If you are not experienced in outsourcing, consider hiring an experienced outsourcing consulting firm to help you through the process. Generally the large accounting firms and outsourcing vendors provide excellent support for large scale projects, and there are a number of smaller firms that can help the small and mid-size companies. If you want to manage the process on your own, even the most sophisticated project management techniques can be broken down into four simple project management stages:
Analysis
Evaluation
Implementation
Review
After you have identified potential outsourcing candidates try stepping through these steps to see if outsourcing makes sense for your organization.
Analysis.
The goal of this stage is to determine your company’s core business and to identify expensive or low performance supporting functions.
Make a list of your mission critical products and services and all supporting functions. Then determine how these sectors must perform to keep you competitive or to place you ahead of the completion. Any department or function that is not your core business, is a large cost center and is not particularly effective in delivering results is a prime candidate for outsourcing. In computing your “costs” do not forget to factor in the time that a problem area may take from your executive and support teams.
Evaluation.
The goal of this stage is to identify and match the needs of your targeted department with an outsourcing provider.
First break down the key functions of the department into its major component structural parts and major functions. A simple analysis can be performed by writing down the department name or function, the work product produced and the information/materials needed to produce that work product. Perform this exercise for the current operations and then for the “how it should be done” case. This chart will be a simple written expression of what is needed from the targeted department or function.
Now it is time to identify local and offshore outsourcing sources, get them to sign a non-disclosure agreement and send them your basic analysis. The outsourcing provider will have many more questions but you will have a simple, basic guide to make sure the provider is on course. You will likely send out a Request for Quote or a Request For Proposal which will contain your “needs” contained in your chart with a request for a solution. It is also a good idea to ask your potential outsourcing partners to send you a proposed contract for you to review at this stage.
You will want to score each provider based on price, service, quality and terms. Do a simple net present value analysis to see if the project makes sense. Above all, do not loose your sense of reality in the sea of numbers. Select the service provider that best fits your needs.
Implementation.
The goal of this step is to transfer knowledge and data from your internal department to your outsourcing partner, implement best practices and commence operations.
Implementing a new outsourcing program can be as simple as logging into a new payroll provider’s system and entering data or as complicated as divesting a major division of your company and coordinating a multi-man year conversion process. Regardless of the complexity, you need to work with your outsourcing provider to create a clear step-by-step project plan with clear actions, deliverables and due dates and have a weekly review process that quickly identifies and resolves any problems or delays. Make sure that your outsourcing partner provides you with some method to clearly track the progress of your project and have contingency plans, testing plans and reasonable penalties if key milestones are not reached. You will also need to create a transition plan for any planned staff reductions.
Review.
The goal of this step is to set up an ongoing system that maximizes the performance of both your internal staff and your outsourcing partner to make sure you get the results you need.
“If it does not get measured it does not get managed.” This must be a mantra for the team if any outsourcing project is going to be successful. Make sure that you have set up specific service level agreements (SLAs) in your agreements that have specific, measurable results. Identify project managers on your staff and with your outsourcing provider and give them targets. If you tie a compensation plan to results you will be amazed at the improvement in quality.
During my years as a business consultant and IT executive, I developed a simple checklist to evaluate vendors and manage outsourcing projects. If you are interested in receiving a free copy feel free to send me an e-mail at the address below with information about your project and company.
Robert Newman is an attorney at the Business & Technology Group @ Jones Garneau LLP. Mr. Newman helps executives in the technology and biotechnology industries successfully raise money and purchase other companies by providing practical legal advice about securities, M&A and technology law. Prior to becoming an attorney, he served for over ten years as an IT consultant and executive at various major banks and financial institutions. He may be reached at: RNewman@jonesgarneau.com or at 1-800-989-8260.
