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To Outsource or Not to Outsource
by: Valerie Swisher
In these days of restricted head count and tight budgets, the question of whether to outsource or hire in-house staff is more critical than ever. The technical publications function, however vital, is undergoing more scrutiny and also facing greater challenges than ever before. Companies that already employ an in-house technical publications department are looking at doing more with fewer resources.
Start-ups, with no internal technical publications staff, are struggling with how to develop technical documents in the most cost-effective way.
This article examines the pros and cons of entrusting all or part of the technical publications function to outside vendors. By examining a typical project, I will analyze costs and also answer questions about when to staff which functions internally.
Numbers Speak for Themselves
For both start-up and mature companies, the basic questions are: When do you outsource your technical publications, and when do you staff technical publications internally? There are no quick answers to these questions, because there are several factors to consider. The easy part of the answer is straightforward number crunching.
The more difficult part of the answer depends on how large your company is, the nature of your products/technologies, and how you operate internally. I can't provide all the answers for your specific company.
However, drawing on my 19 years of experience in managing the technical documentation function, this article provides a framework for analysis and decision-making vis--vis outsourcing and/or staffing the various functions vital to technical publications.
Let's take the easy part of the equation first by examining a typical case: Company X requires a new documentation set for a complex piece of equipment, say a new line of network routers.
The associated document has the following requirements:
- The document must be complete and ready to go to the printer (or be posted on the corporate website) in 14 weeks.
- The document will be approximately 200 pages long and contain about 50 graphics (a mix of renderings and diagrams).
- There will be two drafts (first and final).
- Editing will take place during each review draft (two edits).
- A production specialist will develop the template suite.
The people required for the project are:
- Senior technical writer.
- Graphic artist.
- Copy editor.
- Production specialist.
If these people are employees, the cost of using them includes salary, benefits and other overhead. (Figures used are based on San Francisco Bay Area salaries, benefits and overhead.
National averages will be lower.
)
If the same functions are outsourced for this project, the costs are not burdened by benefits and overhead. (The costs used for contract workers in this analysis are averages, derived from a range of typical costs for each function.
The actual cost in any specific instance will vary.)
Cost of Outsourcing on 14-Week Project
Function Hourly Rate Hours Total
Sr.
Tech Writer 75 560 42,000
Graphic Artist 75 150 11,250
Copy Editor 65 68 4,420
Production Specialist 65 36 2,340
Total for Project - $60,010
The savings in this scenario is $55,969 when the work is outsourced.
If you're just looking at 14 week's worth of work, the monetary analysis is compellingly in favor of outsourcing. But of course, most companies have more than 14 weeks worth of technical documentation work.
On average, a typical company has two or three releases of a product, resulting in two or three projects (of approximately 14 weeks duration) per year.
Over a year's time, then, let's assume a company has three technical documentation projects that last about 14 weeks each (for a total of 42 weeks).
Using the same figures as above, let's look at the annual cost of using outsourced labor vs. in-house employees.
The table below provides the data.
Annual Cost of Outsourcing vs. Employee
Employee vs.
Outsourced Annual Cost
Employee $430,779
Outsourced $180,030
Delta $250,749
The reason for the rather eye-popping savings of $250,749 is that contractors go away between jobs, and employees don't. A good rule of thumb is: If you have 42 (or more) consecutive weeks of work, in-house staffing is economically feasible.
If your work flow comes in bursts of activity, followed by weeks or months of low activity, outsourcing remains the best solution.
Which Functions Should Be Staffed First?
Even if you have a fairly steady flow of technical publications work, there remains another decision: Which functions are best staffed in-house, and which are best outsourced? Looking at the sample 14-week project, the percent of time each function is required during that 14-week period is presented in the chart below.
Percent of Time Required During 14-Week Project (560 Hours)
Function Total Hours Percent of Time
Sr. Tech Writer 560 100%
Graphic Artist 150 26%
Copy Editor 68 12%
Production Specialist 36 6%
Clearly, the writer is the first function to staff internally, the graphic artist is a distant second, and the copy editor is third.
