How to Choose an Outsourcing Partner

By TMCnet Special Guest

Jack Freker, CEO, Oblicore, Inc.

 

When it comes to choosing an outsourcing partner, Google (News - Alert) offers over 13 million Web pages of advice. I’ll stick to 932 words.

 

Most outsourcing providers work hard to satisfy their clients, yet many fall short. Missed expectations have led many clients to “multisource” their work in an attempt to guarantee results and spread operational risk among multiple providers. In early April, at its 2006 Outsourcing Summit, Gartner made multisourcing a key topic, acknowledging its growing use, and warning clients of the added complexity of managing multiple service providers. They specifically directed all in the audience “TO STOP OUTSOURCING…the old way,” and recommended all clients: 1. Understand their own business and metrics, 2. Gain internal alignment around expected outcomes of outsourcing, 3. Manage their business more tightly with greater tools, processes and disciplines, and 4. Pick your partners wisely.

 

Gartner’s advice is sage. When it comes to choosing outsourcing partners, whether for IT or business-process outsourcing (BPO), decision making begins by clearly defining the end result of the outsourcing engagement. As you might do with a marketing plan aimed at generating enough leads to fill a sales pipeline, you work backward, defining the metrics, program elements, likely suspects and personnel required to accomplish the goal.

 

Few organizations enter into outsourcing arrangements with meaningful insight into their own service delivery metrics or the business impact of their services prior to outsourcing. With many outsourcing decisions propelled by visions of cheap overseas labor or the desire to free management from some operational “headache,” starting an outsourcing relationship without knowing how to measure success sets the stage for disappointing results.

 

To effectively model services and define target results, managers must have tools for evaluating service delivery and conducting what-if analyses. This is especially true when it comes to multisourcing. Service delivery management software that supports service level management (SLM) will give you real-time insight into the compliance of all of your contracts and provide you with the data needed for effective governance and relationship management. Before these measurement and reporting processes can be successfully executed, your organization may need to hire or train personnel skilled at managing and optimizing the performance of service providers.

 

Once you’ve got the right people in place and have defined goals and metrics of the required service, you face the challenge of vendor selection. The International Association of Outsourcing Professionals expects the global BPO market to reach $1.2 trillion in 2006. The growing demand for outsourced services, from call centers to claims processing to medical research, is drawing many new players into market – and driving remarkable growth for established players. As a result, service providers in many regions face staffing issues as they compete to hire the best and brightest personnel to manage your account.

 

To help you decide whether a service provider is right for your business, consider the following three questions:

1. Does the outsourcer have credibility as evidenced by deep and broad successful experience in their market?

 

Companies should seek outsourcers that have been successful with industry peers. They should insist on speaking with reference customers and meeting key personnel as part of the due diligence process.

2. Does the service provider have the infrastructure, funding and personnel to manage your service commitments in a compliant manner?

With growing demand for their services, some outsourcers are resource constrained. Before working with a service provider, check to make sure they have technical infrastructure capable of supporting your requirements. This may be especially important with BPO, as most outsourced operations are highly dependent upon software and networks that cannot be made up for with cheap labor. Do your homework and find out whether your provider has the right tools for meeting your objectives.

 

There is also a direct connection between technical infrastructure and process control. With outsourcing functioning as an extension of your business, there is a real need for complete transparency into service delivery. Having real-time visibility into processes – combined with active governance on your part – limits your exposure to compliance issues, specifically Sarbanes-Oxley, and security breaches associated with mishandled data.

 

Your due diligence must also include an evaluation of your service provider’s financial fitness. A well-capitalized outsourcing partner will be better able to attract and retain talented personnel, have adequate facilities and be capable of gearing up rapidly to handle changing business requirements.

 

Then there is the issue of personnel. It’s important to meet with and interview the people who will be handling the day-to-day management and operation of your account. Are they experienced?  Can they lead the troops?  Would you hire them for your business?

 

3. How effectively can the service provider share real-time visibility into service performance?

 

Does the service provider have structured processes and tools for monitoring ongoing service delivery – taking into account metrics important to your business? Are their management procedures based on industry standards, such as ITIL, CobIT, Six Sigma or ISO 20000? Ideally, your outsourcing partner will provide you with a dashboard from which you can monitor service delivery in real-time. Some can even provide predictive alerts – these can be delivered through mobile phones, pagers or email – that warn you ahead of time about potential service breaches. Service transparency is required for effective outsourcing governance. It eliminates ambiguity about service compliance and promotes service optimization – and drives dialog that spurs partnership.

 

Outsourcing success is all about controlling outcomes – outcomes you define based on what constitutes success for your business. Whether you’re outsourcing to lower costs, increase production or improve customer service, the process of selecting service providers begins with a clear set of goals and the means to actively manage service delivery.