Areas to Outsource: Companies must evaluate which,
if any, internal functions would be better performed by an outsider.
Outsourcing back-office operations such as human resources, finance,
accounting and information technology (IT) can not only cut costs, it
can also ease administrative burdens and improve flexibility and
Senior Management’s Commitment: As with any
other significant undertaking, it is absolutely critical that the
outsourcing project has support from senior management.
the Project Team: Outsourcing requires a great
deal of in-house management in order to determine and deliver business
requirements, ensure technical capability and manage the external
relationship. Without this oversight, the potential for strategic
gains can erode.
senior managers have signed on to the project, it’s important to
have the committed participation of affected departments. Their
representatives must be part of the process, because their input is
critical to the project’s success. They must support the decision,
whatever it turns out to be.
Current Operations: Outsourcing relationships often
fail when a firm outsources an activity its own personnel do not
totally understand, and the provider promises to meet requirements
that have not been fully defined, communicated and understood.
order to make an intelligent decision about whether or not to
outsource – and to whom – you first need to fully examine your
needs. Make sure that outsourcing is a good fit for your overall
the Scope of the Project and Develop Objectives:
Begin by defining the problem and the desired outcome. (Are you trying
to lower operating costs, increase flexibility or gain access to
best-of-breed solutions?) Find out if your competitors’ strategies
are working successfully for them. Determine whether outsourcing will
enable your organization to concentrate better on your core
competencies. Evaluate the risks and determine if they’re
Outsourcing Skills Needed:
You’ve defined the project. Now you need to decide what skills are
critical for a vendor to have in order to service you appropriately.
in the process being outsourced.
project management skills.
understanding of your business.
ability to integrate best-in-class service providers into the
willingness to establish performance measures.
or expertise that your company lacks internally.
Potential Providers: Identifying
potential providers can be a challenge, since there are hundreds of
firms offering an array of services for a variety of clients. The
industry is segmented in a number of different ways, so understanding
your needs and which types of companies can best meet them is the
first hurdle to clear. To start your search, get referrals, read trade
publications and surf the Internet.
Due Diligence on Vendors: Several
vendors have submitted proposals and you’re narrowed the field to
two or three top prospects. Now, you need to go beyond the proposal to
make sure the vendor is a match for the project.
sure that their corporate vision and goals are compatible with
their experience so you don’t hire someone who doesn’t have
the right expertise or capabilities.
out how the firm trains and develops staff, and how successful it
is at keeping them.
the vendor’s contingency plan, so you’re clear what happens
should something goes wrong.
Vendors Accountable: The buyer should hold the
vendor responsible for living up to specific requirements. This can be
accomplished with a contract that covers – among other things –
the level of accountability, job parameters, scope of work and
performance yardsticks. Determine in advance the penalties (including
financial) for nonperformance, and spell them out in writing.
serious consideration to an escape clause. If things aren't working
out soon after you begin, being able to terminate the contract without
a penalty is much easier. For example, your contract might allow for a
penalty-free termination within 60 days.
Whether You’re a Candidate for Outsourcing:
Companies that are good candidates for outsourcing share several
goals for what they want from the relationship.
from management as to the benefits of outsourcing.
understanding that outsourcing is a long-term strategic
relationship and not a short-term, quick-change effort.
benchmarks for processes within their business so that outsourced
functions can be verified and measured.
delineated parameters for the process that will be outsourced.
basic drivers for establishing an outsourced relationship, such as
the need to refocus on core businesses, reduce overhead, improve
customer service and increase competitiveness.