Digital Print Management has been a long term advocate of outsourcing.
But, surprisingly very few companies experience the real benefits of outsourcing because of failure in communication.
All too often relationships along with the contracts fail to meet the expectations of the customer.
Digital Print Management have often succeeded in winning contract work because of failure by the last incumbent.
Great for us but not a good advertisement for the industry in general.
What do I mean?
The three main reasons outsourcing fails are:-
The company wanting to outsource has no process for specifying the work to be done.
Poor project management from the provider and the company outsourcing
No metrics or KPI’s for measuring success
Unless you can specify and understand what you want as the party wanting to outsource how can you possibly expect the supplier to deliver your expectations?
You don’t need a detailed document that reads like War and Peace to make outsourcing successful but you do need to know what you expect to receive from the outsourcing process.
The worse scenario is the company decides to outsource a process and hires consultants to do the work for them assuming they know better than the organisation what is required and wasting money in the process.
Tell us what you need.
We can do anything, just tell us what you need.
I’ve sat in many meetings talking with clients understanding what they are looking and hoping for when they are considering outsourcing.
Start with a blank sheet of paper, if you could have anything you wanted what would it be?
Eh voila, there it is, all the information you need to put together a specification.
The responsibility is on the shoulders of the company looking to outsource the business process.
But, the most important and missing piece is how do YOU want your customers to feel when they experience the process you’ve outsourced.
In other words it is your customer or the end user who will have the real benefit, experience or engagement with the business process you’ve outsourced not solely the organisation.
Outsourcing fails because the agreement is not properly structured, doesn’t take advantage of the outsource providers best practices, creativity and innovation.
It does not define the scope and service levels that meet your needs and there is no communication.
When it is well planned, outsourcing relationships provide and deliver substantial benefits to an organisation and not solely cost savings.
In my lastblogI talked about why outsourcing can be good for organisations and the benefits that can be derived from outsourcing.
Outsourcing is not a four letter word (11 to be precise but who is counting)
What is often overlooked or never written about are the disadvantages or pitfalls that companies fall into when considering outsourcing!
It is important to point out that these pitfalls can be avoided if you plan and manage the process. When it does go wrong and believe you me it can, outsourcing is then tarred with a brush such as ‘it doesn’t work’, ‘we tried it, it failed’, ‘it was a disaster, never again’.
If there isn’t a clearly defined set of objectives then don’t be surprised when it fails.
Think of it as inviting a domestic goddess into your house to help with your cleaning, if you don’t give her clear instructions on what it is specifically you want doing she will most likely assume what you think you need and both of you then wonder why you are disappointed with the results.
The concerns about outsourcing anything from your payroll printing to a whole department are based on trust and whether the incumbent supplier will deliver the intended outcomes.
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.
There is huge concern for the organisation that is handing over a primary business process(es) and/or functions to a third party perpetuating the myth you feel out of control of the process and bereft of what is going on.
The purpose of outsourcing is to allow the proper use of internal resources. For example if you are printing and fulfilling orders in house, your employees are doing busy work not business. Imagine how the business focus would change when it has more time to think up new ideas, invest in creativity freeing up employees for more meaningful mission driven work all of which help fuel those ideas to fruition.
But what do organisations concern themselves with when they think of outsourcing?
These challenges tend to centre 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
can the process be shared by 2-3 partners rather than giving it to one supplier
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 give you cause for worry.
However, outsourcing should include extensive 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!
Unforeseen problems can 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 make a commercial decision to outsource a component and handing it lock stock and barrel with no active involvement or development of the relationship.
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 financially stable? How long have they been trading? (Don’t be mesmerised 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?
Question your assumptions about outsourcing, this can be a good thing for the business and the employees it also means you are thinking through the process logically. Trusting someone else to manage the process doesn’t mean you have to let staff go it is simply a matter of redistributing human resources.
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.
Don’t be afraid to ask if you can 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 £50,000,000 the above steps still apply!
What do you think? Can you share an outsourcing story that went horribly wrong or was it the best thing you ever did?
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I have often been asked the following questions when it comes to outsourcing:
Should I outsource or should I keep it in-house?
Is there a process or a mechanism to help me determine how I go about this process?
When or at what point should I view outsourcing as an achievable and realistic option for my business?
The following principles can be attributed to almost any business function that you are considering outsourcing from payroll, the Accounting function, corporate print to HR.
