Identifying the right outsourcing strategy

In today’s dynamic business environment, organizations of varying sizes and across a wide range of industries are successfully using outsourcing as a tool to enhance and grow their business. Outsourcing has become so omnipresent that many managers have come to perceive outsourcing as a necessary tactical element in delivering on corporate strategy.

The global economic recession since 2007 has forced many organizations to look at ways and means to aggressively cut costs across their core operations. Dwindling market shares and the resultant fiscal pressures have forced organizations to take drastic cost-cutting measures. As a result, more and more firms turn to outsourcing to reduce overall spending, conserve capital and increase efficiency as a means of delivering on their corporate strategy.

This trend has resulted in the evolution of outsourcing service providers in practically all hues and shapes. Today there are outsourcing service providers ranging from outsourcing payroll to outsourcing package handling... and everything in between. Small businesses hiring a self-employed accountant to handle the corporate tax returns are in essence outsourcing their tax activities. Large corporations that hire outside customer service firms to handle their customer support are outsourcing that function of their business to focus more on their core business functions. It is entirely possible to outsource practically every business process within an organization.

The golden rule for entering into an outsourcing agreement is that the outsourcer should be able to do the work better, cheaper and faster than you can do it in-house. If an outsourcer can meet these criteria, it should be possible to outsource pretty much anything. The organizations that have used outsourcing for many years know that it is also important to have a well managed plan of action for hiring a consultant or an outsourcing service provider for a business task. This includes deciding which projects or tasks to outsource, whom to hire for these tasks, how to manage the project, how to agree on payment terms, and how to achieve the desired results.

The key to a successful outsourcing initiative lies in developing a customized solution that is designed to meet the company’s core business objectives. It is also important to use a proven outsourcing methodology that offers alternative solutions for consideration by management and to carefully weigh the pros and cons of the alternative solutions offered.

If you are considering outsourcing for the first time, you may find it useful ask yourself the following questions:
• Why is the organization considering outsourcing as the way forward?
• What are the specific competitive advantages that you wish to develop through outsourcing?
• What activities and processes should be considered for the outsourcing initiative?
• What are the specific financial goals expected from the sourcing strategy?
Your answers to the above questions should help you gain more insight into considering what to do and more importantly, what NOT to do, with regard to outsourcing your business processes.

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Mar Hernandez m.hernandez@amicorp.com