Offshoring, Outsourcing and The Rule of Three: A Guide for MSPs

In the ever evolving, always challenging world of managed services there has been a seismic shift in the way that MSPs hire people and deliver service to their customers.  Since the onset of the pandemic, a global labour shortage has triggered an unprecedented crisis for MSPs who have struggled to find or retain talent in their home cities and towns.  Offshoring - once considered a tool of last resort for some, and a bridge too far for others - has now become the central people strategy for thousands of managed service companies seeking new and creative ways to meet their customer demand. 

Yes, the outsourcing genie is finally out of the bottle but can MSPs learn from the early pioneers in offshoring and avoid the risks associated with getting it wrong?  

Where it all began 

You don’t need to convince me that outsourcing is a good thing. We were one of those pioneers who had grown tired of big tech eroding our margins, of our talent being endlessly recruited by those same large tech companies, and of our customers arguing for our prices to go down year on year, despite this being one of the more complex and sensitive professions that their business relies upon.    

No, we weren’t going to be another MSP statistic, so we took the bold step in 2012 to setup our operations offshore in the Philippines.  It wasn’t all sunshine and margaritas though – it took several years and an intensive, sustained effort to prove to ourselves that we’d made a good decision that would have a positive impact on us and our clients. 

The Market 

Today, outsourcing has never been more accessible and there are three common ways for MSPs to approach offshore hiring:   

• Freelancing – for example, using websites like Upwork to find a technician abroad which you would then manage yourself entirely
• BPOs – using a business process outsourcing company to recruit and hire technicians for you which you then manage their tasks day to day similar to an internal hire, but you don’t handle their payroll.  
• Outsourced helpdesk – using a shared helpdesk service such as the one provided by Benchmark 365.  In this perpetual delivery model you don’t hire, train or manage people – you or your customers submit the tasks and it’s up to the provider to execute them even if someone is on leave or exits the company.  

Freelancers 

In my extensive outsourcing career, I can say without a doubt that offshore freelancing is the least reliable, most management intensive and highest risk option for an MSP.    

Arguably, freelance employees may have their place in less persistent functions such as ad hoc tasks, admin and finance, virtual assistants, or marketing assistants.    

However, when it comes to delivering helpdesk or professional services it requires high availability, security, compliance, and business continuity – these are traits that are rarely associated with a freelancer, especially ones using their own equipment in a developing country and particularly when these countries routinely suffer power outages, internet problems and extreme weather events. 

Freelancing tends to also be a short-sighted approach to employment for the freelancer themselves.  Often unbeknownst to them, they face the risk of falling afoul of tax law and have difficulties obtaining crucial loans to support family or to buy a home.  One freelancer in the Philippines recently told me they were prevented from boarding a domestic flight to their home province by an official because they could not prove that they had legitimate taxable income.  

If you still want to persevere with freelancing and you want to deliver reliable and consistent services to your clients then my advice is to apply what I call the Rule of Three – one freelancer to do the work, another to be his/her backup, and another again in the highly likely event that one or two of them will leave suddenly without notice.    

There will always be someone to tell you that they’ve had incredible success with a freelancer – to them, I say “Congratulations on finding your unicorn”.  To everyone else making this claim I say “Show me your collection of four-leaf clovers”.   It is just so rare to hear of anyone legitimately succeeding with freelancers in mission critical roles such as helpdesk or NOC for an MSP, particularly at a small scale. 

BPOs and Employment Agencies 

Even if you think you can beat the odds with freelancing, it’s still going to be potluck trying to find people abroad.  This is where many MSPs have turned to BPOs – business process outsourcing - to find and hire people for them.  

The focus of the recruitment team within a BPO is important for you to verify before engaging them.  Since the pandemic, many new players have popped up claiming to specialise in MSP only to also tell accountants that they specialise in hiring accountants, and financial planners that they specialise in hiring financial planners.   

You know as well as I do that MSP folk are.. well.. we’re different.  We’re highly technical by nature, we’re used to dealing with incredibly demanding customers and those customers have a high – dare I say unreasonable – expectation of quality and communication when accessing your service desk.  In a developing country these are not run of the mill hires – they are specialist roles and are difficult to find and nurture so you’ll want to carefully vet the BPOs credentials. 

Expertise aside, one of the problems we found using BPOs is that they tend to position themselves as a total HR solution – but anyone who has spent any time in managing people knows that simply hiring someone, firing someone or managing payroll is just the tip of the iceberg in running an effective team.  A well-managed crew need persistent oversight, training, empathic support and motivation.    

