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Five Outsourcing Mistakes and How to Avoid Them

by: Sarah Joson

Friday, August 24, 2012 | Outsourcing News |

Common Outsourcing Mistakes

A lot of business owners believe that outsourcing can help reduce costs, which is true, but clearly, there’s more to outsourcing than that. It can help align goals and enable businesses to pursue innovative processes that can help improve the entire operation and increase the value of the company in the long run.  

In an article posted at SMH.com.au, Sylvia Pennington shares some insights of industry experts from an interview done by IT Pro. Here are a few things that business owners should look into before signing an outsourcing contract:

1. Don’t forget the other factors.

A lot of executives tend to fixate their attention on the costs, even to the point where their providers no longer have a breathing room to move and grow. This could result to lack lustre performance and output from the outsourced team. If the supplier realizes that they are not making money on the deal, chances are they won’t be proactive and motivated to work for you. Plus, they will be too bootstrapped to even bother to look for innovative processes that could help your company.

2. Strive for a strong partnership.
Clients should reciprocate and even initiate the efforts of establishing a relationship. Some suppliers, especially the ones located in Asia, tend to be more timid compared to their counterparts in other regions because of their culture. Issues will be easier to handle if both parties are involved and have already established a sound relationship.

Another factor that can help an operation is to have a dedicated “troubleshooter” who will handle problems within the operation.

3. Bringing your best arsenal upfront.
With new IT outsourcing deals, providers that put their best foot forward are likely to create a strong partnership. This process is included under the project management where providers are getting to know more about the clients.

4. Include trust as a major factor.
Clients should also see that not everything they want can be and should be followed. As the saying goes, “just because you can, doesn’t mean you should.” Just because you are paying the provider for the services they will be rendering, it doesn’t necessarily mean that your orders will be followed down to every detail, because providers should also be given the right to voice out their concerns because after all, they are the experts in the process.

Clients can design a reward and penalty system where they can impose counter-charges if the agreed upon processes aren’t followed, and rewards if they over perform.

5. Determine the type of contract that is most suitable to the business.
Long-term contracts are more practical in terms of business flow and overall costs, but if not managed properly, dedication of each party may gradually decrease. Short-term contracts, on the other hand, can result to higher costs and constant disruption of operations.

A provider that agrees to help you review and alter the contract from time to time is what clients are currently looking for as trends and challenges are constantly changing.

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