It is unclear whether most companies ever benefit from staffing production specialists internally, because so little of their time is required on any given project.
Now let's examine the annual cost of an employee writer vs. a contract writer, using the previous scenario. The contract writer will be working for 42 weeks (three 14-week projects), and the employee will be working for 52 weeks.
(Remember, the figures we're using here for the employee are fully loaded with benefits and overhead.) The chart below shows how the figures add up.
Annual Cost of Employee vs.
Contract Writer
Employee vs.
Contract Writer Annual Cost
Employee Writer $135,671
Contract Writer $126,000
Delta $ 9,671
So at 42 weeks of continuous work, the cost of hiring a writer becomes somewhat comparable to the cost of using a contract writer, assuming our sample scenario is typical. You should be absolutely sure that you have that critical 42 weeks of work lined up, though.
If you hire a writer internally and the work flow falls significantly short of that break point, it can be very expensive.
It is my experience that very large companies can support 300-plus technical writers, with a ratio of five or six artists and one editor to every 10 to 15 writers.
Production work is often contracted out, even in the largest of firms.
In companies where the flow of technical publications work is sporadic, the decision of whether to staff internally or to outsource is a bit more difficult. All too often, an erratic publication cycle keeps one or two writers busy with work enough for three or four writers--but only for a few months at a time.
Between cycles, the employee writers have little to do and find themselves assigned to product teams doing busywork.
The best solution is to determine the minimum staffing required to meet the company's average needs, then fill in during peak times with outsourcing. Careful analysis of how that outsourced time is deployed, and by which functions, will help you determine when to hire additional staff.
For example, when a company has one writer in-house full-time but also uses two contract writers, each of whom spends 50% to 75% of his or her time on that company's work for the period of a year, it is probably time to bring in another staff writer (assuming that the work load is stable or growing).
Contract writers can be used to fill in if the company is on a fast growth curve, until the need for another full-time writer is evident.
Outsourcing Scenarios: Beyond the Numbers
There are scenarios where cost alone is not the most important factor. For instance, a compelling reason to choose outsourcing rather than hiring is expertise.
Occasionally, a company will develop a product that requires a writer with specialized knowledge and experience. The specialized writer (who can charge a premium for his or her expertise) is needed for the technical documents supporting that one product or product line, but the writer is not needed for the company's mainstream product lines.
In this instance, outsourcing is the only cost-effective answer.
Another scenario in which outsourcing makes more sense than staffing came up with an Oak Hill client. This start-up company has a complex and unique technology. Management quickly came to the conclusion that staffing a technical publications department would require writers who were not only senior, but who had advanced education in the field of optical networking.
In short, in-house staffing would be prohibitively expensive, particularly because the company's flow of publications work was predicted to be intense for the first three years, then drop off sharply.
As a result, this company contracted out all its technical publications work and saved $1.5 million dollars during its first three years of publications development.
Hire the Right Person for the Right Job
Some start-ups make the mistake of thinking that if they hire a writer, the writer can do it all--write, edit, create production templates and maybe even do the illustrations, because, "It's all done on computers.
" This overlooks the fact that writers are trained to write. They are not trained in graphics.
It's never a good idea to have a writer edit his or her own work. Editing is a specialty unto itself and requires an objectivity that writers cannot have when reviewing their own work.
And having a highly trained and highly paid writer do production work that could be done much more cost-effectively (and better) by someone who is paid at a lower rate doesn't make sense.
Hiring a trained writer may make sense for a start-up (depending on work load), but only if that writer can be supported by outsourcing the other functions. (See the analysis above of the percent of time each function spends on a given technical documentation project.)
A Good Agency Makes Outsourcing Easy
After the decision to outsource is made, the next challenge is to find the right resources--something easier said than done.
It takes time to locate, interview, hire and train qualified contract workers. Getting each contractor on your company's "Approved Vendor" list also takes time.
