Out-sourcing – how to be good at it!

In the present climate the pressure to seek value for money through out-sourcing is stronger than ever.

Yes, you can save money but getting the full value from your outsourced service and making sure that it supports your business in the way you intended is complicated.

The financial benefits alone are often not properly understood.  The results of research by Warwick Business School working with IT group Cognizant showed that less than half (43 per cent) of all CIOs and CFOs have attempted to calculate the financial impact of outsourcing to their bottom line let alone determined the real value to their organisations. They don’t know the real value and it is doubtful that they are getting the outcomes they expected!

Here are some steps you can take to ensure you achieve real value from your out-sourcing activity.

1. Know why you are doing it

Don’t out-source just because the competition does it!

What do you expect from the service and what resource will be available to support it?

Can you specify what you need and will you be able to measure and monitor it when it is delivered?

Have you got experience of managing outsourced services or can you afford to buy that expertise?

How essential is this service to your business operations?

Can you afford to take the risk?

2. Be systematic but keep it simple

Work out a strategy for out-sourcing that your organisation can cope with!

If you are new to out-sourcing don’t go for a complicated strategy that involves many suppliers.

If you go for a complex supply chain, you will need to know how to manage it

If you go for multiple suppliers, you will need to know how to coordinate them

Start with a single and relatively simple business function and a single supplier and build from there.

Gain experience as you develop the approach

3. Know how you are going to measure and monitor

Many companies rely on service level agreements (SLAs)

SLAs are crucial to outsourcing arrangements but you will need more than a traditional SLA if you are interested in business improvement!

Measuring against an SLA will tell you about delivering the status quo

Most SLAs will not tell you if the service is really delivering benefits and the right outcomes to your operation!

You need to focus on business improvement rather than just service improvement processes!

Determine what evidence of success and the right outcomes really looks like and use it!

Use industry benchmarks IF they are useful to your business

4. Invest in the relationship for long-term value

Demands and expectations change over time!

This can lead to disagreements with your supplier which can erode the relationship

Agree at the start how you will recognize and respond to changes together

Share information honestly between you

6. Be an intelligent client

Don’t hand all your talent across to the supplier with the service

Keep enough expertise available so you can talk intelligently to your supplier about performance

Keep enough expertise to cope with changing your contractor if necessary in response to supplier failure or market changes

Keep enough expertise available to cope with business innovation.

Be honest with your supplier about your expectations and your customer base

But be prepared to learn from your supplier

You can find this as a slide presentation on LinkedIn at the following link  http://slidesha.re/hc0HyK

5 thoughts on “Out-sourcing – how to be good at it!”

  1. Pingback: Tweets that mention Out-sourcing – how to be good at it! | Wisewolf Talking – the simple approach to change! -- Topsy.com
  2. One of the complications is that people misunderstand the effect of the ‘TUPE’ regulations and feel they must transfer key staff on to their supplier.

    Furthermore they fail to properly contract with their supplier so that if the contract returns in house they inherit the suppliers staff.

    Forward planning on the commercial side of outsourcing needs to be factored into the contract, bearing in mind the effect of the relevant TUPE legislation. We have worked with managerial teams who had no idea how to make these things work together!

    1. Thanks Annabel, important points – I think panic and ignorance often work together so that managers take a very limited view of what they are trying to achieve!

  3. I f you cannot manage what you have already, then don’t outsource it until you can.

    Outsourceing need not be about saving money and in the long run, rarely is unless what you have was over specified in the first place. One good reason for outsourceing is where your organisation cannot maintain or keep staff skill levels and/or career progression path.

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