As a business owner, you only have 24 hours in a day and you should spend most of this time in your core business activities. Companies, both big and small consider outsourcing their business functions to save time and money. They hire experts to work with IT related activities which they and their employees don’t have an in-depth knowledge about. Typically, outsourcing helps you to align your business goals and stay competitive in the market. But, too often, companies don’t manage to reach the outsourcing goals they have set. They overlook the homework that needs to be done before outsourcing any project.
We have compiled a list of important things that you need to consider before outsourcing a project. This will help you to prepare stronger SLAs, reach your outsourcing goals faster & easier, and secure yourself from the associated risks.
Most probably you outsource a project to save yourself from spending thousands of dollars on hiring permanent staff that could do the same work. Outsourcing needs to reduced operational costs by improving your business bottom lines. If this does not seem to happen anywhere in the near future with your outsourced partner, you may end up spending more than you end up saving. To avoid this, all you need to do is to analyze whether outsourcing will help you reduce a significant amount of your capital by hiring employees.
The most essential element for business survival is its reputation. Company’s bottom line can be directly affected by the trust and confidence of the consumers. People will scrutinize your products, services as well as your social media accounts. With your business reputation on the line, you want your outsource partners to constantly maintain the highest possible standards in your projects.
Core Business Activities:
An important thing to note before outsourcing is that you should not outsource your core business activities. Will Google outsource its search algorithm for improvement? No, Because Google doesn’t want anyone else to work on his secret. Therefore, if you are outsourcing a project, make sure that your core activities are not exposed. Any critical project or sensitive information like passwords, reports, business contacts should remain at the heart of an organization.
Consider the Risks:
” Between calculated risk and reckless decision-making lies the dividing line between profit and loss.”
Outsourcing is often considered as a risky option because someone else is working for your business. Apart from reputation damage, there are more risks such as:
- Breach of compliance regulations
- Data security
- Excessive delays in the project
- Loss of intellectual property
- Policy violations
But outsourcing projects should be viewed as a well-calculated risk. With efficient measures and security policies, you can mitigate the risks and use the opportunity to research, innovate and generate the highest quality results possible.
The outsourced partner will work on a project from scratch. With a lot of business activities aligned, you don’t want him to reach you for every little thing. You need a responsible vendor that can take small decisions on his own and require a minimal supervision. To make the development fast and easy, you should also provide the vendor with a rich documentation that clearly outlines the scope of your project. Most of the doubts can be clarified if the vendor knows the business application of the project that he is developing.
Even with a trusted vendor, you still need to supervise the progress of the project. It is essential to determine whether everything is going as per the plan. Before outsourcing a project, prepare an assessment schedule that does not disturb your core business activities. You can pick a day in the week or assess the progress every alternative day. Preparing it beforehand will manage your time and you will be able to measure the delays and find the areas of improvements in your project. After all, it is your project, therefore it deserves your attention.
Innovations in Your Project:
Many businesses aim to transform and innovate like a ‘start-up’ and ‘think outside the box’. But sometimes their internal constraints and practices do not allow this. You want someone who can not only develop your project but also brings his own ideas and innovations for your business growth. With right innovations, your products and services can become the industry leader, leaving competitors behind. Therefore, it is essential to ask your outsourced partner what else he brings to the table. He must be agile, and ready to make changes as the business needs grow.
Political Impacts in the Organization:
Before selecting a vendor, you must answer the following questions
- What are the political impacts on the organization?
- Who are the stakeholders that will be most affected by outsourcing?
Outsourcing agreements typically involve intensive negotiation between the outsourced partner and the organization’s Finance Group. But hardly, the stakeholders are consulted, either before or during the negotiation phase. Mostly, they are the employees who will be assigned to the supplier and have to bear the change. This can make them feel like they are left behind. This can severely affect their productivity and attitudes to work. Therefore, apply adequate consultation and change management practices before outsourcing.