MINIMIZING OUTSOURCING RISKS

The outsourcing industry has been under scrutiny a few times, from cost-cutting to ethical arguments around driving labour arbitrage. There has often been a wrong perception and the industry has received a ton of blames when things go wrong.

When it comes to outsourcing of public services, the Labour Party has loudly criticized the current government’s positions and actions. The commercially shrewd and well-managed suppliers that support the industry have become victims of the criticisms targeted at the “crook suppliers”, making them to be tagged with the “risky” brush. However, the sourcing industry is growing in maturity as well as learning from previous mistakes both in private and public sector. Talks on getting rid of private suppliers in the public sector is disrespectful to the private outsourcing services groups who boast of a large customer base and consistently surpass challenging service level agreements.

Over the last two decades, a lot of articles have been written on avoiding the most common outsourcing risks, and they have always emphasized on the importance of preparation. The customers should keep the suppliers in-the-know as regards to their expectations early enough in the process because unbalanced expectations could lead to unfavourable contract results.

Private sector based customers are becoming more refined while taking necessary steps to understand their business objectives, costs and requirements. Sourcing policies are becoming a crucial business strategy for them. These strategies have resulted in more partnerships between customers and outsourcing groups while they leverage strong industry relationships to streamline governance as well as utilise innovation to render a reliable and affordable service for their end users.

Outsourcing is not suited to all services. The customer has the responsibility to understand whether or not outsourcing will work for that service. He should also analyse the market so as to be able to select the right supplier. This analysis is expected to cover the market position of the bidder, its financial standing and capability across the required function. Culture should also be put in consideration. A supplier whose culture or business strategies don’t balance with that of the customer is likely to bring dissatisfaction.

Bidder proposals should equally be analysed with the help of an experienced team that can give advice on how solutions fit business outcomes while offering value for money without compromising customer service. It is critical for a customer to understand his business and where he may need outsourcing expertise. Just like the case with data security, it will be a costly error to outsource to a supplier who is less refined. A lot of private customers leverage on workshops and establishing relationships when it comes to making choice of suppliers.

Rather than play the blame game, the government should aim at reviewing and improving private supplier relationships in a way that the processes become clear, transparent and more flexible.

Daven Michaels is a New York Times Best Selling Author and CEO of premiere global outsourcing company, 123Employee. The company employs hundreds of young bright individuals on three continents. His International event, Beyond Marketing Live! inspires entrepreneurs build & grow their business with revolutionary new theories and systems allowing them to design the business and personal lifestyle of their dreams.