Guide

Outsourcing

Outsourcing considerations

It may be tempting to rush into outsourcing, but take the time to think through what your business needs, set the terms and find the right service provider. Before outsourcing you should consider the following:

  • What are your core strengths and what are secondary? What processes are you thinking of outsourcing and why? Is the function a key task which your business needs to control directly to ensure its future competitiveness?
  • What are the costs of doing it in-house? Include hidden costs such as office space and staff costs.
  • Check the return on investment (ROI) - ask potential service providers for help, as many offer an ROI calculator.
  • Would it be helpful to use a consultant to help you find a service provider?
  • What are the costs of not outsourcing? Will your business suffer because it cannot afford to invest in the expertise or the facilities that an outsourcing partner might provide?
  • Are you prepared to spend the time and energy required to manage the outsourcing relationship?

Prepare for outsourcing pitfalls

When you plan to outsource tasks, you also need to plan what you will do if any problems arise. It's a good idea to consider having other service providers that you can turn to relatively quickly and how you might take the outsourced processes back in-house.

It is important that the contract between you and the outsourcing company sets out the circumstances in which you can make such changes. If not, the outsourcing company could claim compensation. See service level agreements.

It's been estimated that as many as 50 per cent of outsourcing deals end badly. This isn't a reason to reject outsourcing, but proves how important it is to choose very carefully who you work with and how you manage the outsourcing relationship. Download an outsourcing relationship management guide (292KB).