Improving bottom-line performance is not only achieved by increasing sales revenues, but also by reducing existing business expenditure and improving process efficiencies.
One strategy is to outsource internally delivered functions to provide cost savings or drive efficiencies. Outsourcing enables a business to focus on core activities, improve the quality of service whilst reducing life-cycle costs.
At eXceeding, we help organisations to outsource core services on a daily basis. We have taken this experience and distilled it down into our top tips on outsourcing IT services.
First let’s look at the benefits.
5 key reasons why you should outsource
- It allows your team to focus
By deciding to outsource non-core activities, you will enable your team to focus on the areas of the business that will achieve the best results – in terms of cost savings or return on investment (ROI) on projects. Your team can focus their knowledge base and skill sets on strategic categories and build strong relationships with key suppliers. This will pay dividends in the long run.
- Use the experts to do what they do best.
Outsourced suppliers are experts in their field for a reason. This means you won’t need to spend time or money in training your internal team. You won’t have any operational costs to budget in for these non-core activities. More importantly, you won’t have to make any large investments, reducing CAPEX.
- Benefit from innovation
Outsourcing certain services allow organisations to adapt quicker to changes within those environments, i.e. regulations and technological advancements. As experts in the field, your outsourced service provider should be aware of any potential changes. They will already be making plans to ensure solutions are available for their clients, in the event of change. Your organisation will benefit by not having to pull together a programme in order to answer the needs of the changes. This will save time and internal resources.
- Work out the savings
One area that is often missed when it comes to outsourcing activities is an accurate measurement of current costs versus various different outsourcing models. Each approach has different advantages and its key to align with business objectives to ensure the best approach is adopted.
- Be realistic
Keeping up with a fast paced and constantly changing market is difficult and costly. This is a key reason why more and more organisations are turning to outsourcing as a solution. Outsourced providers will be constantly adapting to change and advancements in their marketplace. They will be innovating. Outsourcing services to the experts, allows the organisation to spend more time adapting their operations for long term change, whilst the outsourcing partner handles the non-core activities.
Is outsourcing right for your organisation?
It is important to note, however, that outsourcing is not the right solution for everyone. In this blog we explore what outsourcing is and break down some of the common confusion surrounding the term ‘outsourcing’.
Ultimately, there needs to be internal stakeholder buy-in that this is the correct course of action. There also needs to be resource internally to manage the supplier relationship and ensure best value and service from outsourced service providers.
Larger businesses are more likely to consider outsourcing some, if not all of their procurement functions. However, smaller companies experiencing growth, but have insufficient internal purchasing resources, should also considering outsourcing to take advantage of external structures and expertise.
Companies looking to review/transform their procurement functions regard outsourcing as a particularly attractive option. Exactly how long it takes will depend on both the size of the company and how extensive the outsourcing programme is.
It is therefore important to evaluate whether outsourcing is the best solution for your organisation.
eXceeding’s top 10 questions to ask yourself before outsourcing
- Is management fully committed to moving ahead provided you can provide a compelling business case?
If not, how can they be or is the project a non-starter?
- Is your organisation truly ready to accommodate a third-party service provider?
If your organisation is not ready, can you leverage the right change management techniques to enable this.
- If you are outsourcing, what processes, resources and activity must be kept in-house? What is your scope for Outsourcing?
It is vital to establish exactly what can and cannot be delivered by an external source.
- Are all the costs, including delivery costs, accounted for in any potential deal? If not, how do you know if this will be cost saving?
Cost saving is an essential reason and component of sourcing. Establishing if this is going to be part of a deal and to what extent is an essential piece of information.
- What are your precise requirements from potential candidates?
What do you need and can the potential provider meet these with stringent SLAs (service level agreements)?
- If they seem a suitable candidate, can they truly deliver what they claim they can?
Establish in writing the scale of outsourcing, SLAs and assess whether these can be met.
- How does the potential service provider propose to meet your requirements in line with their capabilities?
Ensure you visit any serious potential service provider’s premises to assess their capability to deliver on their claims and any security measures you may require for data handling.
- What is their track record?
Obtain references and case studies to establish their successes or otherwise delivering similar solutions and or dealing with businesses of similar size to yours.
- Is your selection method quantitative, qualitative and objective?
Establish how you will select the winning candidate. Is this reasoned and logical?
- Have you truly evaluated the impact and practicalities of sourcing?
If your organisation does not have the resources available, or knowledge base needed, to deliver this project consider bringing in an outsourcing consultant. Expert procurement consultants have in-depth knowledge of the relevant markets, practical experience and proven methodology to ensure you achieve the best result from outsourcing.
Engaging a procurement consultant to manage your outsourcing
Businesses adopting an outsourcing model usually introduce it slowly over a sustained period of time. Throughout the implementation stage, employers generally favour testing individual aspects of the model bit-by-bit rather than undergoing a vast transformation programme.
Deciding which outsourcing service to choose is never simple, especially where too many options exist and the final outcome is unclear.
This where eXceeding can help. At eXceeding we employ a national team of procurement consultants. This includes project managers – to ensure that all projects stay on track and follow the correct processes and procedures – and category experts – who have up-to-date market knowledge of outsourcing services.
Our role would be to help you to identify the optimal solution for outsourcing to suit your needs.
- Step 1: We would start by understanding your business – assessing your strengths and weakness and reviewing your processes and procedures before developing a coherent strategy for outsourcing.
- Step 2: We would advise on the viability of outsourcing. We’d ask some of the questions above but review the key facts and be able to give an unbiased opinion as to whether outsourcing is the right solution for your organisation.
- Step 3: We would implement controls that are appropriate for your organisation, we’d define tailored KPIs and SLAs and help to establish the best commercial outcomes to meet your individual needs.
- Step 4: We would introduce step-change improvements to create certainty in your operations, improve your organisation’s agility and produce bottom line savings across your outsourced services.
If you would like to talk to one of our outsourcing consultants about how we can help, you can contact us here or feel free to book a free appointment using the link below.