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Outsourcing: Not Just Cheaper

From processing payroll to integrating IT, outsourcing certain functions can mean better talent at lower costs.

Despite the stigma often associated with it, outsourcing is widely used for a variety of business functions--and it's not always about finding the cheapest solution. The smartest small businesses farm out the functions that aren't their core expertise, which adds value and saves money.

"What they keep in-house is the competitive differentiator," says Jagdish Dalal, managing director of thought leadership for the International Association of Outsourcing Professionals and president of JDalal Associates, an IT and business process outsourcing company in Hartford, Conn. "Amazon immediately thought about using UPS for distribution. Dell kept its marketing and design in-house and the rest was outsourced."

Here's a look at functions that any small business should consider outsourcing at various points in their evolution.

Tools For Farming Out

Collaboration platforms that help you stay connected to your vendors

Skype : A free downloadable service, Skype has voice, video and text chat capabilities that allow real-time vendor interaction--even overseas

Google Docs : This free online platform offers virtual files that let parties view and edit projects, presentations and graphs, eliminating the constant exchange of e-mails.

Basecamp : This virtual project management tool (starting at $24 per month) lets teams interact by creating to-do lists, tracking deadlines, sharing files and logging project hours.

SurveyMonkey : This free service isn't just for research--it's also good for collecting feedback on projects and for managing schedules.

C-level talent: As your business grows and you need more assistance with marketing and financial services, consider contracting with a for-hire chief marketing officer or an accounting team that can act as your off-site CFO. Doing so can help you get high-priced strategies without the high price.

Human resources: Healthcare packages and employee benefits are constantly changing. A benefits firm can help you find the best and most affordable packages for your situation. "You need to find someone flexible enough to adapt to you and have the products and services for you as you become a larger organization," says Mark Perlberg, president and CEO of Oasis Outsourcing, which provides outsourced HR services nationwide.

Legal: Small businesses should outsource this function. Law firms are adept at circumventing local, state and federal laws and will save you from excessive legal headaches.

IT: Much of the offshore outsourcing industry caters to IT services--but because of increasing costs and concerns with quality control, many companies are bringing the function back onshore. "Rates onshore have dropped because of offshore outsourcing," says Bill Hayduk, president of professional services firm RTTS in New York, which provides off-site software services. "Over the last 10 years, there have also been infrastructure problems offshore with power outages, quality of skill sets, finite resources and sometimes software quality."

Website strategy: The most effective way to create a well-designed, easy-to-navigate website--complete with the most appropriate search engine optimization tools and other marketing functions--is by leaving it to the experts. Check out local web design companies that will work with you to custom develop your site.

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This article was originally published in the July 2010 print edition of Entrepreneur with the headline: Not Just Cheaper.

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