An agenda for outsourcing

The need for outsourcing goes beyond just the need to save money. Companies that outsource projects in the long term must be realistic about the expectations, choose partners carefully and dispel employee concerns about the project, says Sudhir Gera

Outsourcing is not a new term but it has assumed a renewed thrust, especially with reference to India, because of the huge opportunity it encompasses. Opportunity, not only for Indian IT services firms but also for a wide cross-section of companies that can achieve significant business gains from outsourcing activities—be it in the field of customer service, payroll, insurance, medical services, financial domain, or what have you. An opportunity, too, for tens of thousands of professionals who have begun to look upon this area as a super fast stepping-stone to success.

However, this simple sounding concept of outsourcing, which has multi-billion dollar figures attached to it either by way of savings or business opportunity, is a pretty complex and complicated undertaking. It is not, say, a physical transfer of assets or people to another company. Nor is it a two-step procedure that can be given out to anyone without ample skills. Usually, outsourcing a key function to a third-party service provider involves a number of expectations, issues and challenges that must be managed well—if the project has to be successful, that is. Keeping a fix on each point can save a lot of heartburn at later stages.

Are you geared for outsourcing? This is a question any organisation willing to embark upon an outsourcing exercise must address in a detailed manner. The idea is to make sure that it is not mere ‘herd mentality’ that is driving the company towards outsourcing—the ‘everyone is doing it, so let’s do it too’ mantra may work, but not always. There must be a compelling business need for outsourcing—and it doesn’t have to be cost alone—coupled with the prospect of sustained competitive advantage. However, the most important thing is to look within the innards of the organisational culture and gauge whether it is ready for the changes that outsourcing will bring in. The full support of the management is also essential to see the entire project, along with its business benefits, through.

Realistic expectations: One philosopher is said to have given this advice to people who always want to be happy: “Expect nothing!” Of course, one can’t run a business in a state of ignorant bliss, but in a business context this maxim can be adapted to read: ‘Know what to expect exactly.’ In practical terms, this translates into clearly defining your expectations from the outsourcing project so that it can later be compared with the achieved results. Realistic and well spelt-out expectations will generally lead to desirable results.

Vendor selection: This one is the most critical, and often the most difficult. The old favourite is the ‘tender invitation’ route: Ask for quotes from a few vendors, go for the lowest price. Period. No hassle! Right? Possibly. But treating an outsourcing service vendor on par with a supplier of commodities (products) could have long-term implications for your business. The best thing to do perhaps is to prepare a vendor evaluation checklist, noting down the key criteria for selection, the vendor’s proven ability to meet those criteria, the vendor’s standing in the market, time required to execute the project (besides cost), or anything that can have an impact on the outsourced function. It is also important not to be misled by hype in the media or by only one aspect of the vendor. For instance, contrary to popular belief, size of the vendor alone is not a sufficient criteria for handing out a large project to them.

Service level agreements: The advantages and importance of SLAs for the success of a project has already been emphasised by industry stalwarts and consultants alike. Having set expectations and after choosing an appropriate vendor, it is essential to lay out relationship details with the vendor in the form of an SLA that would govern it for the entire life of the project. ‘The devil is in the details’ is a saying that quite fits when it comes to SLAs. To avoid the devil, just make sure your SLA is as comprehensive as possible, with room for just enough flexibility to take care of exigencies as they arise, but at the same time, without bogging down or delaying the project.

Employee communication: Given the backlash that outsourcing has been receiving in certain quarters and employee concerns regarding their future employment and growth, it is advisable to carry out extensive and honest employee communication. Such an exercise would preempt the apprehensions of affected employees and reassure remaining employees. But, more than that, it would communicate the business benefits of outsourcing to all and enable employees to be greater supporters of this initiative than they would otherwise be.

Thus, companies who go with a predictive approach, a prepared mind and a well-crafted agenda have better chances of success than others who just want to join the bandwagon.

The author is vice president, Marketing Blue Star Infotech. He can be reached at sudhirg@bsil.com