Outsourcing a business unit, function or service can provide many benefits to an organisation. However, implementing a successful outsourcing solution requires a lot of preparation that may be unforeseen even for companies who have been down that route before.
The key to outsourcing success is both sides understanding the nature of the relationship and accountabilities from the outset. Other factors include the technological conditions needed to successfully create the work environment, the location of outsourced employees, and the total cost considerations.
With meticulous implementation, the outsourcing of a specific service, function or business unit can lead to significant gains in growth and efficiency. In spite of intrinsic challenges, the popularity of outsourcing is more often viewed as an ideal solution for scale, reach and expansion — while enabling the client a renewed focus on core business.
Outsourcing offers key support in helping organisations to build capacity and adapt to this new world.
Today, businesses and organisations increasingly look to BPO or Managed Service providers to supplement limited in-house capacity and deliver product and service innovations. The accelerated performance and output from leveraging the additional capabilities of the outsourcing provider can be very evident.
Through specialist knowledge that has reached a high degree of refinement, an outsourcing provider can offer the skills, systems and innovation capabilities beyond those readily available to enterprises. The ability to access desired markets and the development of best-in-class performance define the way outsourcing can deliver value to clients.
At the core of a successfully managed outsourced solution are internal and external teams working together towards shared goals.
What are the key drivers of outsourcing?
There are several drivers depending on the goals of the organisation. A key driver in seeking an outsourcing solution is often cost reduction however, the advantages of a successful outsourcing solution extend beyond cost efficiencies. They represent access to a skilled talent pool, domain expertise, agility and flexibility, and increased innovation.
Having access to an outsourced team which already have the skills and experience necessary to achieve the goal, can drive up service and product quality and deliver results with less investment than doing it in-house. To develop an in-house team to this level can be resource-heavy and time-consuming.
Outsourcing is an effective and efficient way for an organisation to hand over responsibility for employing, training and developing new hires, and maintaining a reliable pool of skilled resources.
So, what are some of the benefits of Outsourcing?
- Flexibility to scale headcount
- Improved quality and service levels
- Supports business continuity and risk management
- Lower costs/ increased efficiencies
- Faster time to market, and time to value
- Supports growth and expansion
Although there are many benefits to outsourcing a service, business unit or function, there are obstacles that will be encountered along the way.
There are multiple considerations for undertaking an outsourcing project. For example:
- Are you thinking of replacing a local in-house team with a new outsourced team?
- Or, engaging an outsourced team in addition to your in-house team?
- Are you planning to outsource a new product/service or a resource-heavy function so you can focus on your core business?
- Where will the delivery location be? For example: locally/offshore, on-site/off-site premises/ WFH (working from home).
Outsourcing consulting and advisory helps to create awareness of possible issues that could develop over the course of the client/ outsourcing vendor relationship. The revelations can balance the benefits and help determine whether outsourcing will be the right approach for you.
To get things moving we begin by developing an in-depth understanding of the client’s challenges and strategy. This is the key to crafting a solution that addresses these challenges.
Barry DowlingConsulting Director at Covalen
Barry describes the relevance of advisory services. In essence, they are designed to support clients from the outset and for the duration of the relationship.
“We offer people and process-centric Consulting and Solution Design Services to enable clients to achieve their goals through Outsourcing. These include project and programme management, business process re-design, learning and development programme design, and transition and transformational change programmes".
According to Barry “We co-create with our clients using talent and technology assessments, as well as inclusive, creative workshops. Our aim is to ensure alignment in gauging changes to our clients’ operating model in terms of people, processes and relevant technology. Our ‘best-fit’ approach is paramount to the success of our projects”.
Consulting and advisory plays a role in determining if the outsourcing service provider aligns with the future goals of the client organisation. And it will also help to highlight whether these goals are achievable.
Frequently in outsourcing projects, the client assumes that there is no need to keep an in-house team for the service/function/ BU, or there is an underestimation of how many individuals are required to effectively run the outsourcing project.
For this reason and several others, it can be highly beneficial to consult with BPO specialists to get a good understanding of the scope of considerations with an outsourcing contract. By performing a cost analysis in the first instance, you will get an idea as to how outsourcing could potentially benefit your organisation.
The pricing model will enable both parties to understand differential cost, opportunity cost and incremental costs — and the significance of volume thereby reducing the need for renegotiations — hence, avoiding delays in carrying out the service level agreement.
Inevitably, grasping all the objectives and options involved in an outsourcing decision involves several detailed discussions. The key takeaway here is that effective knowledge transfer throughout the course of the relationship is a critical success factor in establishing a true strategic alliance.