Considering Outsourcing
These days more and more processes are being outsourced (run by external contractors under a service agreement) by more and more businesses. It is particularly common to outsource IT functions and telephone call management.
Outsourcing can offer many advantages - for example, cost reductions, access to better technology and the ability to prevent management attention being diverted by "non-core" activities within the business.
However, unless the contractual side of an outsourcing arrangement is right, the results can be a disappointment, or worse.
The steps to take in order to make sure your outsourcing is successful are:
- Make sure your objectives are clear. You should know precisely what benefits you are expecting the outsourcing to bring to your business;
- Before you start the outsourcing process, look at your own working methods and make them efficient. Having done this, you may even find you no longer want to outsource! Never outsource a mess;
- Carry out a thorough costs analysis. Know exactly what your system costs to operate;
- Create an invitation to tender. Specify precisely what needs to be done and what your necessary performance criteria are. This will form the basis of your contract with the supplier, so take care. Generally, it is better to express the requirements in terms of outputs (things that must be done) rather than in technical terms. Let the supplier deal with the technical side, but make sure the contract is clear on what you will get out of the process;
- Shortlist suppliers. It is important that the proposed supplier understands your business and its needs - both now and in the future. Contact existing customers of the supplier to find out what they think of the service they receive. Look at the supplier's finances to ensure they have sufficient financial strength to see the contract through;
- Negotiate your contract very carefully. Make sure every critical part of the process is properly documented and dealt with in the contract;
- Develop a transition plan to ensure your service standards continue to be met while the new system is being implemented. This is an important part of the "who does what and when";
- Develop a service level agreement, which makes the outsourced service provider specifically responsible for delivering the agreed goals;
- Make sure you have a disaster plan and an exit strategy. Plan for the worst. If it happens, you will be glad you did. Set up a system which allows a clear mechanism for dealing with any disputes or service failures.
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Tim Johnson |
Putting the running of any important process in the hands of another business is a serious decision and involves risk. The right contract is a key element to managing that risk so as to make it acceptable. The outsourcer's standard terms will be drafted to minimize their risks and obligations, so take legal advice before you sign and, preferably, as early on in the process as possible.
