In my last blog I talked about the benefits an SME can derive from outsourcing but what many people don’t talk or write about are some of the disadvantages or pitfalls that companies fall into! It is important to point out that these pitfalls can be avoided if you plan and manage the process.
Think of it as inviting a domestic goddess into your house to help with your cleaning, your initial worries are trust and the cost of employing someone to do this for you.
Considerations are “does the cost outweigh any benefit after all, you could/should be doing it!”
A compelling argument but imagine the time you gain by finding the right partner to manage the outsourcing process for you? TIME is money and if a part of the business process or function is broken then in reality it’s probably costing the business a whole lot more!
Its true that businesses are wary of outsourcing and recent figures from research conducted by the National Outsourcing Association revealed that “80% of the general public do not believe that outsourcing helps the British economy, with only 19% believing that outsourcing can help get the UK out of recession. An alarming 22% of people dislike the process of outsourcing despite us paying £21 billion in income tax every year. Perceptions of outsourcing centre on cost-cutting, job losses and offshoring and onshore outsourcing.
Concern is based on an organisation handing over primary business processes and/or functions to a third party leaving you feeling out of control and bereft of what is going on.
Areas of concern tend to focus on:
- service levels not meeting expectations
- data integrity and confidentiality worries
- the contract being too inflexible to allow for change in growth patterns of the company
- management changes at the outsource company creating friction and uncertainty
- the outsourcing company going out of business or changing/discontinuing the provision of the services originally hired for
- failure to provide the necessary resource in your company to manage the success of the outsourced business process
When considering outsourcing it is always worth having a contingency plan should a problem arise for example could you bring it back in-house for a short period, do you have an alternate service vendor? This is a double-edged sword because outsourcing by its very nature assumes that the company you choose to partner with will never cause you grief.
But outsourcing should involve research, selection and recruitment of the right provider for your proposed business function. But things do happen, events intervene, companies change management, companies get bought out, companies go bust!
After reading the above it’s enough to make you dismiss the process altogether. Problems arise when “force majeure” intervenes or, you have not planned and managed the process as outlined here!
How do you avoid the pitfalls!
Let me start by saying “outsourcing is about creating a successful partnership” much like a marriage as I have previously alluded. In 90% of failed outsourcing processes this was the fundamental component missing! (Based on DPM statistics) It is no good you choosing to take a commercial decision to outsource a component and handing it lock stock and barrel with no active involvement or development of the relationship.
To quickly illustrate DPM recently won a London based client for the print and distribution of cheques high volume large value along with the payroll processing.
With regular review meetings pre-scheduled into the diary its nigh on impossible to speak or get a response from the client in between these review meetings. “Yes, we are delighted with the way the implementation was managed, its one less thing for us to now think about because DPM does it all” Nice praise thank you!
Regular communication is pivotal to any business relationship, an example of that is marriage if you don’t communicate it can quickly break down leading to misunderstandings and mistrust!
How do you find the right partner/supplier?
Ask yourself the following:
- Does the service provider have a track record of service?
- How does it manage service levels and expectations?
- Is the business expanding?
- How good are the service level agreements it provides?
- How will the relationship be managed?
- Will there will an account manager?
- Who are the providers existing customers?
- What are the strengths and weaknesses of the provider?
- How do they manage problems?
- Visit each supplier and ask questions about the processes
- How secure are their IT systems? Is data integrity (if relevant) conform to UK standards i.e. Data Protection, ISO 27001
- Can they demonstrate good quality assurance management systems?
- Are they financial stable? How long have they been trading? (Don’t be mesmorised by the scale of the turnover its more important they have a proven track record in delivery)
- Ask the service provider if they plan to subcontract the work out and carry out the same checks
- Do they really know and understand their industry sector?
Call me old fashioned but you can do all the necessary checking, set up a tender process and visit the select few. But there is nothing like good old fashioned gut instinct if it feels right it probably is and vice versa.
Dont be afraid to ask if you can dip your toes in the water and trial the service for 1-3 months to get the “experience” (subject to type of business function) although there may be some initial setting up/running charges for the trial it’s worth asking for. If the service is of high value over a long period you may even be able to trial the process free before you make your final decision!
One more thing, whether the value of the process you are outsourcing is £5K or £5,000,000 the above steps still apply!