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Outsourcing – Pointers to Success

Businesses are run to be sold eventually and we have had serial entrepreneurs who have built and sold businesses only to start a new journey. So at the core of such entrepreneurs and businesses is the need to build a new system that addresses a major however an unidentified need.

As businesses can’t afford to focus on all business domains, inadvertently they decide to outsource non-core areas like technology, housekeeping, payroll, and more depending on their business lines. In doing so, many a times, they tend to forget the critical nature of these non-core areas.

As a customer, if I were to review the overall experiences at a hotel or hospitality industry, I presume housekeeping takes precedence to all other aspects of service delivery. Even in a healthcare setup, more value is now attributed to cleanliness and patient care, and the main core function that was the reason for engagement (viz. surgery or medical support) seems to take a back seat. In such a case, if any of these non-core areas were to be outsourced, there has to be a thought through strategy to make it happen and maintain it successfully.

The word “outsourced” is a misnomer in itself. For people within the organization, it is domains or assignments that are insignificant to the Company and hence the reason for off-loading it. This understanding in itself leads to a failed third-party engagement leading to project time and cost over-runs, or service delivery failures.

The owner Company assumes service deliveries to meet/or exceed expectations however maintain an arms-length with the provider. To me, a service provider is only an extension of the primary owner and hence success and failure depend on how one manages the hand-holding and on-going relationship. The owner cannot shy away in case of a failed relationship leading to product failures and/or services impact at owner site. Similarly, in owner’s success lays success of the provider too.

Many a global outsourcing engagements have gone sour and if one would like to insulate or safeguard them from a failed engagement, here are in my opinion a few pointers to success:

Have a clear scope of work to be off-loaded:

The scope of work should be brainstormed and reviewed with stakeholders; critical areas identified should be prioritized.The scope should be presented and discussed with the proposed providers much before signing-off an agreement. As far as possible, cover and/or have grey areas identified and recorded.Any risks to the businesses should be clearly stated and mitigation strategies and timelines defined.

Commercial engagement:

Use the engagement opportunity as a basis for long-term relationship.Perform due diligence, however don’t squeeze the provider beyond a point, nothing comes for free and if we expect quality service, we rather spend on it too. Be fair in expectations and costs.

Product Delivery / Service Level Agreement

Firm up and finalize a Service Level Agreement and above all, measures of performance throughout the Contract term. The SLA’s should be monitored, reviewed, and in case of any deviations corrected before it is too late.Both the owner and the provider need to support and ensure SLA’s are met; throwing stones at each other at a later date will not help either party. It is vital to note that a provider’s success is owner’s success too.

Assign an Engagement Leader:

Nominate a relatively senior staff as an engagement leader or programme manager (based on size of contract and/or criticality of service) to work alongside his/her nominee from provider. Both representatives should complement each other to derive most from the engagement.

Treat your provider with respect:

Treat your provider as one among your own people, don’t behave differently. I re-collect an instance where a company distributed gift vouchers of equal amounts among its staff and providers (contract / consultants) at a facility launch ceremony. Such a gesture acknowledged the contribution made by one and all (irrespective of their employment relationship) to see the Company meet its objectives. This created a sense of belonging and desire to serve better.

Outsourcing, thought to be an easy way out could make or break projects and hence needs to be managed well to make success. The inherent risks in an engagement need to be assessed, addressed, reduced and/or mitigated by both the partners for a long-term relationship.

Trust the readers find the approach suggested to a successful outsourcing engagement worthy and easy to follow.

I would be interested in knowing if there is an entirely different approach? Please share your views, experiences, and/or feedback.

Disclaimer: Any comments/opinions/contributions made on this social portal are purely personal in nature.

©2019 Rajesh Pandita, Region Head – Group Processes & IT, ThyssenKrupp

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