Outsourcing is a strategy that companies employ where the contract outside their core teams functions to specialised efficient service providers who ultimately become valued business partners. Outsourcing can be defined as “the strategic use of outside resources to perform activities traditionally handled by internal staff and resources.”
So Why Do It?
The reasons for outsourcing are wide and varied but eventually, comes down to what your company values and needs. It is not always about the money either.
Some of the most common reasons include:
- Reducing and controlling operating costs.
- Improving company focus.
- Gaining access to world-class capabilities.
- Freeing internal resources for other purposes.
- Streamlining or increasing efficiency for time-consuming functions.
- Maximizing use of external resources.
- Sharing risks with a partner company.
However, these reasons are not enough on their own! You need to ensure that when accessing outsourced services, you are achieving more than one of the above list and are also ready for the requirements needed to make for a successful outsourcing program.
What Requirements Do You Need?
In the good old days, “cost” or simple “headcount reduction” were the main drivers to outsource functions of your business. But the times have changed and the key drivers now are more often strategic and focused on enabling companies to leverage senior in-house staff strength and using outsourcing as a way to extend teams to meet demands and market expansion.
Nowadays, the areas for a successful outsourcing program include:
- Clarity concerning company goals and objectives.
- A strategic vision and plan.
- Vendor selection.
- Relationship management.
- Properly structured subcontract and vendor agreements.
- Open communication with stakeholders.
- Senior leadership support and involvement.
- Careful attention to personnel issues.
- Short-term financial justification.
Two aspects of the above are key, so let’s look a little further into these:
- Open communication; and
- Executive and senior management support.
Everyone concerned should be involved in this process. Having open channels of communication to determine stakeholder requirements and having executive support is critical for a successful adoption of an outsource strategy. Whatever the final outsourcing arrangement looks like, there will be a need to carefully manage the change focusing on the key reasons and outcomes that should be achieved.
Any senior manager should be able to articulate the goals and objectives of the organisation. Strategic objectives like outsourcing must be a top down approach with clear communication about how the initiative will benefit the organisation.
Like all things considered, choosing an outsourcing partner is not the end of the executive’s journey, they must be looking ahead and recognise their own responsibility for the success of the outsource program.
Ensuring Outsource Success
Ongoing management and open communication are vital to the success of the outsourcing relationship. An outsourced team is simply an extension of your in-house team and not the enemy.
Senior management must stay involved and meet at appropriate intervals to discuss the relationship and any issues or successes. Additionally, meetings should be happening at the operational level to ensure delivery success and quality levels are as per agreed levels.