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The Limits of Outsourcing

From its website, Stormy Studio looks every part a professional digital production company. The website is beautifully designed, the portfolio is impressive and the announcement of a prestigious award run by the company’s founder, Jon Draper, is enough to give any potential client the confidence to pick up the phone and discuss a project. But a clue to the way the company actually works lies in its description of a “local and world wide team” who can assure “quality, speed and competitive costs.” The business is part-time and run from Draper’s home as he works a full-time job at an animation studio. His employees are himself and his wife and that “local and world wide team”? A freelance graphic designer, music composer, photographer, 3D modeler/animator, and a mobile developer scattered around the world and ready to take on work as it comes in. Stormy Studio is a company based on outsourcing. But while outsourcing is helping Jon Draper achieve his goal of running his own full-time production company, it’s not a solution for everyone at every time.

One problem, although perhaps not the biggest, is the cost. Sharing the work also means sharing the revenue so that winning a job worth, say $5,000, may result in less than a thousand flowing to the company if most of the work is outsourced. When that revenue minus outsourcing fees is earned without effort, outsourcing looks like a good deal, an opportunity to make a profit while allowing others to do the work.

From a Specialist to a Manager

In practice though, that’s not what happens. Business owners like Jon Draper will still be doing work even if they’re outsourcing the bulk of the labor. Instead of doing the fun things like design or modeling, they’ll be doing the less interesting (at least for someone who studied animation and production) tasks of marketing, negotiating and project management.

And they’ll be taking on risk. Outsourcing work to freelancers means taking on a commitment to pay them regardless of what happens to the client. It’s not unusual to find that a client at some point will either delay or dispute payment, forcing the entrepreneur to pay out of pocket until the dispute is settled.

If you can’t guarantee that the freelancer will be paid, even if it means dipping into your own cash until you receive the money from your client, then you shouldn’t be outsourcing.

Those kinds of problems though are relatively rare. More common and much harder to answer is the question of what to outsource. Hand out work that you’re capable of doing yourself and you will be changing your job from hands-on designer, copywriter, animator or whatever it may be to a job in management and sales — fine, if that’s what you want to do. At least you’ll be doing it for your own firm.

More common though is the outsourcing of work that the company’s founder lacks the skill to do. A company formed by an animator, for example, may well need to look to a freelance music composer to produce the score for a film or a specialist modeler to generate the 3D animation.

That, though, raises new issues. Even if the entrepreneur lacks enough skill and knowledge to do the freelancer’s work, he or she must still have enough expertise to be able to judge its quality. And having acquired that expertise, there’s always the temptation to enhance it so that the next time a client needs a film with a score, a particular kind of writing or some photography to match their website, the entrepreneur will be able to provide it themselves.

Outsourcing work to experts is one solution to a problem. The other solution — and it can be a big temptation — is to regard that request as revealing the holes in your own knowledge and an opportunity to become a better all-round professional.

A Freelancer’s Time Isn’t Yours

Timing is an issue too. Stormy Studio’s promise that its worldwide team means faster service is only true if you take into account the benefits of different time zones. The company is based in the UK which means any local freelancers will have completed a day’s work just as a client in the United States is checking his morning email.

But the distance has a downside. Freelancers work for multiple clients and the people who hire them only have control over a small number of their hours each day or each week. When a client tells a traditional company that it needs a product right away, the boss can tell the team to drop what it’s doing and focus on a more urgent task for now. Someone who hires a freelancer can only stress the urgency and hope that the person he hired has a flexible enough schedule to be able to take it into account. It doesn’t always work that way.

But the biggest reason to think twice before outsourcing work to a freelancer is the hardest to resolve. You have to trust the freelancer to produce work that’s as good as yours.

The client isn’t going to care who did the actually work. He won’t know that someone in Romania wrote the code or that the animation came from Russia. He’ll only know that it came from you — and if the work is shoddy or below professional standard, it’s your name that he’ll be warning people against.

Outsourcing work means putting your reputation in the hands of freelancers whom you might not know and who will care far less about your name than you do.

None of this to say that you should never outsource work to others or that you should try to do everything yourself. If you’re a talented designer it makes sense to hire an equally talented programmer to do the coding. But you need to be sure that:

  • you have the money to pay your freelancer;
  • are outsourcing work that you can’t do better yourself;
  • that the freelancer can produce the work based on the schedule agreed with the client;
  • and that the work really will be as good as yours.

Get all that right, and you’ll be running your own virtual business too.

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