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
