3 Things to Do Before Outsourcing

It is becoming easier and easier to outsource some, most, or all, of the everyday business needs.  These requirements may be IT, HR, accounting, marketing or almost any other part of business.  Outsourcing is becoming an attractive option as there are a lot of positives that can come from outsourcing.  However, there are also big negatives that can come from it.  The key to outsourcing, just as any other business activity, is to do due diligence first.  Let’s look at some dos and

The key to outsourcing, just as any other business activity, is to do due diligence first.  Let’s look at some dos and do not’s when measuring whether to outsource a function.

Have an Outsourcing plan

I have come across a lot of companies that outsource a function to cut costs or avoid headaches.  The function is not a core part of the business, but one just required as part of existing.  Avoiding pain points is a good reason to outsource.  Unfortunately, it still requires some consideration and planning.  Outsourcing is never as simple as “throwing it over the wall” for a vendor to handle.  In all cases, the details need to be nailed down.

The details entail what will be outsourced and how the outsourced processes will flow.  These should include interaction with in-house staff and procedures.  Along these lines, a lot of vendors will work with their customers to help integrate the outsourced service into a company’s processes.  Transition support is a great offering to take advantage of, but there can be some cost associated with doing so.

When you lay out the details of what to outsource (and the required integration points and processes), it provides an excellent starting point for both a SOW and related SLAs.  These are critical deliverables to have when you want to evaluate the performance of a vendor.  Vendors rarely have in-depth knowledge of your business.  Thus providers require explanation and details at a level that is not needed for in-house staff.

Have an Exit Strategy

One of the most painful things I have gone through in business is extracting processes and data from a vendor.  The extraction is typically done to bring things back in-house.  Outsourcing always seems so simple.  Unfortunately,  if you aren’t putting pieces in place to be able to switch vendors or bring a function back in-house you are asking for trouble.

You should always be able to answer the question: “What happens when the vendor fails or disappears?”  Vendors offer great deals to help a company outsource their functions.  However, the vendor is rarely going to provide help to change to another provider.  Even when transition help is offered, it tends to be minimal.

This lock-in can lead to solutions like the old Roach Motel advertisement (or the line in the Eagle’s, “Hotel California”) where you can check in, but you can never leave.  The new vendor will often help make the transition in that case.  However, if you are bringing things back, in-house there is no one to help.  Make sure the plan does not require support from the vendor (if possible), just to be safe.

Have a Metric

A metric must be available to measure anything, so a process that does not have a metric will never be measurable.  Metrics are important when outsourcing.  Without them, you end up with a vendor that is responsible for telling you how they are doing.  How often do you think a vendor is going to say they have been letting you down and you should find another provider?

This is a typical situation I have seen when an entire function is outsourced.  HR and benefits tend to be so visible to employees that it is not often an area of concern.  In this case, the vendor can be in a sort of monopoly position.  Metrics and feedback are readily available.

However other areas, IT, for example, tend to be run by a supplier with almost no real measurement from the customer.  Large vendors even take advantage of this at times where they bill junior resources and use the client as a sort of training ground for those junior resources.  This bait-and-switch is exactly why third party audits can be highly beneficial to a company.  It helps avoid the case where the fox is watching the chicken house.

Getting Help

There is much more to consider when looking at outsourcing and we will return to this topic in the future to dig a little deeper.  For now, you can always send an email to info@54.197.223.3 or contact us on our website.  We are happy to help you with any specific questions or to schedule a consultation call or IT audit.