Outsourcing – Best Practices, Methodologies, Factors To Consider and Pitfalls

Outsourcing a project has numerous benefits to a company, but how to implement a successful outsourcing initiative can be very challenging. Additionally, if implemented properly the project can result to a significant gain towards the firm’s development and efficiency.  However, despite the challenges that come with outsourcing, it’s becoming a popular solution to executing company tasks without risking the jobs of the existing staff.  To reap all the outsourcing benefits, business owners should identify challenges of the process and implement the best practices to satisfy their needs by considering relevant factors.

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The first best practices that may be used to maximize the anticipated outcome is Setting Clear goals. When the company has defined set of objectives and requirements, getting the best partner becomes easier. When the partners are aware of the businesses precise goals, they will work towards satisfying their clients’ requirements and easily identify barriers that will hinder the accomplishment of those goals. Secondly, choosing the right Engagement model. The client defines their engagement model to their provider by discussing how you would like to engage with them, and defining the personnel responsible for managing and tracking the project and the individuals responsible in case of any failures.

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Thirdly, selecting the right service provider. This is a crucial task that should be handled with the best practices since they will affect the final outcome of your project. The provider should have enough resources, have the right team and their systems should be up to date. Fourthly, establish the company’s culture. The firm needs to set a culture that will actively involve their employees by listening to their suggestions and making sure they are aware of advantages, limitations and cultural differences with the chosen outsourcing company. 

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Lastly, the fifth best practice approach to consider is the creation of a connection with the offshore team. Building a healthy connection with the partners not only assists the company in receiving the best outcomes and at the same time ensures that in the future you do not need to go through the whole process of finding another service providence team.

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Outsourcing Methodologies

  • Business Process Outsourcing Methodology. This methodology is very structured and will assist the business in satisfying their client’s needs. The main advantage of this model is that it is easy to understand as well as apply and maintain. The system is well coordinated and documented so that all their customer’s data is incorporated to assist the transition team in all important business processes (Krstic & Kahrovic 2015). Additionally, it is very flexible and can be changed to cater for the client’s needs. Also, it provides a focused and common language for both customers and the service provider.
  • Cost estimation methodology.  This methodology enables the user to estimate the costs they will incur by regulating entities for a system applied from the outsourcing company. Additionally, the cost estimation methodology is designed to calculate the service cost and the operation and maintenance cost of the outsourced system. The various cost estimation techniques include actual cost where the estimate amount of the future costs for the system is estimated. The second technique is engineering estimate where the system being costed is broken down where each part is priced separately for direct labour, material costs and any additional costs.

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Outsourcing Factors to Consider

Businesses need to take into consideration various key factors, which ultimately assist them in taking informed decisions. The factors that the companies to consider are

  1. Pricing. The firm needs to investigate on the sellers pricing structure and compare it to the prices of other vendors who provide the same services. Moreover, despite the fact that pricing is a vital factor it should not be the only defining factor in considering the right supplier.
  2. Communication. The service provider should be in a position to provide all the necessary information and answer all the questions the buyer needs. They should be competent enough to clearly understand your terms and conditions so as to ensure that the project is delivered on time.
  3. Service Level Agreement. The business needs to make sure that everything is clearly stated out and ensure that there is no uncertainty about the level of quality expected for the presented services.
  4. The management team. You need to Inquire on the individuals that will lead your offshore team and make sure that they well equipped with the necessary resources and information to satisfy your needs. A skilled organisation will result to a positive result.
  5. Resources and Technology. The decision to outsource includes an analysis of the supplier’s available resources and technology. Additionally, their software and necessary equipment should be up to date. Lack of trained personnel, modern technology and inadequate resources might lead to failure of delivering quality services (Kremic, et al., 2006). They need to be able to handle any task assigned to them.
  6. The Competitive Advantage Factor. The buyer needs to consider factors such as the reliability and capability of the vendor to help the business attain the goal. The supplier must be in a position to exploit their assets for the benefit of the outsourcing company. Additionally, in cases of emergency or increased wants the vendor must be in a position to cater for the increased needs of the company.

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It is evident that before the business settles on their service provider they need to undertake a thorough investigation. The main important factors are pricing because they have to work under their budget and the Service Level Agreement which will contain all the relevant information before any

is signed.

Pitfalls of Outsourcing

 Outsourcing has numerous advantages to a company but on the other hand the process faces different challenges such as Lack of control. Once the businesses outsource their services, they lose control of how various tasks are carried out. According to (Kremic, et al., 2006), if the company is highly recognized for offering high quality services, outsourcing could harm the quality and the firm has no control over this. However, they can only monitor the jobs by either sending a trusted employee to supervise how things are being done or by trusting the services offered by the vendor. Secondly it leads to loss of focus. Since most outsourcing companies are offering their services to various clients, the task you have assigned to them may not receive the maximum focus it deserves. This might highly affect the final output. Thirdly, the services offered by the outsourcing corporation may be below expectation or not delivered on time. Additionally, incase their services do not meet your expectations, the business will be at a risk of not satisfying its end goals.

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Fourthly, it lacks of flexibility. The contract given to the outsourcing business could be too rigid to accommodate change. The vendor must be in a position to still provide services to their customers in case of emergency. Fifthly, it can cause management difficulties. Changes in the outsourcing company management might highly affect their clients since terms and conditions might change thus affecting the signed contracts. A friction of actions might occur. Sixthly, it is characterized by unforeseen costs.  Each price that will be incurred must be clearly indicated in the agreement. Prices might raise in the future and that’s why it’s important to include a section that specifies whether the client will re-evaluate or terminate the contract (Kremic, et al., 2006). It is crucial that one takes into consideration any unexpected costs.

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Seventhly, it is affected by cultural barriers. Each business has its own culture and sometimes outsourcing services may lead to the provider not meeting the company’s expectations since they do not understand the businesses culture. Moreover, if the same task had been assigned to the employees of the company, they would have delivered high quality services since they have a deeper understanding of the company’s culture. Lastly, if the business does not identify the limit that will mostly affect their business, the outcome may not be as per their expectation. The challenge that I find more dangerous from the list above is unforeseen costs, because once the business loses financial track, the business is likely to collapse.

Conclusion

To sum up, it is evident that outsourcing has become a common subject in most businesses. The business must therefore ensure that the service provider they choose is well equipped with the necessary resources and at the same time satisfy their goals. Moreover, when the challenges of outsourcing are identified and worked on, the business will reap maximum benefits from the process of outsourcing.

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