Outsourcing is the new normal…

“Outsourcing is the new normal”, reads a recent report by Raconteur.

Raconteur looks into businesses globally, how they use outsourcing to help them develop and grow and trends in the outsource industry. It concludes that what once might have been considered a dirty word outsourcing has proved the doubters wrong and offers businesses the opportunity to grow and prosper.

A Grant Thornton report in 2014 found that 40% of global business either currently outsource or plan to outsource their business processes – and this figure continues to grow.

When asked why they outsource, business owners’ responses included:

“It gives us agility”

“It means the business can call upon expertise in different areas. We can access the creativity of specialists”

“Outsourcing enables us to be quicker to market”

Technology is seen as a huge driver for change in the outsource market with cloud computing having the biggest impact on a company deciding to move functions to an outsourced basis. Many will turn to out of house software packages from providers like Deputy and then outsource the hosting onto a cloud system to integrate with the rest of their software, as one example. We’ve seen evidence of this here in the financial services profession.

Additionally, outsourced cloud services are becoming increasingly popular with companies that want to expand their global reach. If a business needs to be sending or receiving large digital files from China regularly for example, then the company needs cloud capabilities and access to file transfer services such as Digital Pigeon in order to be able to do so.

If you are currently looking to appoint an outsource provider because you want to lower costs, gain access to a wider range of expertise or give your business an extra level of flexibility the success of any relationship will depend on how well the outsource provider is integrated with your business. The below process will help you to find and appoint the right outsourced partners, and help with these integration aspects.

Five steps to successful outsourcing

  • Determine why you are outsourcing

Firstly establish why you are looking to outsource. The key here is to be sure you are outsourcing the right things for the right reasons. Do not simply identify an issue in your business and attempt to outsource it.

Outsourcing successfully can provide capacity and ideas, but the partners you elect to appoint do not know the nuances of your business sufficiently to be able to fix any problems on your behalf.

You should enter any outsourcing agreement with a spirit of partnership, recognising that they are only part of the solution. Remember, they are there to add value. They cannot fix the things that are broken, unless it is their mandate and time will be dedicated on both sides to come up with appropriate solutions

  • Be clear on what you are hoping to achieve

You should then be clear on what you are looking to outsource. For example, rather than just a general heading of compliance, define exactly which areas of your compliance procedure you would like to outsource.

Ensure you have clearly defined metrics for what you are expecting from the outsourced arrangement. Is it a Return on Investment (ROI is often used when outsourcing a marketing function) or a saving of time? (e.g. outsourcing your Paraplanning). These metrics will not be achieved immediately as relationships take time to build and nurture. Therefore any justification for outsourcing needs to have a longer-term focus.

Define what you want to achieve and, ideally, when you will achieve it by.

  • Select your outsource partners

The third step then is to decide who to outsource to. Begin by looking at your own business and consider the cultural aspects. Identify what does and doesn’t work for you. For example, if your company is heavily into IT and constantly looking to work with the newest software, a key criteria is that your outsource partner is just as comfortable with this.

Create a list of potential firms and then obtain information from each of them in order to define your shortlist.

Armed with your shortlist, consider things like:

Qualifications, if relevant to the process you are outsourcing

Charges. As with everything in life, cheapest is rarely best!

How important face to face time is to you and whether this is something they can facilitate

How they will handle the security of your information and that of your clients

Your preferred methods of working or communicating, and whether they can accommodate this

Ideally this should be a two way process; an experienced outsource company will also be looking to Fact Find you, to ensure your company is a good fit for them.

  • Agree the how

The last stage in the process is to agree the how. This means discussing with your selected provider how the service will work. For example, if you decide to collaborate with an employee leasing company or a professional employer organization (PEO) company so that your business can share employment responsibilities, then communication is key. Make sure you are realistic here, and bear in mind that this is a fit between two companies and has to work for both parties.

The items agreed in your how should be flexible. In my experience in business, nothing ever goes to plan!

It should also be future focused, in the sense of factoring in both your current needs and those for your expected business in 1 year, 3 or 5 years’ time. Ensure you know where your company is heading and check that the outsourced provider can be with you over the long term.

Ensure pricing is discussed thoroughly. It must be clear and unambiguous. As a business owner you should be able to identify exactly what the costs will be, so there are no hidden surprises.

While you hope this will be a long and happy partnership, make sure you have a well-defined exit strategy in the event that you wish to change providers. Even if the service is incredible, your own business may change in such a way that you no longer require the outsourced support.

A final, but essential, part of the how is to put in place a Service Level Agreement (SLA). Most outsource providers will have SLAs already, which will confirm exactly what they aim to deliver and when. Make sure both parties are clear on this, that it fits with your business requirements and importantly, what will happen if SLAs are not hit.

  • Regularly review your relationships

You have now worked out why you want to outsource, what you would like to outsource, who you will outsource it to, and how you expect it work. The final piece in the puzzle is to keep the outsource relationship under review.

This is about managing the ongoing relationship and should include periodic reviews. During these meetings you can discuss the SLAs, ensuring they are being met, as well the future plans for your business and how your outsourcing partner can help support any planned growth.

Always remember your outsource provider should act as a true partner; a firm that will work with your company to help achieve your aims and support your clients.

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