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How to Avoid Pitfalls When Outsourcing Business Services?
Outsourcing of business processes is definitely not a new phenomenon, in certain industries like manufacturing it has been around for ages. One of the pioneers in this field was the soft drinks market in the USA where giants like Pepsi and Coca-Cola kept their secret formula to themselves and outsourced bottling of their drinks to franchises to jack up volumes.
In subsequent times there has been a drastic shift in a scenario with more companies choosing to outsource different processes to experts in specific areas of operation while retaining the reins of the company in their hands.
Business outsourcing services are today a multi-trillion dollar business with even top-flight blue-chip companies climbing onto the bandwagon. This process can be broadly categorized into two – back office and front office functions.
1. The first is in the form of support services that prop up the core activities of any business. Functions comprise amongst others accounts, human resource management, and data entry and processing. There are wider ramifications in the insurance sector with claims, commission, and policy management falling into this category.
2. Front office functions include direct customer interaction like call centers and say loan processing and evaluation in financial institutions.
That outsourcing is today the mantra of the commercial community is because of two primary benefits. It is a cost saving option as huge investments in skilled manpower and infrastructure is not required to run definite departments.
The next is the increased speed of processing turnaround due to time differential between originating and outsourced country. Work uploaded at end of the day is processed and received back at the start of a day. The result is an enhanced level of client satisfaction.
However rosy the outsourcing picture can look at first glance, it has to be taken up with caution as there are pitfalls that the first timer has to be wary of. There will always be a great cultural divide and a wide divergence in the management style of functioning between the business and the outsourcing agency.
There will also be concerns about security systems in place to protect data integrity. However, as it will be seen now, for every problem there is always a solution. So too is the case with the outsourcing industry.
What then are the pitfalls that companies may face when outsourcing business services and how to get around them –
Lack of Research and Due Diligence-
Before awarding a contract, businesses do not carry out proper due diligence and research and verify the credibility and standing of the company. This can be detrimental to your interests at a later stage. It is not enough that an agency offering business process outsourcing services takes up similar work as yours.
Verify if there is a matching of business goals and objectives, verify if they have the required infrastructure to match your scale of business and verify if they have the financial capability to invest in infrastructure in future to be in step with your business growth. And finally, confirm the market reputation, not only of the company but of the directors and stakeholders as well.
Not checking Data Security measures-
This is important as it can damage your business by compromising your confidential business data as well as client information. It is advisable to check out this aspect yourself before awarding an outsourcing contract. Form a core team of your IT professionals; study the systems prevailing in the agency and initiate control measures from your side which will not be changed without a nod from you.
However, it must be acknowledged that most outsourcing companies have layers of inbuilt data protection and security measures in place. But it always pays to be extra cautious in this area.
Inadequate stringent contact stipulations-
Have iron-clad contracts in place with very specific stipulations. Not having so keeps doors open for misunderstandings and in worse case scenarios costly litigation that can easily be avoided if all the clauses are very clear and unambiguous.
The contract should be such that both parties know what is required of them. Include scope of work, confidentiality agreements, non-competitive agreements and crucially the schedule and periodicity of payments. Also, incorporate an exit clause that you can bank on to terminate the contract should there be any deficiency in service.
Low is not always the best-
Do not think that you have got a fair deal simply because you have managed to snare a low priced contract. Too many companies fall into this trap and have a tough time getting out of it. Weigh the possibilities and options carefully and ask yourself – are you getting what you need at that price? If not opt for quality even it costs more.
See Also: How can your firm profit from outsourcing business solutions?
Outsourcing is the business option of the times. Avoid pitfalls when outsourcing business services and you are on your way to exponential business growth.
One of the leading exponents of business process outsourcing is Cogneesol. We have a team of experienced professionals well versed in all the nuances of the outsourcing process. Our services include ITES-BPO (information technology), KPO (Knowledge Process Outsourcing) and LPO (Legal Process Outsourcing). To know more, write us at [email protected].
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