Guide

Outsourcing

Outsourcing: seven top tips

Outsourcing is when you contract out a business function to a third party over a long period of time. Outsourcing can bring a lot of benefits to your business and help you focus on core activities. However, there are risks to giving up direct control.

Follow these top tips for successful outsourcing:

  • Consider carefully: Take your time making decisions and make sure you are clear about the terms on which you and the supplier are working together. See outsourcing considerations.

  • Good relationship management: This calls for constant communication and flexibility. Make the most of online project management and collaboration tools to help you stay on top of projects and in control of the company. Remember that although the supplier takes responsibility for the process, you still need to actively manage the relationship. Nominate a member of staff to take responsibility for liaison.

  • Communicate internally: It's equally important to establish effective and regular communication within your business. Staff may have particular concerns about their own jobs, so keep them informed. If staff are being transferred to the outsourcing provider under the arrangement, as sometimes happens, you will need to consider the relevant employment law. See responsibilities to employees if you buy or sell a business.

  • Commit long term: You are likely to get the best results if you can stay with your supplier for several years. Switching suppliers can be disruptive, so it pays to commit to building a long-term relationship from the outset.

  • Be flexible: You may need to renegotiate the contract before the end of the term. A flexible contract benefits both parties, allowing the supplier to innovate and you to react to changing circumstances. See how to negotiate the right deal with suppliers.

  • Measure success: There should be financial benefits, but other reasons for outsourcing are harder to quantify. These could include improving customer service, reducing errors or increasing speed to market. Include these factors in your assessment and consider how you'll measure them. See measure performance and set targets.

  • Plan a clear exit strategy: The relationship might end prematurely or may simply have run its course. Either way, make sure that your service level agreement contains a clear exit strategy. It should detail how the outsourced functions should be brought back in-house. It should clarify who owns what assets and specify when compensation is due, and how much. See service level agreements.