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What
are the benefits of outsourcing services? What are
the rules that should be defined when negotiating outsourcing
services?
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Posted:
Jul 2009 |
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If
you decide to outsource some services from your
business, make sure that you stay with one basic
though – you need to state clearly what you want
from contractor. Do not count on assumptions. Do
not count on "It is expected by
default". Do not expect that things that are
not said will be understood. You've got to say
what you want. |
Outsourcing
services or externally contracted services can be
defined as assigning a job to somebody that is not
employee of your company. There are several
justifications for outsourcing services; lack of
expertise, lack of manpower for certain task, seasonal
tasks, activity out of primary business, cost optimization,
avoiding of "dirty" jobs, ...
There
are many situations when company wants to take the
outsourcing solution. Logistics services are frequently
used as outsourced services. For example, the company
has a focus on production and sales/marketing, but wants
to reduce complexity by outsourcing warehousing and
distribution services. Or, company do not need permanent
legal advisor, due to limited need for this activity and
therefore outsource it by contracting legal affair
agency.
But
regardless of type of activity you need to outsource
just remember the basic rule: say what you want. You
need to say it by verbal demand but also you need to
include it into contract agreement. Here are few basic
guidelines for description of your outsourcing activity:
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What
needs to be done?
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Define
what needs to be delivered
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Define
timeframe of activities
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What
is the technology involved?
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Agree
on Tracking and periodical reporting
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Additional
analysis and data input needed
Beside
basic framework of activities it is necessary to define
"What If?" options. These points need to
describe parameters that will protect both parties. For
example, the manufacturer of beverages is outsourcing
the distribution, but wants to keep the service level to
their customers. Therefore company decides to demand for
a certain delivery lead time into contract. From the
other side, the delivery contractor wants to protect
minimum breakeven point of profitability and therefore
requires minimum annual delivery volume. In case that
either party breaks the rules, the penalty should be
paid to the other party, in order to give both parties a
certain minimum level of protection from basic business
risks. So there should not be "I though",
"You said", "that is assumed", etc.
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Outsourcing
services is giving great opportunities for both
parties, the business owner and contractor. The business
owner is gaining simplification of business
activities that are not the focus, reduction of
costs, balanced headcount and higher efficiency.
The outsourcing contractor is developing his
technical capacity without need to deal with
customers, think about commercial policy,
portfolio, etc. Instead it builds his technical
capacity and therefore obtaining higher output and
lower costs due to specialization. Combined
together both parties makes more efficient and
competitive value chain that can give them
advantage toward their competitors, thanks to the
outsourcing services.
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No
assumptions when negotiating contracting
deal -->
Assumption = Ass U Me I'll Ass You |
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