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Secrets to Successful Outsourcing - Part 2

Which factors are critical to successful outsourcing and successful outsourcing partnerships - whether you are contracting out simple tasks or huge projects?

Here is Part 2 of the article - if you missed the first post, read Part 1 of the article here.

1. Sourcing Options: By adopting a flexible approach to sourcing, companies can adapt sourcing strategy to projects, services and circumstances. A fragile economic situation may make multi- rather than single-sourcing seem more tempting in order to spread the risk of outsourcing amongst several providers; however, risks such as the possible loss of integration across projects and poor governance may make this a perilous option. Vested outsourcing where clients and providers collaborate to achieve their goals and objectives is a trend that may be worth investigating.

2. Contracts: A solid contract is essential and companies could cover any number of things such as roles, responsibilities, warranties, minimum service levels, incentives, penalties, data ownership, intellectual property rights, and so on. Build in the flexibility to make the changes that may well be necessary in longer-term projects and that may well include the option of pursuing Plan B or implementing the exit strategy. Finally, consider breaking large projects or larger contracts into smaller ones.

3. Transition: Set up a team from both sides of the partnership to manage the transition, define the processes to follow, set a timeline and establish hand-off points or milestones as each part of the transition process is completed.

4. Communication: At the heart of successful outsourcing relationships is the way companies connect with each other and their stakeholders so good communication channels are vital. Good client and supplier links can help each side clarify and understand goals, roles, responsibilities, project progress, industry developments, business changes, and similar and as a result can help create trust between all parties.

5. Key Personnel: Control outsourced projects better by retaining key skilled staff to monitor the provider company’s performance and make those key managerial decisions. Staff morale can also be enhanced through their acquiring expertise from the provider during the outsourcing process which in turn can allow the company to keep key staff and retain rather than outsource similar projects in future.

6.Measuring Results: A range of rigorous but meaningful measurements that do not overly rely on tools such as Service Level Agreements or Key Performance Indicators but integrate qualitative assessments can effectively monitor the performance of the outsourced project to see if it is delivering what was promised.

7. Risks: Any relationship brings risks and they can be costly: projects can be delayed or fail, reputations can be tarnished, data can be lost, security can be breached, and many more disasters in the same vein might await provider and client alike. Companies can adopt measures such as risk registers and adopt approaches, such as Management of Risk, to help them reduce their exposure to potential disasters.

8. Security: Data access is a sensitive subject and data protection a priority. Clients must therefore consider their liability under data protection laws and ensure providers have adequate data storage, encryption, firewalls and detection, and similar.

Useful links:

  • See in greater depth how Risk Management Training can help you.
  • More information on using PRINCE2 and MSP to manage outsourcing.
  • Comprehensive information about the UK Data Protection Act.
  • For some background reading on outsourcing and the public sector then read OGC Code of Practice: Workforce matters in public sector contracts.
  • The University of Tennessee Center for Executive Education is the first step for more information about Vested Outsourcing.