Mention the term 'outsourcing' and different associations get formed in the minds of different people. For instance, outsourcing may conjure up images of a freelancer working in some remote location in a far away Third World country. Or, it could mean project outsourcing large chunks of software development to a leading outsourcing company that has clients spread worldwide.
So, just how many models of outsourcing are there? Which is the best and what are each one's strengths and weaknesses?
Broadly speaking, there are three main types of outsourcing models in the industry today, each catering to a niche market. These are the freelancing model, the project outsourcing model and, finally, the virtual employee model of outsourcing.
The Freelancing model of outsourcing
This is the most common and popular form of outsourcing wherein a freelancer is contracted from the various leading freelancing portals such as oDesk, Elance, Freelancer or Guru. While lowest bids are a big attraction, the wide choice available is also a huge draw for clients who can be based anywhere in the world and could be running a business of any size.
Hiring a freelancer is also easy which makes it the obvious choice for most businesses. A freelancer is usually contracted for short-term and low-budget projects that do not require too much collaboration or communication between the client and the freelancer, such as article content writing, SEO, and data entry.
However, the freelancer will always remain an external 'agency', who is neither an employee nor a dedicated resource. Freelancers usually work with several clients and handle multiple assignments, giving priority to the higher-paying projects. So, you are never sure just what priority your own outsourced task is being assigned and whether the deadline set will be met. There's always an element of risk involved while working with a freelancer since no contract gets signed with them and its all purely through emails and good faith. Since there is no supervising authority involved in freelancing, lack of accountability and professionalism are often the chief complaints against them. In addition, a freelancer works independently from home, with a limited set of hardware, software and communication channels.
The Project Outsourcing model
Big companies which need to outsource large volumes of work most commonly employ the project outsourcing model. In this, organizations outsource entire projects to outsourcing companies in countries that specialize in outsourcing, the most popular being India.
The most common projects that are project outsourced are software development, accounting software, mobile application development, software for medical billing and the like. With this model of outsourcing, the outsourcing company takes complete charge of the project. The client simply states the requirements at the beginning of the process and after that has to, more or less, relinquish all control over the outsourced project. The outsourcing company that is project managing the client's work executes the work in the manner it deems fit. It may assign work to a particular team which then works on it. The final product/ application/ software is then submitted to you by the outsourcing company.
The advantage of this model is that deadlines are rarely missed and experts work on your project. On the flip side, project outsourcing works out more expensive than either a freelancer or a remote employee because you are paying for the services of an entire team even though in reality an individual worker may have been assigned to it. However, the biggest drawback of this method of outsourcing is that you have absolutely no control on your project once you hand it over to the outsourcing partner.
The Virtual Employee model of outsourcing
The new entrant in the field, and one that is slowly revolutionizing the way the world outsources, the virtual employee model is by far the most effective way to outsource. In this, a client or a company ties up with an outsourcing vendor that provides them with their very own virtual employee. As the name suggests, a 'virtual' employee is nothing but an employee who works for the client in a permanent, full-time manner, except that this employee works remotely from the vendor's office.
A virtual employee can handle any kind of work in just about any domain – finance, law, medical work, data entry, content writing, software development, graphics designing, animation and even architecture and engineering.
The advantage of hiring a remote or virtual employee is that despite this carrying the tag of outsourcing, it is actually the equivalent of getting your own dedicated resource. That's not all. The virtual employee works out of a controlled office environment of the outsourcing service vendor and not in isolation from home. You play an active role in the selection and hiring of your remote employee, contracts are signed and the vendor's office effectively serves as an extension of your own unit. In other words, outsourcing to the virtual employee gives you an offshore extension of your office with the vendor's HR executives acting on your behalf to monitor and supervise your employee.
And since the service vendor's office is equipped with world-class infrastructure, the latest hardware and software and state-of-the-art communication systems, there are few chances of the work or interactions getting disrupted.
Therefore, in the final analysis, it does look as though the virtual employee model is the best outsourcing practice.