The majority of businesses use outsourcing to some extent. In most cases it's common sense.

To get a perspective on this.

In most cases it would be senseless for an SME to employ its own computer guru when it only runs five computers.

In this instance the function is outsourced because it wouldn’t be practical or economical to in-source.

Outsourcing as a Cost Control Measure

However, when a large company or corporate makes plans to outsource a department, the incentive will be different.

In this instance the motivation is usually one of cost control or cost reduction. It doesn’t take a mathematical genius to see that off-shoring to say India or China is going to be attractive to anyone examining the base costs of the exercise. People cost money wherever you are in the world, but in some places they cost much less money.

Maintaining Quality of Service When Outsourcing

Okay, what about quality? The education systems of India and China turn out a good product, young people rising to the challenges of global competition in a very competent fashion. Companies based in these countries use this raw material specifically to penetrate commerce on a global scale. Yet, for the western business world, outsource and off-shore solutions using the same raw material are riddled with issues and often end in complete disaster.

This can only be the result of failures at a very basic level with regard to the management of expectations for both outsourcing company and outsourcing client.

The Cost Effectiveness of Outsourcing

Perhaps a good rule of thumb would be to accept that you only get what you pay for, and sometimes not even that.

It’s always worth remembering that the responsibility for the execution of any function within a business remains the responsibility of the business. This applies whether the function is performed in house or by an external agency.

Explore that a little. If you outsource your IT function and the quality of service falls it will be the users in your business or your customers who suffer the consequences. This includes any resultant rise in business cost or fall in productivity. It may be someone else’s fault, but it is your shareholders who will require the explanation. And it will be you who has to deliver it.

Level of Service versus Savings

Okay, you may trade a fall in performance off against other savings, or you may levy penalties against your IT provider in order to balance the books, but let's be honest - the delivery of IT service is meant to smooth the flow of business, not hinder it.

The same can be said of any outsourced function.

A better position would be if the level of service didn't fall. Ah - now there's another problem. How do you know if the service provision is a success or a failure?

The answer of course is that you measure it. How? Well, you need to know exactly what you want from the provider and then you need to test the delivery by metrics.

The Main Reasons for Outsourcing Failure

The principal cause of most outsourcing failure stems from businesses farming out functions that have not been properly quantified. How can the success or failure of a process be measured if there is no definition of what is supposed to be accomplished or how?

The second biggest reason for outsourcing failure is the deadline.

Most outsourcing projects are given a deadline that is way too short. The reason is obvious - outsourcing is all too often seen as a cost cutting measure. And there is nothing wrong with that. Except that the necessary steps are frequently left too late. The exercise is driven forward by financial necessity with complete disregard for the required control measures.

Ensuring Outsourcing Success

Given these two areas of probable failure, what steps should you take to ensure that your outsource project is successful?

1. Make sure that the function is fully defined. In this, process documentation and technical writing can work for you.
2. Make sure you allow sufficient time to complete the definition process before obtaining quotations for service provision.