Outsourcing Can Backfire if Not Planned Well

Posted on June 10, 2010

Outsourcing is a major business decision that has to be taken after much thought and deliberation. Any company deciding to outsource its business services needs to construct an efficient and stable outsourcing plan after the consideration of a number of factors like, the time required to complete a project, the available expertise, the types of services being outsourced, the capability of the offshore vendor to maintain confidentiality and the current market forecast.

To prevent a possible backfire as a result of outsourcing, a few rules are to be followed during the planning of the outsourcing process.

  • Never outsource a core business process: The core business process of a company is vital and should never be outsourced. According to Simon Muthiora, the executive director of Skills Geographic Kenya Limited, a human resource recruitment company, “Core responsibilities that require experts are not outsourced. A company cannot outsource the services of a chief accountant. You may choose to retain a permanent employee for this and outsource payroll accountants.”

  • Never outsource projects which demand a high level of confidentiality and managerial control: Outsourced projects often go beyond the control of the management. Thus, if your project demands a high level of confidentiality and managerial control, then at no cost should you outsource the project.
  • Never outsource a long term business process: Employing your own staff for a long term process is always more advisable. Although your investment at training them will cost you more at the beginning, but once they are trained they will be able to do their jobs efficiently. It will prove to be cost-effective in the long run, rather than immediate cost benefits that you would derive from the outsourcing model.
  • Never outsource a process which could hurt customer loyalty: Outsourcing of certain specific services may reduce customer confidence in your company. For example, customers may have developed a long lasting relationship with your front office employees and a decision to outsource such services may not be the wise thing to do.

Apart from avoiding outsourcing the type of services mentioned above, it is important to make a foolproof outsourcing plan, if at all you plan to outsource non-core, routine tasks to offshore service providers.

Ensure that you avail a trial (paid or free) of the company’s services before you outsource your operations completely. The trial will help you judge the quality and timeliness of the company’s services. Based on the trial you may or may not choose that company to outsource your routine tasks.

Also, when it comes to payment, never make full payment at the time of signing the SLA (service level agreement). There are some companies that disappear without giving you the promised deliverables. Hence, wait for all the deliverables to arrive. Check the quality of the work done. If there are any issues, report to the service provider. When everything is done, release the payment.

By keeping these points in mind while outsourcing, there are very little chances of your outsourcing plan backfiring.

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