Companies can gain expertise and resources at a low cost by outsourcing.
Efficiency, standardization, automation, and training cut outsourcing costs by 40-70%. Also to cost savings, organizations can also enjoy the following:
- Enhanced capabilities
- Better predictability of service delivery
- Reduced risk
- Improved scalability
Technical writing, accounting, and marketing are often outsourced along with IT infrastructure. These processes can save money and free up resources for important duties.
But “outsourcing” activity will not fix it if it is not currently working. As the name suggests, you need to have a business process in place before you can outsource it. Proximity (talking to the person sitting next to you) is not a process. Controlling a process is necessary to outsource it.
For successful business process outsourcing, focus on these five areas:
Outsourcing success factors: clearly define the requirements
Before embarking on an outsourcing relationship, it is important to define what the success factors are for the process. These success elements should meet customers. Once identified, you can determine if these talents are business-critical. If not, it would be best to outsource the process.
After outsourcing, use process success factors to set relationship requirements.
Outsourcing should be more than cost-cutting. Cost is rarely the driver for delivering customer satisfaction. Your business model will prioritize quality, predictability, velocity, or scalability. Cost control and mid-term reduction should follow these principles.
Clear outcomes, connection, and strategy needs will help you through the next steps.
Successful outsourcing: define the process.
Having defined the requirements for the process, you can set about defining the process you wish to outsource.
If you already have a process in place, all the better. The provider may assist you in defining a process if you don’t have one. They will have expertise in this domain, so can tell how to set up the process. If this is the case, having defined the requirements will put you in good stead to achieve this.
If the provider outlines the procedure, check sure it’s managed as a project and the source can supply it (more on that later).
When defining the process, ensure that the following are covered:
Process inputs and outputs
- Define how and what your team will deliver to the provider and how and what you expect back from the provider.
SLAs (Service Level Agreements) for each process operation
- SLAs should encompass response and turn-around timeframes, but more importantly quality measurements.
Roles and responsibilities
- Define which party handles each operation as well as specific roles within the process. The process owner must be someone on your team.
Lines of communication
- This should cover day-to-day communications between the teams as well as escalation procedures.
Metrics and reporting
- So you have defined the SLAs- how do you know these are being met? Capturing and reporting should be integral to the process. They don’t add to management, letting resources focus on service delivery.
- Nothing always goes to plan. Ensure there is a mechanism in place to handle possible exceptions.
Select an outsourcing provider
Outsourcing is a partnership, so you need to have confidence in your partner to make the relationship work. To give the arrangement the best chance, ensure that you select your provider well.
The partnership is too often perceived as a customer/supplier relationship where the customer is always right. This ignores the provider’s knowledge and causes stress and waste.
Both sides of the relationship bring their expertise to the relationship. If you define your criteria and procedure, your provider will know what you need.
Consider the following when evaluating potential providers:
Ability to deliver on requirements
Ok, this is given; do they have the capability to deliver on your process and requirements?
Sustainability and continuity
They can meet your needs now, but can they do it on time? Make sure your outsourcer can fulfill deadlines. Does the provider plan to replace or grow staff to meet your goals? Can the supplier change an executive? Freelancing or contracting is inexpensive but rarely sustainable. This works for projects but not processes.
We associate outsourcing and offshoring. Not always. Service delivery may depend on the provider’s location. Instead of nightshifts, international customer help may be better. A provider in the same time zone may decrease communication delays.
The contract needs to be interesting for the provider. Too small and there is no value in it for them, nor any significant benefits for you. If you are a little client, they may not provide you with the service you deserve. Thus, the provider’s size must match your needs.
The purpose should outweigh the profit. Pricing shouldn’t matter. The provider will lack resources to innovate if you restrict them. Service will suffer. Long-term cost reduction is better. The supplier improves the process for you and your consumers. Your rule and strategy will show the cost. Track efficiency savings throughout the contract.
You should treat the provider as part of the team – as if they were colleagues in another office. So when selecting a provider their culture is an important consideration. Bureaucratic providers hamper fast client response.
Track and report on the process
As with any process, it is important to check the SLAs and KPIs (Key Performance Indicators). These will have been defined as part of the requirements and process development.
Make sure the seller explains the process. Excessive reporting requests waste their and your resources. Do you need a daily provider report if you report weekly? Monthly reports may be enough if the activity is minimal and stable.
To ensure provider reports are correct, check the process. SLAs and results matter. You can use your own numbers to critically assess any discrepancies.
Much of what has been covered so far focus on requirements, SLAs, and tight process. Too often outsourcing is associated with rigid contracts and red tape.
But with a changing business world, organizations need to evolve. Your industry and the providers will change, so you must be flexible to adapt and capitalize.
Outsourcing should provide you with a flexible layer that can absorb fluctuations in demand – both up and down. The relationship should enable you to align resources with your business requirements.
You should be aiming to improve efficiency over the lifetime of the contract. Limiting the provider’s flexibility hinders innovation, forcing them to use lower-skilled, cheaper staff to discover efficiencies. This will lead to poorer quality output.
Focusing on your needs and outcomes lets the supplier adapt while your organization benefits.
If you clearly describe your requirements, choose a competent provider, and check results, you may work with your provider to innovate in a way that benefits you, the provider, and your consumers.