Outsourcing

These are the Do's and Don'ts of Working With a Third Party Service Provider

Every tiny operational detail, however small it maybe, holds importance in a start-up and cannot be ignored.
These are the Do's and Don'ts of Working With a Third Party Service Provider
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Entrepreneur Staff
Senior Correspondent, Entrepreneur India
6 min read

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As an entrepreneur sets out on his/her journey, one of the first things that needs to fall in place is the team. But in the initial stages when the business is bootstrapped, it’s not possible to hire full time employees who look into the various departments required for the functionality of the startup. In such a scenario, start-ups often turn to third party services or freelancer who can execute these operations for them.

It’s a trend

It’s not just a trend amongst startups but for the ease of it big brand names from IBM to American express are also following the same trend. None of these companies have support staff of their own, they outsource all the services like IT and Office support. Yet it is difficult to find out who is from the outside and who is a member of the staff, but the fact is on an average 40 percent of their staff in any business unit is outsourced.

The Services Needed

In the initial stages, most entrepreneurs are running around, looking after each process in the start-up. Amit Sodhi, Co- founder, Rentickle, said that as a start-up you know one thing to be true: there is only so much time in the day. While you have what it takes to manage a variety of tasks, you don’t want to bite off more than you can chew. “A key step towards the direction is taken by outsourcing non-core activities. The services which are usually outsourced by startups are Logistics, Supply Chain Management, Customer Service/ Support, Accounting & Payroll Management, IT & Online Security and Creative & Content Management for Marketing etc.,” said Sodhi.

To offer their startups convenience, a lot of co-working spaces also partner with a lot of third party service providers to their start-ups. 91springboard, a co-working facility across India, has booster credits which it offers its startups. Pranay Gupta, co-founder, 91springboard said that they have negotiated with over 35 companies that provide critical services to startups in order to secure discounted rates for its members. “We extend access to these boosters to our members so that they may avail services from the likes of PayTM, Google, Vodafone, Tata AIG and more at a much cheaper price,” he said.

But when you are hiring a third party service provider, you are entrusting them to take on your start-up journey with you without leaving any room for error. Every tiny operational detail, however small it maybe, holds importance in a start-up and cannot be ignored.

So, what should an entrepreneur know before hiring a third party service?

Clarity of Engagement

While a lot of start-ups turn to third party service providers for the smooth functioning of their business, it is essential to check that the provider actually understands what it takes to be working with a start-up. That is why clarity of engagement is important while interacting with a third party service provider. The founder has to ensure that the provider too understands his/her vision for the startup. Amit Mishra, strategy and development director, India for Eight ops, a business card management app from the Japanese company Sansan, said that when you are signing a third party service provider don’t just think about fast implementation but also the quality of the work being done.

While partnering with the third party provider, Sodhi said that it’s also necessary to have a vision of where you want to go. A service is what differentiates one player from its competitor in today's market and leads to its making or breaking. “While outsourcing may cut down your costs and bring down turnaround time, it is important to have a long term view while deciding which service to outsource and which not to. Non-core services might become a source of sustained competitive advantage tomorrow and outsourcing the same might prove otherwise by leading to decreased quality standards, sluggish response times coupled by slow issue resolutions and so on,” he said.

Keep the Timeline in Mind

While you may be working at a breakneck speed, it’s important to not to forget that your third party service provider has other clients too. In such a scenario, it’s important to discuss the timeline and the course of the project you are outsourcing, believes Sheetha Chacko, communications director, Milestone Media. “Prior to signing up a provider, discuss the number of projects you will be outsourcing and the timeline for each,” she said. This will prepare the third party service provider and also help you build a good rapport with them, which is essential if you want to continue working with them she said.

Understand the Legal Aspect

A third party service provider often comes from a founder’s circle of friends and acquaintances. However, even then a founder should understand the legal aspect of the contract. A lot of entrepreneurs are working on revolutionary technological products and so it becomes important for them to protect their IP. Mishra too said that signing a legal agreement is necessary while outsourcing your work. “A third party could misuse your work and that’s why it’s important to sign a NDA with all aspects covered in detail– involving the smallest of technical aspects to cover all loopholes. These are the logical things that entrepreneurs often miss but shouldn’t,” he said.

Do Not Share Complete Control

The authority of the outsourced product should lie with the founder or the start-up. While it’s important to gain the trust of the third party service provider, yet you can’t leave an outsourced hire in complete control of your product. Abhishek Agarwal, Co-founder, Globepanda said, “Check with them from time to time so that they know you have the final word on things. Also, don’t outsource for a short while and think you will manage it yourself in the future. Instead focus on other aspects of your business.”

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