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Tips to have an Effective Outsourcing Business Case

by: Admin

Tuesday, May 15, 2012 | Outsourcing News |

Business executives often believe that drafting an actionable outsourcing plan makes an operation impervious to problems. The process itself is stressful enough, but try adding the step of looking for a service provider and negotiating after the RFPs have been sent. Clients are eager to improve business operations and cut costs. Vendors, on the other hand, are in it to make money and build a brand.

Measures before closing an outsourcing deal

ISG Senior Consultant Sven Geissler shares an article at info.ISG-One.com that shows five basic precautionary measures that businesses can look into before inking an outsourcing deal. These steps can also help avoid having a seemingly flawless outsourcing business case but ends up with more costs.

1. Use all financial data you can legally get your hands on. What better way to start a financial plan than with the company’s data resource. To map out the plan, make use of the projections for the incoming year such as trends, incoming budget, and the timeline of the operation. Also, it would be better if initial investments and variable costs are identified outright so that whether the costs come up or not, the budget will remain intact.

2. Set financial boundaries. Before an operation starts and processes add up, a party should clearly be stated as legally and financially liable for all the services, equipment, and even assets of the outsourcing partnership. This is to avoid additional costs and unclear ownership of the elements involved in the process.  

3. Try the volume-based pricing model. Have proper estimation of the number of staff, volume of output, and the resources consumed by the operation to see less budget problems in the future. A good thing to base the pricing model on is the current in-house operation, and then additional margins can be added for the outsourcing operation.

4. Prepare estimations of the total expenses of the outsourcing operation. It is a known fact that the cost of doing an operation in-house is a far cry from the amount the company will be shelling out for the outsourcing operation. The goal is to save money, not spend more. Make sure that all the stakeholders are aware of which processes will be outsourced, how much the initial costs will be, and of course, how much they will be able to save if the operation becomes successful.

5. Prepare a measuring system. Having metrics will enable business owners to properly monitor the performance of their operation, and see if the goals are met. It would also help identify the areas of the plan that can be a risk to the entire operation.

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