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Striking a Balance between the Risks and Rewards of Outsourcing

by: Karen Cayamanda

Friday, October 15, 2010 |

Risks & Rewards of Outsourcing

Majority of business owners think that the best outsourcing setup is one that covers the least amount of cost. Alsbridge cites that this is not exactly the case. Outsourcing should be focused on the long-term value of the contract and how it meets overall business objectives instead of solely on operational expenses. For this, Alsbridge shares five points that companies should keep in check in evaluating the coherence of an outsourcing setup with organizational goals and strategies.

1.    Contract Terms - An agreement in form of a contract is binding and enforceable. Thus, one should take the time to review and understand the terms of an agreement. The service definition, terms for payment and termination, and governance are some of the most essential areas in a contract. Due diligence in evaluating these details can go a long way.

2.    Statement of Work (SOW) - This is expected to provide a precise and transparent definition of service that can be expected from the service provider. As far as responsibilities and roles are concerned, SOW also applies to the client performing his end of the bargain. Specified market-based “towers” to organize the SOW was proposed by Alsbridge. For instance, these towers are Server Management, Contact Center Management, Applications Development, etc. This classification of services or SOWs allow for easier comparison of providers. Also, you will be able to easily determine the actual cost of services per contract term.

3.    Service Levels - The Service Level Agreement outlines the terms of service of your provider. The terms and clauses in this contract are directed to protect your interests by ensuring a commitment from your provider. This commitment covers the promised deliverables and the quality of output agreed upon.
4.    Transition and Transformation - A description of the transformation across goals and milestones should be clearly articulated in documents at the onset of the agreement. This should address concerns such as turnover, objectives, roles and responsibilities, change management, status reporting, contingency plans, and staff policies.

5.    Pricing - As you get accustomed to an outsourcing setup and as you reap its profitable benefits, the cost of outsourcing will generally decrease over time. When starting out with this business solution, it is best to contract a provider with quotations that are based on market prices. This conveys the idea that your deal with your provider is one that is safe and reliable.

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