The Difference between Outsourcing and Subcontracting

November 3, 2021

Outsourcing and subcontracting are two excellent ways of getting work done in a pinch. While business executives tend to confuse one for the other, the two practices are different enough. The distinction is found in how much a company can govern the work process and if the work could be performed in-house. 

Understanding the differences between the two is essential for ensuring your company pursues the most cost-efficient work process, whether you need outsourced sales consultants or an in-house lead generation team. Here’s what you need to know about the differences between outsourcing and subcontracting:

All About Outsourcing

One of the ultimate benefits of outsourcing is that it saves a company a lot of money by having a third party perform the work instead of an in-house employee or team. It is usually part of a company’s plan to lessen labor costs and can apply to various areas, like sales, business development, accounting, and more. 

Under outsourcing, a business can allocate whole departments or jobs to an external firm permanently. Typically, outsourced tasks are processes that a company’s internal staff can perform but are restricted by time or staffing. When a company outsources certain functions, its personnel can focus on their core roles instead, ramping up productivity.

Many companies view outsourcing favorably since it offers a cost-effective solution, making payrolls, overhead costs, and operating expenses more affordable. Through this, businesses can contract an outside provider to take over their sales, administrative work, and other tasks. For example, if you have a small sales team and you’re tackling many different campaigns, it makes sense to get an outsourced sales team to cover one of these. Doing so will lessen the burden on your in-house employees, helping them feel less stressed and more focused on their tasks.

All About Subcontracting

On the other hand, subcontracting is the process of hiring an individual or company to complete a specific, specialized task that usually cannot be done by an in-house team. While it sounds like hiring an in-house employee, subcontracting does not permanently assign entire roles or departments within a company, making it a temporary work arrangement. The task is cemented in a contract, which means that once the terms of the agreement have been fulfilled, the partnership has ended.

Subcontracting is a relatively older business term since it conventionally refers to the process of hiring an outside company or individual to complete specific parts of a project or a business contract. Usually, companies subcontract another provider to perform work that could not be done internally. The two parties work closely together throughout the project and strive towards its success, although it’s important to note that the hiring party has sufficient control over the entire process.

For instance, subcontracting is popular when trying to construct a model house. A firm may hire a builder to build it. However, while the builder’s staff is competent in all that’s required for construction, they do not have the interior design skills needed for a model house. For this reason, the builder subcontracts the decoration to a qualified person to complete the job.

Conclusion

Outsourcing and subcontracting are two prevalent practices that have helped enterprises worldwide become more efficient and meet their goals. Now that you know the difference between the two, you can discern which kind of work process benefits your business the most.

The Sales Group is a professional sales consultancy and outsourcing firm specializing in outsourced sales, lead generation, fractional sales, and more throughout North America. Contact us today to find out more about how we can ramp up growth for your business.

Donna Gliha, Chief Sales Officer / President
donna.gliha@salesgroup-global.com
salesgroup-global.com

A proud nominee of the 29th Annual  RBC Canadian Women Entrepreneur Awards

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