Balancing the Outsourcing Equation

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Information about Balancing the Outsourcing Equation
Business & Mgmt

Published on February 4, 2014

Author: managedoutsourcesolutions

Source: slideshare.net

Description

Companies considering outsourcing should determine what tasks are to be outsourced.
This article discusses the factors to be considered while choosing the services to be outsourced.

Balancing the Outsourcing Equation Business managers are often faced with the dilemma of making a choice between a professional BPO Company and an in-house team to take care of their projects. Typically, the very first question that arises in their minds may be ‘Which services (if any) are to be outsourced.’ Before making a decision, they should be clear on which option is more profitable, the cost of running that service in-house or outsourcing it to reliable partner --- provided the quality of the service remains outstanding in both cases. Evaluating In-house and Outsourcing Costs To get a clear picture regarding the cost, evaluation should be done by applying the same set of specifications to both internal and external services. This principle can also be applied when evaluating supplier catalogues. Organizations use evidencebased measurement and price/performance comparison to assess the functionality of their IT departments. This helps them to understand where price cuts can be made or improvements can be achieved. You may come to a decision as regards outsourcing vs. carrying out the tasks inhouse by comparing the data obtained based on the cost factor alone. However, it is very important to understand that cheap services are very likely going to be of a lower quality, less efficient and end up costing more in the long run. The right step would be to evaluate the cost in terms of performance – consider whether the pricing is affordable taking into consideration the quality of service. When Selecting a Service Provider You must be vigilant on certain factors, when selecting a service provider. Here are some questions to ask when looking for a reliable outsourcing partner: • • • • What can be expected from the supplier? How to approach a supplier? How to ensure the service provided is worth the amount you pay? How to make sure whether the contract or service level agreement (SLA) is transparent?

In case you already have a service provider and they are approaching you for service renewal, then consider factors such as whether their service delivery still match up to SLA promises, whether the prices are still competitive, whether they are proactive in introducing technological innovations, and whether they are still listening to and responding to your needs. It is advisable to look for another option if your provider is working on obsolete systems or offering low quality services. How can you figure out whether the services you are hiring are really worthwhile for the cost you expend on them? Here are some guidelines. • Look for service catalogues that include itemized costs, which will help you have a clear idea of what is available, assess what you actually need and choose likewise. • Outsourcing services must be transparent in all aspects. Typically, these services are priced on the basis of five factors: o o o o o Service Delivery Quality of Service Time-scale Service Volume Complexity Involved Why Outsourcing May Prove Costly If you feel that your provider’s services are overpriced, there may be reasons for the same. • Many outsourcers rely heavily on low cost support centers located in India or Eastern Europe to contain costs. However, increased labor cost in these locations has led to a corresponding increase in the service providers’ costs. Another factor that has an impact on pricing is infrastructure complexity, with many organizations working with a combination of legacy standalone systems and newer applications (like ERP) to handle operations. Linking all of these together is rather complex and can prove costly. • You may have opted for round-the-clock support that is not always necessary. If you are outsourcing non-core back office tasks, you surely do not require 24/7 support. Usually, service providers may not specifically point out this fact to you. Anyway, you must review the service levels you need and make orders accordingly, to obtain full value for the money you pay. What Outsourcers Can Do to Ensure Transparency Outsourcers can take a proactive approach when dealing with their customers, by guiding them on where they can save. They should make SLAs transparent and produce easy-to-navigate, clearly-priced service catalogues, which can create an environment of trust and cooperation between the customer and the service provider. It is a welcome move on the part of some service providers who take the effort to understand their clients’ businesses more thoroughly and rise to the level of a partner or expert advisor by providing constructive business recommendations.

Professional BPO companies should have the capability to gain a deeper understanding of their customers’ servicing needs, and provide the right counsel. A dedicated and reliable outsourcing company can prove to be a pillar of support to organizations looking to improve performance while controlling costs. Moreover, the awareness that their outsourcing partner has their best interests in mind is surely the number one reason that will encourage organizations to outsource.

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