Whilst some BPOs do a wonderful job of cultivating a warm and inviting culture for your offshore employee, none will be intimate enough with your day-to-day operations to monitor performance beyond showing up and clocking in to bridging specific skill gaps or enhance employee productivity.  

I believe that despite the perceived notion that a BPO provider will help you overcome the limitations of hiring offshore workers directly, the Rule of Three still applies.  Yes, BPOs should theoretically have a better shot at recruiting people than you but they will undeniably face many of the same challenges anyone else hiring abroad will suffer - including sudden and unexpected absences through to performance and productivity issues resulting in inevitable staff turnover. 

However, the issue with the Rule of Three in a BPO is that the cost can add up quickly – let’s say you agree to hire a crew of Level 1, 2 and 3 staff in Manila via a well known agency there.  In today’s market that’s going to cost you an average of about USD$8,000 in payroll, and then another average of USD$2500-$3500 in BPO fees that they must charge your business to facilitate hiring, and HR services.   It adds up. 

If you’re thinking you’ll just ‘test the waters’ with a singular offshore hire you may soon discover that the management overhead is more than you expected, and that the cost benefit is eroded by problems that are frustratingly unique to offshoring. 

A unique approach built by the pioneers – outsourcing your helpdesk with Benchmark 365 

We’ve had extensive experience trying to freelance or utilise the service of BPOs.  We gave it a good run and we would not be here if we did not have some clear successes along the way.   

However, most of our success can be attributed to the extensive time and capital we put into our offshore strategy.   We spent nearly 5 years just to ultimately determine that we needed to build a much larger team to make offshoring a viable alternative to onshore staffing.   Most other MSPs simply do not have years to spend on trial and error like we did – they just want solutions that work.    

That’s why we decided to develop Benchmark 365 – an alternative to offshore hiring.   It’s a shared services model helping MSPs leverage the benefits of a low cost, high availability team without the headaches of hiring and managing offshore (or onshore) staff. 

We’d already done the initial heavy lifting by hiring a large crew of qualified technicians and support personnel and we’d already put in place crucial services that most MSPs don’t think of when hiring abroad – like a quality control team, and an extensive management team to keep techs productive and happy working for MSPs all around the world. 

There are so many benefits to this approach – for one thing, there is no need to apply the Rule of Three,  MSPs already gain access to a team of dispatchers, Level 1, 2 and 3 personnel at a fractional cost and those that need it also benefit from the fact that we service MSPs globally so they have can offer their customers 24x7x365 service.  To build your own DIY 24x7 team is at least 5 hires abroad, or onshore and very difficult to manage if that’s not your core offering. 

Lastly, but certainly not least, our MSP Partners only pay for what they use, which means a 100% utilized workforce, not 50% as is the market average for offshore workers once leave, national and regional holidays and productivity issues are taken into account.  And not 65% which is the market average for an onshore technician – this factor alone makes Benchmark 365 the most profitable option for MSPs. 

Shared helpdesk services offered by Benchmark 365 means MSPs can focus solely on sales, marketing and business development.  In our studies, our Partners are growing 3x faster than MSPs who handle their own offshore staff. 

A final word on choosing the right people strategy for your MSP. 

If you’ve read this article and thought “guy who founded outsourced helpdesk recommends MSPs use an outsourced helpdesk” I encourage you to listen the Infinite Scale podcast - our show about scaling MSPs through outsourcing - before casting that judgement.   

On that show, as well as in my book, I routinely mention that building your own team can be an incredibly rewarding endeavour – after all, I’ve spent two decades building an MSP team so why shouldn’t you? 

The truth is that not everyone wants to. Many MSP entrepreneurs tell me that they find it draining and exhausting managing people and to them I say you will not find any reprieve in hiring offshore – it is not easier and don’t be lead to believe otherwise. 

Others tell me they would never dream of outsourcing, but that they simply cannot recruit and that the competition for talent is so aggressive that they now risk losing customers due to a resource shortfall.  To them I say keep looking for people but don’t let your customers down – Benchmark 365 was built to allow MSPs to scale up with us when we’re needed, and scale down when circumstances change.  

Whatever path you choose we hope to continue to see growth and prosperity for all MSPs, and opportunities for all employees wherever you are in the world. 

To your success, 

James Vickery 
CEO 
Benchmark 365  

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