Outsourcing 101: Which Non-Core Business Functions Should You Consider Outsourcing

If you're an entrepreneur, you've probably heard about outsourcing. This is when you hire outside vendors to handle tasks or services that are normally handled internally. While some businesses choose to outsource important functions such as manufacturing, product development, or research and development, you can also outsource non-core business functions. This approach can enhance performance and productivity, enabling you to concentrate on revenue-generating and growth-driving activities.

What are core business functions and non-core business functions?

The main difference between core and non-core business functions is that they are critical to the success and growth of the business and are typically the focus of a company's strategic planning and resource allocation, as they directly impact revenue and customer satisfaction. Non-core functions, on the other hand, are supportive in nature. Although non-core functions might not directly affect the company's revenue and growth, they are still crucial for the efficient and effective operation of the business. Non-core functions support core functions and help ensure the business can operate smoothly and efficiently.

For example, accounting and finance may not be a core function for a software development company. However, ensuring the company's financial records are accurate and compliant with regulations is still vital. Another example of non-core functions, such as human resources, is crucial for managing and supporting the company's workforce. HR functions include recruitment, training, benefits administration, and compliance with labour laws and regulations. While HR may not directly generate revenue or drive growth, it is essential for attracting and retaining top talent and maintaining a positive work culture.

As a business owner, it is important for you to understand the distinction between core and non-core functions to prioritise resources and optimise operations. By focusing on core activities and outsourcing non-core functions, businesses can improve efficiency and productivity, reduce costs, and drive growth.

Core Business Functions

• Company's primary activities or services that are directly related to revenue.

• For example, manufacturing, research and development, product development, business development

Non-Core Business Functions

• Activities that support the core functions but they do not directly generate revenue or drive growth.

• Often outsourced or delegated to third-party providers to free up resources and focus on core activities.

• For example, IT support, accounting and finance, human resource management, office administration, customer support, public relations and advertising

The Pros and Cons of Outsourcing Non-Core Business Functions

Accounting and Finance

Administrative tasks such as data entry, bookkeeping, and accounting are essential for any business but can be time-consuming and tedious. Outsourcing these administrative functions can free up time for your employees to focus on more business-related tasks such as customer service and business development. Additionally, outsourcing administrative tasks can save costs, as outsourcing providers typically have the necessary tools and expertise to perform these tasks more efficiently and at a lower cost than an in-house team.

In-House	Outsourced
Pros: More direct control over financial data and processes Faster response times for urgent issues Ability to maintain relationships with banks and investors Cons: Higher labour and overhead costs Limited access to specialised expertise and technology Potential for error and fraud without proper checks and balances	Pros: Lower overhead costs Easy to scale Access to specialised expertise and technology Reduced risk of fraud Potential for improved compliance with regulations Cons: Less direct control over financial data and processes Potential communication barriers with offshore providers Potential for loss of institutional knowledge

Human Resource

Human resource (HR) functions are critical for managing and supporting a company's workforce. While some HR functions may be considered core for specific companies, others may be regarded as non-core such as payroll processing, employee benefits administration, recruiting and staffing, as well as training and development, which can be outsourced to third-party service providers. Outsourcing certain HR functions can help companies reduce administrative burdens, improve compliance, and free up internal resources to focus on core business activities. However, it's crucial for companies to carefully evaluate the costs and benefits of outsourcing HR functions and ensure that they choose a reputable and reliable third-party provider.

In-House	Outsourced
​Pros: More direct control over hiring Maintain better employee relations and culture Cons: Higher labour and overhead costs Limited access to specialised expertise and technology Potential challenges in legal and compliance issues without proper training and resources	​Pros: Lower costs Access to specialised expertise and technology Scalability Reduce the risk of legal and compliance issues Potential for improved benefits and HR processes Cons: Less direct control over hiring and employee relations Potential communication barriers with offshore providers Potential for loss of institutional knowledge

Marketing and Advertising

Marketing is another key function for companies to promote products or services and generate revenue. While some marketing functions may be considered core for specific companies, others may be regarded as non-core and can be outsourced to third-party service providers. Outsourcing certain marketing functions, including market research, online and offline advertising, public relations, performance marketing, search engine optimisation, content marketing, and social media management, can help businesses improve their marketing efforts, save time and resources, and focus on core business activities.

In-House	Outsourced
​Pros: Control over marketing efforts and strategies Maintain the quality of work Foster collaboration between different departments and teams. Cons: Can be costly Limited expertise and technology Time-consuming	Pros: Avoid the expenses of hiring and training in-house marketing staff Access to a team of experts who have experience and knowledge in various marketing disciplines Flexibility to scale up or down marketing efforts Cons: Lead to a loss of control Potential communication challenges Quality concerns.

Conclusion

As a business owner, outsourcing non-core business functions can be an excellent way to increase efficiency and productivity. However, it's wise to approach outsourcing with a clear understanding of the risks and benefits involved.

One piece of advice for business owners considering outsourcing non-core functions is defining their goals and objectives. Before outsourcing any tasks, it's essential to ask yourself why you want to outsource this function, what benefits you hope to gain from outsourcing, and how you will measure the success of the outsourcing arrangement - this can help you to select the right outsourcing partner and ensure that you are making informed decisions and choosing the right outsourcing partner.

With the right approach, outsourcing can provide many benefits and help businesses achieve their goals more efficiently and effectively.

Ready to outsource your non-core functions? Check out our services page to learn more about how we can help you streamline your business operations.