Thursday, November 09, 2006

Process of Outsourcing

Outsourcing is a business decision that is often under taken to reduce cost or focus on competencies of a company. It is shifting a significant amount of management control and decision-making to the outside vendor which always involves a considerable amount of information exchange, co-ordination, and trust. The process of outsourcing starts from client’s need recognition and ends with the end of contract.

Identifying Opportunities
The primary goal of outsourcing is to gain business benefit by handing over a part of a business responsibility to someone who is expert at handling it. It needs lot of before hand planning and anticipation of problems. While taking a decision to outsource a particular responsibility the major thing to be taken care of is that the organization should profit from this outsourcing and the current resources could be redeployed to some other work. Also all the possible options for outsourcing should be found and then a best option according to the company’s requirement should be selected.

Request for Proposals
Once it’s clear about what is required from the outsourced company; search for the service providers begins. A request for proposal document is drafted which contains all the requirements briefly specified along with the important criteria’s to be taken into consideration for the proposal. The more specific the document will be the better will be the chances to get the right service provider.

Evaluate the Proposals
Once the (RFP) is sent to all the providers, there will be a whole lot of proposals pouring in. Before selecting any proposal each and every proposal has to be studied in detail and their pros and cons have to be identified according to the requirement. There are many things which can be taken into consideration while choosing the vendor, their technology competence, their position in the market, their resources etc. It changes from company to company and from project to project. It is very important to take an unbiased decision while selecting the provider.

When a technical process is outsourced, the provider typically will have great technical skill but not always understand the business model or the dynamics of the marketplace. So it must also be taken care that the provider is well aware about your business too. Security, Confidentiality and Ethics of the service provider can be one of the considerations, while choosing the best proposal.

Negotiating and finalizing the contract
Negotiations are a part of each and every contract. Both the parties must consider the process in minute detail and specify exactly who will do what and when. Some of this will involve technology, file formats and security provisions. It will also involve identifying tasks within the process and how they will be performed by people under the outsourcing agreement. The contract needs to be very specific but also flexible enough so that both parties can live with it through circumstances neither anticipated. All the legal formalities have to be completed before signing the contract and the contract should also be made under the supervision of some legal entity.

Measuring performance
Once the contract is signed its time for its implementation. While implementing the contract performance has be to measured at specific intervals and compared with the benchmark standards. Necessary changes in the process or equipments can be made on the right time to avoid delays and perform according to the standards. Constant check on the provider’s activities will maintain consistency in the output.

Completion and Renewal of the Contract
On successful completion of the project, the contract comes to an end. All the financial issues are settled. The manpower and other resources are handed over to the parties as agreed in the contract. The project can be renewed if required, on the discretion of both the parties.

New challenges are bound to come up with each and every new contract but a systematic approach of outsourcers in deciding their Outsourcing partner will reduce their overall risks.

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