Freelancers vs. Outsourcing: Which is Best for Your Business?

Behind every successful business lies the collective effort of a skilled workforce. It’s never a one-person act — the bigger your business becomes, the more people you need to be working on your side.

Finding qualified talent amid rising overhead costs poses an additional challenge. But luckily, you have two cost-effective alternatives to help you build your dream team: work with a freelancer or hire an outsourcing company.

To know which of these two is best for your business, let’s look at their main differences, including their advantages and disadvantages.

Key Differences Between Freelancing and Outsourcing

Freelancing and outsourcing are geared toward the same goal — providing businesses with a specific service. Despite their shared interest, freelancing and outsourcing have significant differences. Knowing the fine line between these two business concepts can help you make a more informed choice, especially if you consider cost, management, and output quality as deal-breakers.

To begin with, let’s look at their definitions.

1. Working with a Freelancer

Freelancers are independent professionals who provide specific services to their clients, often in a project-based, hourly, or contractual setup. Their tasks may range from graphic design, website development, and copywriting to photography and business consulting.

Being a freelancer is synonymous with being a business owner, especially for those who take this line of work seriously. But for some, it is a gig or a side hustle on top of their regular jobs. 

Whether they see it as a business or a side hustle, freelancers are in charge of finding their own clients, managing their schedules, and sending invoices. They also use their own equipment to complete the job. Except for the initially agreed-upon conditions, such as deliverables and timelines, freelancers have full control of how they complete their tasks and where they want to work.

2. Outsourcing to a Service Provider

Outsourcing, on the other hand, occurs when you hire a third-party service provider to handle some of your business functions. Unlike freelancing, where you work with an independent professional, outsourcing means working with another business entity.

The outsourcing work arrangement also depends on your agreement with the service provider — part-time, full-time, contractual, or project-based. You can also communicate specific requirements, such as your ideal staff’s skills, expertise, and years of experience. The service provider will take it from there, tapping the capabilities of their recruitment team to find qualified candidates on your behalf.

Legally speaking, your outsourced staff is your service providers’ employee. Because of this, the latter will handle all administrative needs like payroll, benefits, government-mandated contributions, equipment, workspace, and management, among others. The level of control you have over your team also depends on the outsourcing model you choose. Two of the popular options are managed services and staff leasing.

Outsourcing also gives you access to a wide range of services: customer service, IT support, digital marketing, data entry, design and creatives, back office support, analytics—you name it!

Do you need an extensive (yet simplified) guide about outsourcing so you can leverage its full potential? Get our free downloadable outsourcing guide.

In summary, freelancing means working with an independent contractor who provides specific services such as graphic design and website development. Meanwhile, outsourcing means working with a third-party service provider to handle certain business functions like customer service and data entry. Whereas working with a freelancer is great for one-time projects, outsourcing is ideal for long-term engagements and larger-scale initiatives.

Pros and Cons of Hiring Freelancers

Working with a freelancer is ideal for one-time projects or tasks that come and go. For example, if you don’t have a multimedia artist yet and need to release a promotional video, you can easily hire one through freelancing platforms like Fiverr or UpWork. But what else should you consider? Below are some of the pros and cons of hiring freelancers.

The pros of hiring freelancers:

• Easy access to skilled professionals. You can easily find a freelancer that offers the service you need within your budget on various freelancing platforms.
• Reduced operational costs. Working with a freelancer means you’ll only pay for the actual service you need, when you need it. 
• Direct communication. Because you’re working directly with an independent contractor, you can give them direct instructions about the task they must complete.

