Some Tips to Consider in Preparing your Outsourcing Business Case

A sound business case presents a picture of preparedness on the part of your firm. However, this also enables you to improve your business operations and financial performance. This is necessary to start-up firms and many other companies that lack agility or efficient structure, in an outsourcing deal. Sven Geissler, a senior consultant at ISG, […]

A sound business case presents a picture of preparedness on the part of your firm. However, this also enables you to improve your business operations and financial performance. This is necessary to start-up firms and many other companies that lack agility or efficient structure, in an outsourcing deal. Sven Geissler, a senior consultant at ISG, suggests the following 5 tips to do before entering in an outsourcing deal:

Evaluate your Financial Status

Determining your company asset sets accuracy in your business decision making. Moreover, it also helps you to have a broad perspective of your business. This would be in terms of your recurring costs and allocations even at a corporate level. Your firm and company’s analysis per business unit is first evaluated financially. You can then determine the types of services you can afford to outsource without gathering data from scratch.

Classify your Financial Responsibility

As services and transactions are inevitable in your business undertaking; it is important to note that it doesn’t necessarily change your legal liability and even financial ownership. Therefore, before entering into any agreement with your provider it is helpful to know and classify the following first:

  • inventories
  • licenses
  • third party agreements previously signed to shun unnecessary expenses

This is also to clearly define your rights and liabilities upon entering the agreement.

Create a Volume-based Consumption Reference

In consumption-based pricing models, volume based consumption is more efficient when moving to a more flexible cost structure. For cost efficiency, it is necessary to have the data of your company’s expenditure in terms of staffing level, unit of consumption including those that aren’t measured. Such data will help you to easily monitor the price difference when doing it in house or if outsourcing it.  Once successful, if your standard can be used repeatedly and can provide consistent results rest assured that you won’t have hard time of forwarding your data to your outsourced firm during your transition.

Prepare your Projected Costs when Outsourcing

Remember that your aim to reduce cost and develop organizational agility fuels your decision to outsource. Thus, similar to tracking your budget for personal finances there would always be certain set-ups that require one time payments while some others are recurring. Thus, make sure that your firm can sustain such expenses and at the same time has a contingency plan to sustain your operations.

Set Up a Performance Standard for the Entire Project

A check and balance mechanism is efficient for your firm to keep track of your dedicated employees in the Philippines or elsewhere. Establishing these key performance standards will help you to reduce risk, maintain productivity and determine other cost drivers of your operations. Comparing your firm’s progress from the onset of your decision to outsource is easier and at the same time the data can be utilized as firm reference in discussing your expectations to your outsourcing service provider.

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