What Are The Deciding Factors In Deciding Or Complete Process Outsourcing?

What Are The Deciding Factors In Deciding Or Complete Process Outsourcing

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When it comes time to evaluate whether an organization should take part in complete process outsourcing there are number of factors they should consider. While business improvement and financial performance plays a large role in the final decision of whether outsourcing is a viable option for a company or not, there are many smaller factors that must be considered within the country. Outsourcing may only involve moving a small department of your business offshore, but the move will affect numerous departments that are still housed within your organization which is why the decision should not be taken lightly.

Core of outsourcing decisions

At its core, all outsourcing product development decisions are made based on their potential business value. In order to even proceed investigating the benefits of outsourcing an organization must take a close look at their business model and decide if outsourcing is a viable option that will fit within their business model. There is not an exact science or formula that can help your business decide if outsourcing is the correct choice or not, but there is a flexible framework that can be utilized to decide if it is a viable option for your company.

A large part of the decision is dependent on a formula that is known as the QCDV. The formula stands for Quality, Cost, Delivery, and Value. In particular the quality and delivery components should be heavily weighted in terms of outsourcing since they directly affect your customer service and this can affect your businesses reputation and thus sales. After all, if outsourcing affects your ability to please a customer they will not return to your customer and harm your overall business. This is why it is vital to look at outsourcing partners that can provide the same level of customer service that your business currently provides.

Measurability and Definability of your company

Before you can seriously consider outsourcing, another area that you need to study is how well your organization is able to define its objectives and goals. At the same time, a business needs to study its practice and look at how well items such as customer service, business practices, and overall response time can be measured. The reason for this is simple; if an organization cannot define its objectives or measure its practices it will be impossible to describe these measures to an outsourcing vendor. Thus the venture will be failed from the start.

The best way to discover if your business has these attributes is to set up an evaluation team whose key objective is to discover what needs your company has and what needs should be communicated to an outsourcing partner. The team should be composed of experienced employees who work in different sectors of your organization. While a consultant can help with this task, they should not be responsible for the final decision, because they do not have the same wealth of knowledge that those within the inner departments of an organization do.

Evaluation team concerns

There are many factors that an evaluation team will need to look over. Including in these are if the company has the competencies to make outsourcing practical. They also will need to consider if procedures are in place that will align correctly with outsourcing. Additionally, the evaluation team should consider the current regulations, standards, and governing bodies of the company that are associated with producing a product or completing a task in a timely manner. These factors will all influence how adaptable a company is to outsourcing.

Financial cost or savings of outsourcing

Of course, at the heart of the evaluation should be careful consideration of the financial savings that outsourcing can provide an organization. The overall goal of outsourcing is to save company money, but different ventures produce different results. For example, some outsourcing efforts are able to show reduced costs on a yearly basis, while other ventures will require more time to show the cost effective results. Before entering a new partnership realistic expectations need to be in place otherwise the venture will fall short of its intended purpose.

The outsourcing partner that is chosen also clearly needs to understand your expectations when it comes to cost reduction and overall performance. They should be held accountable for performance as well with bonus perks offered and an 'or else' approach for when they fall short.

If they are not able to meet performance standards they need to be aware that any contract in place is now void to protect your organization from suffering the consequences. Thus, the evaluation team should also be responsible for developing a cost/performance analysis standard that the outsourcing partner will face each quarterly term. This allows a company to see what capital and expenses are tied up in outsourcing and evaluate if the decision is truly saving the company money or falling short.

Final thoughts on complete process outsourcing

There are always risks when entering into a contract with a vendor and outsourcing business tasks and core competencies. However, careful considerations such as a vendors cost, capabilities, and the potential outcome of the move will help lower the risk and increase the chances of a positive partnership. While these options will help lower the capital and financial risk, other areas also need to be considered such as impact on customer service and overall company performance. With a proper evaluation team however each separate risk can be evaluated and a final decision can be made that will benefit the company overall.

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