The cons of hiring freelancers:

• Quality issues. A freelancer has full control over how they complete their work. This can raise concerns over the quality of their output. While revisions are possible, some freelancers require an additional cost for any changes. For freelancers who are paid hourly, this can increase the number of hours they render, resulting in an inflated invoice.
• The need to constantly find a new freelancer. Your engagement with a freelancer stops the moment they complete their task. If you need their service again, there’s a possibility that they may not be available because they’re already working with another client. As a result, you’ll need to look for another freelancer who can take on the job. This can be time-consuming since you’ll need to do everything over again.
• Communication delays. Communication is always a two-way street. Despite the ability to communicate directly with your chosen freelancer, delays may still arise. As a business owner, you can be too busy when your freelancer needs something from you. Likewise, your freelancer may also be occupied with other engagements to give you a prompt response.

Pros and Cons of Outsourcing

Outsourcing can save you up to 70% on operational costs. This business activity, which can help you bridge the gaps in your business, works best for long-term engagements and even time-limited projects. However, there are still challenges you need to look out for. 

The pros of outsourcing:

• Access to skilled professionals. Outsourcing lets you specify what you’re looking for in a talent so they can assign you to someone who meets your qualifications. It’s also advantageous that your outsourced staff work in a corporate setting because they can get proper support and training from their peers.
• Better quality output. Providing quality service is a must-have for outsourcing companies that want to stand out in the market. To achieve this, most BPO companies have dedicated Quality Assurance teams to monitor the quality of their employees’ work. Outsourced staff also have a team leader or supervisor who oversees the former’s performance from time to time. As a result, you’re assured of receiving top-notch service.
• Service provider to handle admin-related duties. Unlike a freelancer, your outsourced staff is free from any admin-related responsibilities. Because of this, they can focus more on their respective tasks. The outsourcing company will take care of everything on the backend. This includes your staff’s payroll, software, equipment, workspace, etc.
• Increased cost savings. Outsourcing is a cost-efficient way to fill vacancies in your organization, especially if you choose to outsource in offshore countries. To get an idea of your potential cost savings with outsourcing, try our savings calculator.
• Guaranteed data security. Data security is also a big thing with outsourcing companies. They must adhere to strict data protection laws and regulations to continue working with clients from different countries. With this, you can be confident that your data will remain safe regardless of the service you plan to outsource.

The cons of outsourcing:

• Limited control. Depending on your chosen outsourcing model, you may have limited control over your outsourced team. 
• Language and cultural differences. If you plan to outsource to offshore locations, you must also be prepared for possible language and cultural differences. Choosing a country with high English proficiency and cultural affinity with your country can help you prevent this concern.
• Hidden costs. You must also watch out for potential hidden costs. As much as possible, ask your service provider for a complete and transparent breakdown of their service pricing.

Factors to consider when choosing

Choosing between freelancers and outsourcing depends on your needs, budget, and expectations. Here are some factors to consider.

1. Cost

When looking at the cost, it’s important to assess how frequently you plan to use the service. Doing so can help you compute your potential cost savings. For example, working with a freelancer can be cheaper for one-time projects. However for long-term engagements and regular tasks, outsourcing may be a better option.

2. Quality

For a businessperson like you, getting your money’s worth is necessary. Before deciding, you should do your due diligence by checking their portfolios, reading customer reviews, and reviewing their quality assurance processes.

3. Scalability

If your business experiences growth, measuring your service provider’s scalability should be a top priority. It’s a critical factor since you need to have enough talent to handle the growing needs of your clientele. Otherwise, it may leave your employees feeling overwhelmed and your clients feeling underwhelmed with the service they receive.

This begs the question: Of the two choices, freelancing vs outsourcing, which is better at scaling up quickly?

With everything we’ve discussed above, we can conclude that the best option still depends on your current business needs. However, it’s also safe to say that hiring an outsourcing company can be more beneficial if you need extensive support for your day-to-day operations and if you’re particular about the quality of work you wish to receive.

Scale your business with the right people

If you believe that outsourcing is a better option for your business, Booth & Partners is here to help. We are an outsourcing company that offers staff leasing and managed services for various business processes. When you work with us, we can guarantee high-quality service delivered by our skilled talents from the Philippines and Colombia.

Contact us today to learn more about our services.