Review.
- Espin Sport Ebike – The Espin Sport is a good ebike for someone who is looking for an ebike that feels and rides more like a regular bike. There are many ebikes that are really only bikes in name. In reality, they’re basically electric mopeds. The Espin Sport, by contrast, is a bike you could probably ride without the battery and you’d feel like you’re just riding a regular bike. Check out my Espin Sport Review.
- Varla Eagle One Scooter – The Varla Eagle One is an excellent scooter that can make sense for a lot of people. It can work as a primary mode of transportation. You can use it to work on gig economy apps like DoorDash, Uber Eats, and Grubhub. And it can also be a recreational vehicle if you’d prefer to use it for that. Check out my Varla Eagle One Review.
- Varla Falcon Scooter – The Varla Falcon is an excellent scooter that offers a good amount of power at a lower price point compared to more powerful scooters. It’s not exactly an entry-level scooter, nor is it a high-powered scooter. I think it fits somewhere in-between those two categories – an intermediate scooter if I had to give it a category. Check out my Varla Falcon Review.
- Hiboy S2 Scooter – The Hiboy S2 is an excellent entry-level commuter scooter that's perfect for someone looking to save some money in transportation costs and improve their commute. Check out my Hiboy S2 Review.
- Hiboy S2R Scooter – The Hiboy S2R is one of the more interesting electric scooters I’ve been able to test out. It’s not a high-powered scooter, but for an everyday transport option, it’s very useful, especially given some of the unique features that it has. Indeed, for the price, the Hiboy S2R might be the best value scooter I’ve used. Check out my Hiboy S2R Review.
- Fucare H3 Scooter – The Fucare H3 is a fun scooter and I’ve enjoyed testing it out. For a daily commuter or quick trips or errands, the Fucare H3 is probably the scooter I’ll use. It’s portable and easy to maneuver, so it’s just easier to take on the road when I need it. Check out my Fucare H3 Scooter Review.
More Recommended Investing App Bonuses
For additional investing app bonuses, be sure to check out the ones below:
- M1 Finance ($100) – This is a great robo-advisor that has no fees and allows you to create a customized portfolio based on your risk tolerance. You also get $100 for opening an account. Check out my M1 Finance Referral Bonus – Step-By-Step Guide.
- SoFi Invest ($25) – SoFi Invest is an easy brokerage account bonus that you can earn with just a few minutes of work. Use my SoFi Invest referral link, fund your SoFi Invest brokerage account with just $10 and you’ll get $25 of free stock. I also have a step-by-step guide for the SoFi Invest referral bonus.
- Webull (20 free stock shares) – Webull's current promotion gives you 20 free shares valued between $3-$3,000 each if you open an account using my referral link. Here’s a guide I wrote about how to earn your free shares using Webull.
- Moomoo (15 free stocks) – Moomoo is a free investing app currently offering 2 different referral bonuses if you open an account using a referral link. Read my Moomoo referral bonus guide for more information.
- Robinhood (1 free stock) – Robinhood gives you a free stock valued between $2.50-$225 if you open an account using my referral link.
- Public (1 free stock) - Public gives you a free stock valued between $3-$70 if you open an account using my referral link.
More Recommended Bank Account Bonuses
If you’re looking for more easy bank bonuses, check out the below options. These bonuses are all easy to earn and have no fees or minimum balance requirements to worry about.
- Upgrade ($200) – Upgrade is a free checking account that’s currently offering a $200 referral bonus if you open an account and complete a direct deposit. These bonus terms are easy to meet, so it’s well worth doing this bonus as soon as you can. Here’s a post I wrote with more details: Upgrade $200 Referral Bonus – Step By Step Directions.
- Ally Bank ($100) – Of all the banks out there, Ally is, without a doubt, my favorite. At the moment, Ally is offering $100 to customers who open an eligible Ally account and meet the requirements. Here are the step-by-step directions to earn your Ally Bank referral bonus.
- Fairwinds Credit Union ($175) – Fairwinds Credit Union is offering a referral bonus for users that sign up using a referral link. Fairwinds has no fees or minimum balance, so this is a particularly easy bonus to earn. Since this is a smaller credit union, my gut instinct tells me this offer won’t be around long, so if you’re in a position to meet the bonus requirements, grab this bonus before it’s gone. Here is my step-by-step guide on how to earn your Fairwinds Credit Union bonus.
- Chime ($100) - Chime is a free bank account that offers a referral bonus if you use a referral link and complete a direct deposit of $200 or more. In practice, any ACH transfer into this account triggers the bonus. This bonus is easy to earn and posts instantly, so you’ll know if you met the requirements as soon as you move money into the account. I wrote a step-by-step guide on how to earn your Chime referral bonus that I recommend you check out.
- US Bank Business ($900) – This is a fairly easy bank bonus to earn, since there are no direct deposit requirements. In addition, you can open the Silver Business Checking account, which comes with no monthly fees. Check out how to earn this big bonus here.
- GO2Bank ($50) - GO2Bank is an easy bank bonus that I recommend people take advantage of if they have an easy way of meeting the direct deposit requirement. I like that it’s easy to open the account and that the bonus pays out quickly. Check out my step-by-step guide on how to earn your GO2Bank $50 referral bonus.
- Current ($50) – Current is a free fintech bank that’s offering new users a $50 referral bonus after signing up for an account using a referral link. Current is an easy bonus to earn and also gives you access to three savings accounts that pay you 4% interest on up to $2,000. That means you can put away up to $6,000 earning 4% interest. That’s very good and makes Current an account I recommend to everyone. Check out my step-by-step guide on how to earn your Current Bank bonus.
- Novo Bank ($40) - Novo bank is a free business checking account that’s currently offering a $40 bonus if you open a Novo business checking account using a referral link. In addition to being a good bank bonus, Novo is also a good business checking account. It has no monthly fees or minimum balance requirements and operates a good app and website. Indeed, it’s the business checking account I currently use for this blog. Check out my post on how to easily open a Novo account.
- Varo ($25) – Varo is a free fintech banking app similar to Chime or Current. It’s currently offering a $25 bonus to new users that open a new Varo account with a referral link. The bonus for this bank is very easy to meet, all you need to do is spend $20 within 30 days of opening your Varo account. Check out my step-by-step guide to learn how to earn this bonus.
Kevin is an attorney and the blogger behind Financial Panther, a blog about personal finance, travel hacking, and side hustling using the gig economy. He paid off $87,000 worth of student loans in just 2.5 years by choosing not to live like a big shot lawyer.
Kevin is passionate about earning money using the gig economy and you can see all the ways he makes extra income every month in his side hustle reports.
Kevin is also big on using the latest fintech apps to improve his finances. Some of Kevin's favorite fintech apps include:
- SoFi Money. A really good checking account with absolutely no fees. You'll get a $25 referral bonus if you open a SoFi Money account with a referral link, and an additional $300 if you complete a direct deposit.
- 5% Savings Accounts. I'm currently getting 5.24% interest on my savings through a company called Raisin. Opening a Raisin account takes minutes to complete, it's free, and all of your funds are FDIC-insured. I explain how it works, why I'm now using it to store my emergency fund and any other cash savings I have, and why I recommend everyone check it out in this review.
- US Bank Business. US Bank is currently offering new business customers a $900 signup bonus after opening a new account and meeting certain requirements.
- M1 Finance. This is a great robo-advisor that has no fees and allows you to create a customized portfolio based on your risk tolerance. You also get $100 for opening an account.
- Empower. One of best free apps you can use to monitor your portfolio and track your net worth. This is one of the apps I use to track my financial accounts.
Feel free to send Kevin a message here.
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