Last month, we ran the first part of our outsourcing special.
It detailed what outsourcing can and cannot do for you, what you might consider using outside expertise for and where the returns can be found. We also listed the key questions you should be asking a prospective third party and the factors that will help you decide whether either taking departments, such as HR, marketing, accounts, sales or IT, off the payroll or not creating them in the first place will pay dividends.
Here in the final part we find out how you should be preparing for the process and managing your third parties. And we look more closely at IT outsourcing, an area used by an increasing number of smaller and medium-sized businesses.
How do you prepare for outsourcing?
It’s important to remember it’s not a panacea. Almost by definition, if you are outsourcing a particular business function it’s because it’s, to some degree, a problem. However, it’s important to be absolutely clear about what the problem is before you pass it on to a third party.
This is particularly true if you are talking about an area such as sales. Robert Koenig, CEO of Inline Sales, stresses that outsourcers cannot perform miracles. They can only work with the raw materials presented to them by clients. “A lot of potential customers come to us and it’s clear they don’t know what their unique selling point is – they come to us to solve the problem for them, but if the relationship is to be a success they have to know what they are selling.”
Andy Hirst, a director at logistics outsourcing company Seymour Hunter, agrees it’s important to be absolutely sure the requirements of your business will be served by the outsourcing. “Very often, customers don’t know what they want from an outsourcing company. We are approached on occasion by businesses where they would be more comfortable doing the logistics themselves.” The message is, even if something is not a core competency, at the very least you should have put sufficient work into the business proposal to ensure a third party can work effectively on your behalf. Mike Sobers of KPMG, who is often called in to do remedial work on outsourcing projects that are not delivering, puts it simply. “Organisations outsource what they are not good at. If you are in that position, how can you possibly know what you want?”
Chris Batten of Group 300, a company that outsources its HR function, argues you should approach outsourcing in terms of strategic planning rather than simply reacting to a situation. “All companies suffer developmental problems and growing pains. But very often they decide to outsource in response to a problem and by that time it may be too late.”
What should you expect?
Levels of performance and your ability to dictate terms depends partly on the size of the contract, says Martyn Hart, chairman of the National Outsourcing Association (NOA). “If you’re dealing with the likes of IBM, for example, you won’t have as much say in what you expect. Instead, they’ll have standard contracts and service level agreements for you to sign.”
Most outsourcing organisations do offer service level agreements (SLAs) and performance reports that will enable you to monitor and assess them. And in most cases you should be able to insist on a contract that is bespoke to you and your business.
The problem remains, however, that many of you will not have written down business processes, so will find it hard to write expected service levels relating to your specific requirements. You need to benchmark where you are with where you expect the partnership to take you. It’s easier in some areas, although hiring a consultant, even a one-manband, to fill in for your lack of in-house expertise and to outline the key requirements is often wise.
This is particularly true in the field of IT, which for many of us is a term synonymous with ‘dark arts’. As Wilson Bigg, director of Skyline Managed Services points out, it may be that you pay through the nose for blanket cover that you don’t actually require. “You might sign up for 24/ 7 IT support when you’re closed at the weekend, for example.” Alternatively, if your website is being hosted by a company that offers a guarantee of 95% access to servers, it’s easy to be impressed by the percentage while forgetting the impact on customers who are unfortunate enough to attempt to log on during the downtime.