Outsourcing Options

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When deciding to launch a new business venture, entrepreneurs are faced with many decisions regarding how to handle specialized tasks, such as accounting, recruiting, and technology management. In some cases, entrepreneurs decide to handle the majority of these tasks internally, either overseeing operations themselves or hiring qualified individuals to do so. Another option for new business owners is outsourcing: paying another business or an independent contractor to handle specific tasks. Outsourcing agreements can be temporary or ongoing, and in many cases they offer small businesses a relatively inexpensive means of gaining access to the expertise they need to launch, maintain, and expand operations. With new developments in e-commerce technology emerging on a regular basis, you will likely find it beneficial to regularly revisit your outsourcing decisions to be sure you are taking advantage of options that might prove less expensive and more efficient.


Some small business experts advise entrepreneurs to "decide what you are good at and outsource everything else—i.e., focus your company on your core competency, and let someone else do the rest," according to a March 2002 article in Entrepreneur.com. Others caution against overuse of outsourcing because it may put too much operational control into the hands of others. Issues to consider are cost savings, timing, and the reliability of the business or independent contractor being hired. Does outsourcing actually save the company money? Will it allow the company to complete an important task or offer improved services more quickly? Is quality likely to be compromised? Is the business or independent contractor likely to remain in business?

The technical expertise required to operate an online business prompts many online entrepreneurs to outsource various tasks. As the E-Commerce Times advised in May 2002, "When you want something done right, there are times when doing it yourself is not the best option. Even the best companies need to recognize the limitations of their operations expertise and know when to outsource certain e-business functions." If you are planning to launch a new Internet-based business, or if you are planning to take your business online for the first time, you may have already considered outsourcing some or all of the following tasks: Web site development and hosting, payment processing, order fulfillment, and call-center services. While it is possible to purchase these services separately, in many cases, e-commerce specialists offer solutions which bundle together several services.


One of the first tasks you will be faced with as an e-commerce entrepreneur is deciding how to build and host your own Web site. If you are technologically astute or willing to hire technical staff, you might save money by developing and hosting your own site. Keeping it in-house will also allow you to maintain more control over your site. However, the majority of Internet start-ups outsource this type of work to one of a vast number of Web developers. While some Web-hosting companies limit their services to simply housing your site, many offer Web site design, construction, and maintenance services. Before hiring such a company, be sure you know exactly what services you expect to be rendered and how much they will cost. It is also a good idea to review other sites created by Web development companies, particularly those for businesses similar to yours in size and scope.


If you plan to operate an online business, you also have to decide how you want to process payments. You can obtain the necessary accounts and purchase the necessary software, or you can outsource this process to a third party. Many banks offer online credit-card processing solutions, which handle online payment processing for small businesses. By opting to outsource payment processing, you can dramatically reduce the amount of work involved in setting up a payment-processing system for your business. Technology companies like Verisign, Authorize.Net, and PayPal also offer comprehensive payment processing solutions specifically designed for small businesses. One place to begin researching various payment-processing outsourcing options is MerchantSelection.com, which provides ratings and reviews of payment processors.


Many online ventures also outsource fulfillment services, including packaging, shipping, managing inventory, and processing returned merchandise. Companies specializing in fulfillment for smaller online businesses include e-fulfillment.com, Ifulfillment.com, and Fulfillmentplus.net. Each of these firms offers different services and charges different fees. As a Juanita Ellis advises in Entrepreneur.com, "Before you select a fulfillment company, be sure you've gathered all the information needed to make the best choice. You'll want to know the cost of distribution, warehousing and customer service. In addition, get at least three customer references you can call directly to find out their experiences with the company."


Customer-service centers that field all types of calls, from requests for additional information about a product or service to customer complaints, are known as call centers. Some companies operate their own call centers, but many rely on outside call centers that serve numerous different businesses, all transparent from the customer's perspective. If you believe your business would benefit from call center services, particularly Web-enabled ones, you can turn to an outside source. Experts cite concerns over outsourcing customer service tasks like call-center services due to issues related staffing, training, and quality control. However, outsourcing can also give small businesses access to more sophisticated technology than they might otherwise be able to afford.

Outsourced call-center services are out of reach for most small businesses. By one estimate in 2000, infrastructure alone cost roughly $90,000—or $4,500 per agent—for a 20-agent center. Still, less expensive options began to emerge in the early 2000s. Hoping to target small and mid-sized companies, AT&T Corp. and Qwest Communications have explored network-based call centers, a cheaper alternative to traditional call centers because they use a single network and eliminated the need for costly infrastructure. Call-center technology specialist Rockwell offers FirstPoint Business Edition, a Web-enabled call center solution for small-and medium-sized businesses at $1,625 per user.


Ellis, Juanita. "Fulfillment Companies at Your Service." Entrepreneur.com, July 24, 2000. Available from http://www.entrepreneur.com.

Hirsh, Lou. "The Case for E-Business Outsourcing." E-Commerce Times, May 17, 2002. Available from http://www.e-commercetimes.com.

Lowe, Keith. "The Pros and Cons of Outsourcing." Entrepreneur.com, March 4, 2002. Available from http://www.entrepreneur.com.

Morphy, Erica. "The Dangers of Outsourcing Customer Service." CRMDaily.com, April 25, 2002. Available from http://www.ecommercetimes.com.