BFM2013_2_05_The content of outsourcing

In our experience, if you decide to outsource the execution of a service, then the actual details of the execution should rest with the outsourcing supplier.

Defining the results is certainly the easiest way, but it is not so easy to implement: do you really know all the “outputs” produced by your own processes?

By “outputs” we mean not only results from IT-based processes, but also results produced by other processes- including items as number of rooms cleaned, phone calls answered per minute, etc.

If you define the boundaries of your outsourcing contracts and SLAs around outputs, it becomes easier to quantify the level of service and negotiate the price of the contract (i.e. by number of incidents or “time slots required” to execute a process).

And, of course, the price of any additional services that may be required at a later stage.

Some companies outsource only whole processes, A-to-Z, top-to-bottom: if your outsourcing supplier understands your business, probably this approach is less resource-intensive (for you) than the output-based approach we suggest.

However you build the framework for your outsourcing contract, it is important that you thoroughly analyse your business needs.

When you will first transfer a service to an outsourcing supplier, probably you will rely on partially structured and organized information to build the framework of the contract.

Some companies instead rely on the outsourcing supplier to build the framework.

In our experience, this is the worst choice, as neither you nor your supplier will really have the knowledge required to manage the outsourcing contract.

Our approach is to carry out a “due diligence”: both the prospective supplier and the customer document the framework, to confirm that what the customer perceives is what is assessed by the supplier.

Usually, such an exercise is quite expensive, and progressively suppliers started steering away from prospective customers that have a history of “serial proposals”, i.e. requiring new proposals whenever an assessment of internal processes is required- but always ending up giving the business to existing suppliers, or delivering with internal resources.

A common approach is to shortlist prospective suppliers on a limited set of parameters, and then pay the shortlisted prospective suppliers a “fee” to carry out the detailed assessment.

Sometimes, the cost of such an assessment is credited by the supplier if awarded the outsourcing contract.