Outsourcing: Everything You Need to Know Before You Start

Thinking about outsourcing? Before you sign anything, let’s make sure you know what it really means, why regulators care, and how to do it without creating more headaches than you solve.

Why Outsourcing Gets a Bad Rap

I once heard someone say outsourcing is “paying someone else to fix your problems while you keep making new ones.” Funny, but not quite fair.

Done well, outsourcing feels less like throwing problems over a fence and more like bringing in a specialist team that does one thing brilliantly, every day, so you can focus on clients and growth.

Done badly? It’s usually because we’ve tried to outsource ambiguity, wishful thinking… or a mess.

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What Outsourcing Is (and Isn’t)

In plain English: outsourcing is an ongoing arrangement where a third party performs a function or activity, you’d otherwise do yourself. That could be IT operations, a repeatable business process, or a specialist capability you can’t scale internally.

What it isn’t:

• A one-off consultancy report
• A software licence with no managed service attached
• Casual help that doesn’t replace an internal function

Whether a cloud or “‑as‑a‑service” solution counts as outsourcing depends on what’s actually being performed for you and how critical it is to your business services.

Using a SaaS CRM system for marketing is not outsourcing, but relying on a third party to manage and host your ERP system containing all client information and processing is most likely to fall in scope.

Regulators care less about the label and more about dependency, data, and impact on clients.

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Material Outsourcing Explained

If you’re in a regulated financial services business, outsourcing comes with strings attached.

If the arrangement is material, you’ll likely need to notify or even seek approval from your regulator. Why? Because material outsourcing affects critical services, client outcomes, and operational resilience.

Materiality triggers typically include:

• Impact on critical business services
• Access to client or sensitive data
• Difficulty of substitution or exit
• Potential harm to clients or financial soundness if the provider fails

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My Golden Rule

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When Outsourcing Works Best

• Repeatable, well-defined processes
• Specialist skills you don’t need every day
• Technology operations where resilience and security are demonstrable (think tested BCP/DR, not just pretty diagrams)

Where it struggles: vague scopes, “fast/secure/cheap—pick three” SLAs, weak audit rights, and non-existent exit plans.

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The Essentials Before You Sign

Before you even think about contracts, make sure you’ve covered these bases:

• Materiality assessment – Is it outsourcing? Is it material?
• Provider due diligence – Financial stability, capacity, security, resilience
• Contractual must-haves – Audit rights (including regulator access), SLAs, exit clauses
• Oversight model – Who’s accountable, what gets reported, and when
• Exit by design – Data return, knowledge transfer, substitution path

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I’ve created three practical templates to make this easier:

Use the Contact Form or leave a comment if you’d like me to send you this pack.

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What Happens If You Skip These Steps?

You risk delays, regulatory pushback, and contracts that look fine on paper but fail under stress. Worse, you might end up managing more complexity than you ever did doing the work yourself.

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Ready to Outsource Without the Drama?

• Sense-check materiality
• Map the regulatory path
• Flag gaps in due diligence, oversight or exit

Book a 1:1 call for your free pre-outsourcing assessment or health check

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Next Steps

• Share this article with your compliance team
• Download the checklist and templates
• Subscribe to my weekly newsletter for practical insights