It's also true that technical publications is a critical function, and it isn't easy to cede control over it to an outsider.
The temptation to maintain close control over the work often overcomes the purely financial argument.
It's crucial to find a technical publications provider that can work closely as a partner. Partnering with a good provider rather than just contracting with a vendor can make all the difference.
It relieves a lot of pressure when your technical publications provider operates as part of your department, can be relied upon to solve problems, and puts the right resources on the job when they're needed.
There are a number of advantages to using a contract agency, in addition to the cost savings.
Benefits include:
One-stop shopping.
Agencies have a depth of resources that includes writers, artists, web designers, production specialists and more.
Agencies can tap these resources quickly to find the people with the exact qualifications you need. Speed staffing.
Contracting with one individual at a time is simply not an option for many companies. There is too much time and paperwork involved in locating the right people and getting them approved as vendors. An approved agency can place workers without going through a lot of bureaucratic spaghetti.
And a good agency will assure that the contractors are screened and qualified.
Insurance.
If you contract with an individual who doesn't work out, you must start over again.
If you have outsourced through an agency, you can go to the agency and ask it to find someone else. A good agency also will make sure the work is performed according to specifications, on time and on budget.
Reduced paperwork.
In addition to the paperwork associated with finding and hiring contractors individually, there's a cost associated with financial administration (issuing purchase orders and processing/paying invoices). If you are outsourcing through an agency, your company issues one purchase order and pays one invoice. The agency is responsible for taking care of the contractors.
Staying on the right side of the IRS. A good agency will assure that there is no possible question about whether a contractor is being treated as an employee or a contractor. Safety valve.
When the work load surges, your outsource agency can rapidly pick up the extra work by placing contractors who are already up to speed.
When the work load drops, the extra people go away and don't cost you a thing. Adaptability.
If your product line or technology shifts, an agency can shift with it, providing different personnel, if necessary.
It's not that easy to shift permanent employees when they no longer have the right background for the job.
And re-training is expensive, particularly in terms of lost productivity.
The Final Analysis
Whether you should outsource or hire isn't necessarily a black-and-white decision. Your first attack should always be a cost analysis. Run a sample scenario, as I have done here, and then examine the other factors.
In my experience, beyond the start-up phase, the companies with the most successful technical publications projects have been those that deployed a judicious mix of employees and outsourced contractors; this prepared the company and its partner agency to adjust quickly as the technical publications work flow increased and decreased.
The second step should be a careful analysis of work flow.
This will be more difficult for a start-up company that has no internal technical publications experience.
Try talking to a few technical publications outsource firms to get a feel for the scope of the job, duration and so on.
If, as a start-up, you have work for one or more full-time staffers for the foreseeable future, start looking. Most start-ups don't have a very clear picture of what the future may bring, and they should consider outsourcing until projections are more reliable.
Work flow projections are typically much easier to determine in a more mature company that already has technical publications staff. The trick is to predict when projects will be initiated and the scope of each one.
An experienced technical publications manager will have little problem with this, but there's always the surprise project--which is almost always an emergency.
Factor this in: If your staff is in the middle of a new documentation set, how much of an additional burden can they absorb before things start to break down?
Finally, if you do decide to outsource, your choice of contractors is going to make or break the project. Select an outsource firm that you can trust, with people who are experienced and field-tested.
Cost is critical, so run the numbers first! But beyond the issue of price, the job must be completed on time, on budget, on spec and up to your standards of quality.
Don't settle for less.
# # #
About The Author
Val Swisher is president of Oak Hill Publications, Inc., a 10-year-old technical documentation outsource agency based in Los Gatos, CA. Her clients include industry leaders such as Cisco Systems, Extreme Networks, Brocade Communications, Adobe Systems, Apple Computer, 3Com Corporation and a host of start-ups.
You can email Val at vswisher@oakhillpubs.com or visit her website at http://www.oakhillpubs.
com .
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