Thirteen Things You Need to Know Before You Outsource

Thirteen, outsourcing.While outsourcing is not rocket science, the truth is it is a nuanced science.  Outsourcing models are becoming trickier thanks to technology advances.

What hasn’t changed is the difficulty in negotiating your way through an outsourcing contract. There are seemingly innumerable variables to consider and account for. But if you can get the basics right, the rest will fall in place.

 

Here are the important questions to ask:

  1. What exactly are you outsourcing? Are you outsourcing peripheral services or something that is core to your business?  Analyze your needs and know what you want before you issue an RFP.
  2. What are you monitoring?  Do you need traditional service level agreements (SLAs), which monitor performance or have you moved to tracking business level agreements (BLAs) or outcomes , which most businesses are opting for these days? And what are the penalties and your ability to exit the contract if the provider doesn’t perform?
  3. Do you have the required documentation? Unfortunately, most organizations rarely document their processes, and certainly in not enough detail required by a service provider. So you have a major task ahead.
  4. Is a site visit necessary? Transitioning your processes to a partner located across the street or perhaps across two oceans can be scary. You can’t see the infrastructure or the environment. You don’t know the people, their culture, skills or work ethics. What do you have to do to become comfortable with the situation?
  5. Do you need a pilot? Sometimes it’s best to test things out first. Select an important piece of the puzzle and see what works and what needs rethinking.
  6. What is the transition plan? Transitions typically are the most difficult part of the outsourcing process.  Transitioning processes calls for a high level of expertise. Make sure you have experienced transition teams working with you. Build a structured method to manage changes including sign offs from all the teams impacted by the process. How will your partner move from pilot to transition, from your location to their location, etc.?
  7. How will you communicate with your employees about the outsourcing agenda? Don’t ignore  internal communication. Outsourcing often leads to layoffs. Keep your team informed of all decisions, make sure you have their buy in and support and answer their questions promptly and honestly. Outsourcing can go terribly wrong if the internal communication does not explain the advantages that the company – and employees – can leverage. Anxious employees may begin to circulate unfounded rumours, resulting in poor work environments and unnecessarily resignations.
  8. What is the training and recruitment plan? Eighty percent of all business processes are essential the same. But 20 percent are specific to you. Who is going to train the provider’s employees on the intricacies of your business?
  9. How will you create a partnership? Here’s a good start: Keep your outsourcing partner updated about business changes, future plans and potential barriers. Always remember your outsourcing partner cannot deliver high levels of satisfaction if it doesn’t understand the inner workings of your business. Similarly, examine the partner’s infrastructure and business practices.  Cultural alignment is also important to outsourcing success. The more their values and infrastructure are aligned with yours, the higher the chance you will not look for a new provider.
  10. How will you communicate with your outsourcing partner? Keep the communication healthy, consistent and transparent. Your outsourcing partner needs information about your business to ensure the appropriate availability of talent, infrastructure to meet the SLAs / BLAs.
  11. How will you manage the relationship?  A strong governance program is really the foundation for outsourcing success. What governance practices are you putting in place? Do you have the right people with the right skills to manage a successful relationship?
  12. How will you create an environment open to innovation? What does your outsourcing partner need to know in order to deliver improvements, cost savings and innovation? And can you maintain an open mind about doing things a new way?
  13. How will you help your provider be successful? Pay careful attention to your partner’s needs to make the engagement a success.  It does take two to tango.

These questions are just the start but will help build the foundation for a successful outsourcing relationship.

1 Comment on "Thirteen Things You Need to Know Before You Outsource"

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  1. Peter Ishola says:

    Hi Karthik,

    Thanks for putting together this list. I strongly agree with your number one point. Defining the objective is usually the most critical starting point for any outsourcing process.

    Great article

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