Five Success Factors for Outsourcing

Five, success.Today, the focus of outsourcing is around scaling and flexibility. Outsourcing partners have reached levels of maturity that are very different than they were a decade ago. This is because of cultural change, the fact that collaboration technologies have improved and the tools to manage outsourcing have been significantly refined.

Now, a remote workforce has become an internal reality for practically every enterprise. Social and technological globalization is more than a reality. 24X7 is no longer an idea accessible to only a handful of enterprises with sophisticated infrastructure and management capabilities—it’s a reality to most organizations across the globe.

For those who have come late to the outsourcing party, here are five success factors to keep in mind:

1. Become a champion of globalization

The world is making an increasing number of resources, ideas and intellectual capabilities available to everyone. Champions and proponents of globalization are extracting capability from remote corners of the world and creating new opportunities for business. What do new markets/ geographies offer your business? Take a 50,000 ft view of the world.  Find the talent, find the technology, and find the price that is ideal for you. Look for provider partners that can sustain a relationship and drive innovation through their expertise.

2. Treat outsourcing providers as partners

Regardless of where you outsource /insource, treat your outsourcing provider as a partner. Discuss your needs with the provider (specific to outsourcing), but don’t fail to discuss your overall business plan, strategy and goal. Provide your partner with business context. Communication is the key to successful outsourcing. Meet the outsourcing provider the same way you meet other vendors and suppliers. In fact, we’d go a step further and suggest you treat your outsourcing provider as an employee. Just as an employee has a well-rounded understanding of your business, its vision, ethics and goals, so should your outsourcing provider. And as a demonstration of your commitment to the outsourcing provider, ensure that it grows with your business.

3. Clearly-define your needs

Managing employees in the next building is difficult. Imagine having to manage a team that does not directly report to you and that is 5,000 miles away! With outsourced teams there are time zones and language barriers to overcome. There are cultural differences and legal hurdles to cross. It is therefore essential to ensure that you clearly define what you will outsource. Today, R&D, design, prototyping, testing, manufacturing, service, support, quality, infrastructure and talent can be outsourced within the IT vertical. Define what is being outsourced. Define the required outcomes. Define the processes to follow. Define the regulations that have to be met. Set down the SLAs. Capture all this in a language that both parties understand and agree to. Bridge the distance between yourself and your provider through clear goals and communication.

4. Incentivize your provider

Pay your employees for performance, this should be the central approach to outsourcing. Don’t sign inflexible service agreements, based on resources or tickets or devices. Instead, ensure that your contracts incentivize your provider to deliver outcomes that are aligned with your business. You may want your provider to have more stakes in the game by ensuring that contracts are outcome-based and not resource or effort-based. This may mean accepting operating risks by making investments in material specific to your business. Work at defining value creation with your outsourcing provider. This will help your provider restructure the outsourcing strategy to suit your needs and ensure business-aligned outcomes. You can examine tiered pricing to ensure that your provider partner is motivated to grow the account and harvest better returns.

5. Reduce risk

Ensuring that your outsourcing service provider is a domain expert automatically reduces the risk such a partnership presents. Domain expertise reduces the risk of decisions that can prove to be expensive to your business. Similarly, there are a variety of risks that need to be assessed and addressed: does your provider have the ability to scale and remain in sync with your business growth? Does your provider have access to technologies and best practices that you require in the foreseeable future? Will the provider make investments in technology necessary to run your business? Keeping up with uncertain technology changes is a risk—and one of the ways to mitigate it is to transfer the risk to a partner.

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