What Does A Company Need To Know About Outsourcing To Be Successful?

Outsourcing is a business strategy applied by more and more companies each day

. This valuable tool should be considered whether it be a small business or a large corporation. I'm sure you have heard of its benefits such as increase in productivity, lower production cost, and more time for the company to focus on the core business activities. However, business owners should also be aware of the disadvantages of outsourcing. The lower cost it presents may not really be there by the time they get to compute everything. Lets discuss some of the hidden cost of outsourcing for the benefit of those considering this operational strategy.

Outsourcing may save dollars but it can also add to the expense if communication is not established throughout the entire process. Meaning can be lost in translation resulting to missed deadline submissions and poor standard of quality.

Product outsourcing should never be a last minute option for the company. It should be included in the Strategic Business Plan in order for it to become a success. Everything that is carefully planned and thought of will return with better results than something that is just rushed.

The selection of a capable outsourcing company can prove to be costly as well. Applied Business Consulting has helped hundreds of companies succeed in vendor selection. In the interview of viable outsourcing firms, ask the hard questions to better evaluate their response. Companies need to know if the outsourcing agent has the expertise to handle the statement of work (SOW), if they are able to comply with approved management practices and if they are able to meet the contract requirements.

Other hidden costs of outsourcing are transfer of technology and the time to designate someone to interface with outsources. Not to mention the re-aligning the company's internal resources to meet the needs of the outsource firm. The company might also have to address the potential employee objections and dissatisfactions.

Having production outsourced does not stop from the initial output. It actually continues on and on that is why the cost of monitoring should also be considered. Regular meetings should be scheduled and reports should be transferred and read. All of these should be accounted for when computing for the cost of product development outsourcing.

Five key takeaways from our work in outsourcing:

1.Look beyond price when calculating the true cost of outsourcing. While price is certainly the most critical consideration in any outsourcing decision, it is not the only metric that management must track.

2.Use risk assessment tools to ferret out hidden problems. Use these tools not only during the transfer process, but also to determine what hidden risks may arise once the outsourced process is up and running. Build these findings into your service agreements.

3.Out of sight should not be out of mind. Outsourced processes need to be managed like any other portion of the business. Some of our clients expanded managerial roles after FTEs were moved offshore. The managers lost focus of the distant processes they were supposed to be managing and focused instead on managing what was in their own backyard.

4.Look to make process improvements before you outsource. There are at least two good reasons for this. First, you may find that improving in-house processes eliminate the need to outsource by capturing significant cost reductions while improving customer service. Second, the outsourcing provider will strive to lower the costs of your process yet is unlikely to pass those benefits through to you.

5.Consider low-cost providers closer to home. Many smaller call centers are finding success in the U.S., delivering lower Midwest pricing along with high customer satisfaction and fewer hidden management dangers.

by: Tom Queeney

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