There are plenty of benefits to outsourcing, from time and cost savings to a higher quality of work. But there are also downsides to be aware of and certain tasks you should keep under your roof.

Dave Walker, director of technology at storage specialists Lovespace, is more than familiar with outsourcing gone wrong.

When he worked for a larger company, senior management made the decision to outsource a major IT project. The problem? No one in the management team knew how the project should be run or what they wanted from it.

“The solution was to basically lob a grenade over the fence of outsourcing. Then a sales team somewhere out in the wilderness picks up the grenade and throws it to their engineers to try and solve,” Dave said.

“But because there’s not enough communication, not enough internal ownership of the problem, six months or three years later the ‘solution’ comes back and it’s not what was asked for. Plus, it highlights that what was asked for wasn’t the right thing anyway.”

The story highlights some key lessons of outsourcing:

• Understand the task or process you’re outsourcing
• Have clear reasons for outsourcing
• Recognise that outsourcing is about building a relationship – not just a way to hand risk over to someone else.

There are a number of different reasons for outsourcing:

Lower costs

Lower costs are one of the biggest benefits of outsourcing. Specialists can carry out the work more efficiently and have economies of scale. This means the cost of completing a project is often lower than you could achieve internally even after they’ve added a margin.

Outsourcing can help to keep costs low by avoiding bringing on additional team members, which requires not only the salary but also the investment in office space, equipment and management time.

Access expertise

Most businesses don't have every specialist they need in-house. Look at digital marketing for example.

To build a competitive online presence, you need expertise in email, social media, SEO, paid advertising, Google Analytics and more. How do you ensure your marketing activity is as effective as possible?

Outsourcing is useful because it gives companies the chance to fill skill gaps with specialists. A digital agency, for example, will have staff who are proficient in each area of marketing.

Free up internal resources

If your internal teams are tied up working on ambitious projects, you might want to outsource routine tasks. A common example is developers; if your internal team is focused on building a new platform, you may opt to work with an external agency to deal with bugs and day-to-day issues.

A caveat to this point is that you still need to factor in time for project management and clear communication with external contractors. While technology makes it easier to stay updated on projects remotely, it’s important to put in the time and effort to make sure everyone is on the same page with goals and objectives.

Improve company focus

Improved focus is one of the main reasons for outsourcing tasks. If your employees are bogged down with low-impact, administrative tasks on a daily basis, they won’t have the time to be creative or think about the bigger picture. Outsourcing frees up their time, allowing your business to make the most of your in-house expertise.

To decide what tasks to outsource, it’s a good idea to start with these three statements. List relevant activities or processes that could fit under each heading.

1. These tasks are time-consuming and add little value being in-house.

Think about the activities that your staff do simply because there isn’t anyone else to do them. These tasks might be vital to the business, but keeping them in-house doesn’t add any extra value.

For example:

• Bookkeeping and payroll

2. These tasks are valuable, but my company doesn’t have the time or expertise to execute them properly.

Be realistic about the tasks you aren’t doing justice to. These are activities that will have a positive impact and drive growth, but they regularly slip down the list of priorities. Perhaps you don’t have the time to develop a proper strategy or you lack the in-house expertise to reap the benefits.

For example:

• Social media marketing
• Event management
• Recruitment

3. These tasks are expensive to run in-house and would be cheaper to outsource.

Tasks that require specialist equipment or technology fit into this section. Is a client looking for a one-off project that requires cutting-edge technology? Does it make business sense to hand over these operations to an expert?

For example:

• IT operations, including hosting and cybersecurity
• Software development, particularly if you’re a small business and don’t have a fully-fledged team in-house

While there are numerous tasks you can outsource, there are also certain tasks that you should keep in-house.

Don’t outsource core competencies

Think about tasks that are vital to your business. Is it a core part of your brand? Is it something you do better than everyone else? If so, keep it in-house.

Outsourcing lets your company focus on what it does best – so don’t outsource what you do best!

There are two main reasons for this:

1. Outsourcing prevents you from developing staff and growing a talented team of experts in-house
2. Outsourcing can go wrong. If it’s vital to the success of your business, don’t pass it on to someone else

Don’t outsource problems

Every business runs into problems along the way, whether it’s a technology challenge or an advertising campaign that isn’t working. It might be tempting to outsource, but having a third party blindly take over probably won’t lead to positive results.

Outsourcing problems can also create a reliance on contractors or external agencies. It means that your team won’t be pushed to solve challenges in the future and might lack an understanding of how elements of your business or product work.

Don’t outsource difficult or sensitive conversations

Letting an employee go is one of the toughest things you’ll do as a leader. But it’s something you should handle internally.

Outsourcing difficult conversations paints a picture of a leadership team that doesn’t really care about its staff. While it’s natural to consult with an expert, your managers need to be capable of delivering both good and bad news.

There are plenty of reasons for outsourcing tasks or projects. It frees up time to focus on what really matters, gives you access to external expertise and ensures key tasks aren’t sidelined.

Once you’ve decided what you want to outsource, the next step is to choose the right contractor or agency. Talk to a number of different firms and do a trial run before you hand over an important project. Some companies are good at selling themselves, but have little substance behind the sales patter.

Zoe Cunningham, MD of software development specialists Softwire, recommends avoiding businesses that claim to be able to do everything – not all projects will be viable.

“Outsource providers will often just say yes to everything in the brief in order to win the work. But organisations should try to be wary of any professional services partner that offers a blanket 'yes' response,” she said.