Few Misconceptions of Outsourcing

Company: “How difficult can it be to outsource a process?”

Outsourcing is not easy, just because you outsource a process to experts does not mean that it will work better than it did before and at a lower cost. It is essential to first decide why you want to outsource, is it because your core business is not IT and therefore you are not good with it, or you wish to reduce cost. Once your outsourcing motive is clear you then need an Outsourcing plan i.e. you need to have some idea what you expect from your outsourcing vendor, how will you shortlist a vendor, who from your company will interact and manage outsourcing transactions etc.

Apart from above, following should also be considered in your outsourcing agreement

• IP Protection
• Client/Company Data Privacy
• Permission for Subcontracting
• Exit Strategy
• Properly Address Dispute Resolution
• Indemnification

Once contract is signed you need to impart your process/business knowledge to the vendor so that he can give cost saving solutions. Provisions should also be taken to ensure that incase the company wishes to bring the outsourced process back inside the company how will it be achieved.

Company: “Outsourcing is, when we get to transfer all our IT problems to a vendor who has expertise in the area. It is then their lookout how they fix the problem and achieve cost saving simultaneously. And the best part is that once process is outsourced we won’t have to do anything or change the way we do things.”

Outsourcing is not a “Pick and Drop” concept. In other words, companies cannot just pick up a process and drop it off to an outside vendor and expect everything to work absolutely fine without any effort from their end. Vendors are expected to find the root cause of the problem and suggest a feasible and lasting solution; this can only be achieved when they have full knowledge of how company does business.
Every company has its own nature of working. Though outsourcing providers are better at the given function they need some guidance from the company to understand their business process. Only after they understand the nature of business they can differentiate between what company wants and what they need to achieve their goals. Based on their understanding they find the root cause of the problem and put forth a solution.
This solution suggested by the vendor by its very nature might change the way company does its business. Therefore it is essential that company should also be willing to make changes (sometimes major) in the way they do business while outsourcing.

Company: “We need to achieve cost saving next year. We know that if we outsource our processes overseas, we will achieve our financial goals for next year.”

One of the top reasons for outsourcing is cost saving. Most companies calculate cost against a baseline which is static in nature, due to which they save cost in short term but in long run they might run into problems. Ideally, cost calculation should include dynamic aspect as well i.e. they should take into account the following

• Overhead created by getting things done world away.
• How much they have to Compromise on quality, if any
• Government policies of the outsourced country
• Estimate hike in rates and personnel turnover in 3 to 5 years down the line

About Author:

Tina Nebhnani is consultant and part of Systems Plus Pvt. Ltd. She is a part of consulting team that delivers Sourcing and Vendor Management Office projects. She can be contacted at: tina.n@spluspl.com