What is outsourcing?
A good place to start is to understand what the process of outsourcing is.
Outsourcing is the contracting out of a specific task such as payroll, invoice processing, billing, credit management to a third party provider often implemented as a cost saving measure for tasks that a company requires but is now finding onerous and time consuming to manage in-house.
SME’s to large companies turn to outsourcing to cut costs and streamline their operations.
What are the key points to bear in mind when you are considering the need to outsource some or all of a business process(s).
Key Points to Consider Before You Outsource?
Where are you in the outsourcing process? What does the outsourcing process conjure up in the minds of senior management? And what are the tangible benefits that can be derived from outsourcing?
What is your level of commitment to the process? i.e. Is it a fundamental part of your business plan to relinquish some if not all of a business function? How serious are you about outsourcing as a mechanism to streamline some of your business processes?
Have you decided how much time you are going to put aside to establish this as a project and move it forward?
Outsourcing some of your business processes can save you time and money!
Who or what person will “champion” the process and will take responsibility for steering the project to its conclusion? By this I mean having the authority to make the decision outright for your organisation to procure an outsource partner.
Have you determined what areas of the business might benefit from being removed to an external outsource partner?
What impact is the process (you are reviewing) currently having on your business? In other words is the business function now taking too much time away from your core business objective?
Is it costing or adding too much to your bottom line?
Is the process too manual intensive? Is it not cost effective to make the investment to automate or mechanise the function in-house?
How many people are involved in the process? In other words has the function outgrown that of the organisation to a point whereby externalising this particular business process is a realistic alternative?
Are you able to quantify the time taken to get payroll/invoice processing complete and on time?
Can you quantify the cost of doing it in-house?
Is cost the main factor in considering outsourcing? What I mean is, are you basing your decision to outsource purely in terms of what it is costing you to do it in house? Are there other factors that might influence your desire to outsource?
Coming Next: The Benefits of Outsourcing for Your Business.
Do you have any questions you’d like us to answer?
Any anecdotes or experiences you’ve had with outsourcing that you can share?
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Outsourcing a business process is a viable and cost effective proposition for many businesses.
When you decide to outsource a business function such as outsourcing billing the risk can be minimised by ensuring you select the right partner.
I use this term because it has to be a relationship, one that works two ways, it’s not an association; or “just the company we happen to use to do our billing, payroll, print function you are outsourcing it has to be a relationship designed to aid your business which translates onto your bottom line.
Your check list should include the following:
Deciding which business process should be outsourced is defined by what has become a bottle-neck in your company.
What process/processes are you considering outsourcing? – outsourcing billing, payroll, HR?
What selection process/mechanism are you going to use to find such a company?
Who is going to be responsible for managing the task of selecting the provider?
What criteria of selection should be used to disseminate the good from the bad?
Please don’t make this solely size of turnover or accreditation driven; there are just as many small and large companies doing just a good and bad job of providing services to the end user. If, after an initial discussion a potential supplier can satisfactorily demonstrate in-house quality, policy and procedures that are integral to you and your requirement then don’t rule them out of the picture!
How do I evaluate the service provisions on offer?
I would recommend you think about what credentials the supplier has i.e. years of expertise, references and case studies of projects undertaken. More importantly a genuine gut feel of the person(s) and the company you are talking too!
What are you asking the incumbent supplier to do/provide service wise?
What will my decision making criteria be based upon?
I urge caution here as a decision should never be price driven in our experience this has always been to the detriment of the company seeking to outsource and you will end up by shooting yourself in the foot. Partnering with a company who does it “cheaply” implies that they don’t have the infrastructure to follow through which means they won’t or can’t deliver what you really want or have asked for!
When is a good deal EVER A GOOD DEAL?
When is a good deal ever a good deal? The cheapest price should never be your main criteria for selection.
Has a budget been set for the process OR what cost savings are you looking to achieve?
What timescales are you looking at to implement the project?
Right from the outset you must be clear that once a decision has been taken to outsource you determine a live start up date otherwise the time you spend investing in moving the project forward is worthless and the supplier feels frustrated as they have also invested time and goodwill in assisting with the outsourcing process!
What are your next steps?
Digital Print Management aim to provide an independent outsourcing services for electronic & paper billing, payroll, cheques and secure print management.
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