The anatomy of outsourcing

People want to know how much outsourcing costs. Unfortunately, the answer is not a simple one.  I would love there to be a Netflix of employment, but alas, employing people is complex – and so the cost structure tends to reflects this. 

But stick with me – this is worth knowing. **Cue the flip chart and had puppet**

For a start, salaries can vary tremendously. Do you want an entry-level admin or a senior Web3 dev? A junior sales associate or a veteran VP of sales?

On top of the salary, you’ll incur typical government taxes, insurance, healthcare, and employer contributions – as is the case with any country.

Then there is the office, facilities, and hardware. It’s a lot more common these days to work from home – but it’s not necessarily the best approach for everyone. Call me old, but I still believe in offices.

Then there is the service fee. This is the money that goes to the outsourcing firm to make all of this happen – seamlessly and reliably. Yes, these guys also have to make some money. They are the glue that sticks it all together. These fees are sometimes a percentage of the salary costs (markup), and sometimes they are a flat fee. 

You also have the option to get very light support from the outsourcing firm, or alternatively, they can offer maximum support to the point where they can run the department for you.

Sometimes, these separate costs are hidden, and the client is presented with a simpler all-in price. But generally, if you aren’t privy to all the separate costs, you’re probably paying higher margins to the intermediary.

It’s a bit like making a sandwich.

Read more thought leadership articles here:

• Economic implosion heralds offshore boom
• The real face of outsourcing