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Getting Ready to Outsource

by: Ronald Escanlar

Friday, January 20, 2012 |

Prepare your Company for Outsourcing

Outsourcing as a business strategy continued to mature last year as companies faced challenges in the global marketplace. However, outsourcing, just like any business strategy, is not capable of solving a company’s woes by itself. As a tool, outsourcing is only as good as the organization that wields it.

Companies that want to explore outsourcing to stay relevant in the marketplace may think about 10 tips that industry website Business Finance says can help organizations in deciding whether to outsource or not.

Results versus process. Outsourcing, according to Business Finance, has two types now - “black box” and “white box”. Black box outsourcing refers to results-oriented outsourcing - SLAs, SOWs, and service deliveries are designed to deliver results, with less emphasis on how the results are achieved. White box outsourcing, on the other hand, is process-oriented - the outsourcing framework is designed to maintain efficient and effective processes.

Create the criteria before issuing RFPs. To maintain an objective approach and at the same time, streamline the outsourcing evaluation process, ensure that outsourcing goals and objectives are set in place before issuing any Request for Proposals (RFPs). The company knows their system best - weaknesses and all - and they should offer this info to any prospective outsourcing service provider.

Take charge of bidding. Do not let the outsourcing service provider dictate how the negotiation progresses through pre-packaged services that do not specifically consider the company’s unique requirements.

Check the resources of the outsourcing service provider. Top service providers even suffer from a varying level of quality among their employees. Choose a service provider not only because of its credentials, but also because of the quality of its staff.

Peg transition costs to real market values. Transition costs of outsourcing are usually underestimated, as change management costs and losses due to transition delays are not factored into cost equations. A comprehensive outsourcing transition plan will ensure that hidden costs are revealed.

Take advantage of innovation. Due to technological innovation and process improvement, most service providers are increasing their profit margins yet offer the same rates to their clients. With a properly-structured outsourcing agreement, clients have much to benefit from their providers.

Be prepared for change. Transitions involve teams of people who may be working with each other for the first time. The complexity of the whole operation may require forming a transition task force and even the hiring of transition specialists. As with any process, the transition phase must be organized with milestones and quantifiable factors.

Create SLAs that are relevant to the organization. Too much metrics can actually complicate Service Level Agreements (SLAs), resulting to lost productivity hours and administrative nightmares. Establish few yet relevant metrics that contribute towards making the outsourcing agreement as productive and efficient as possible.

Do the homework first before negotiations. Clearly outline the role and responsibility of each member of the negotiating team. Identify possible deal breakers, and draw up a list of unfeasible alternatives that the provider may offer.

Don’t lose focus - the negotiation is about to outsource or not. Companies may take up outsourcing without really realizing what they are signing on with a very aggressive outsourcing service provider. The outsourcing solution is not for everyone - it can only be as effective as the company relying on it.

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