Jun

24

Are you an entrepreneur, in charge of your own startup or medium-sized company, who’s heard of outsourcing but couldn’t latch on to the idea on how to proceed or are you a regular person who’s just wondering how do companies start if these ever decide to outsource work?

If you’re either, this summary article can guide you through the process of outsourcing in 5 steps, showing you that outsourcing can be as simple as counting the fingers on your hand.

1 – PREPARATION

Deciding to outsource?

The decision to outsource is taken at your company’s strategic level. Normally, this requires your board’s approval since sometimes in outsourcing, you have to dissolve some of your company’s business functions which could involve the transfer of people and the sale of assets, this is a decision you cannot make alone!

The process begins with you and your company as the potential client to ask the following questions:
•    Whether your company needs to outsource some of its activities to acquire profit or not?
•    What current business functions and processes in your company need to outsource?
•    Where are you and your company going to direct your outsourcing requirements? Would be it near-shore (a business process outsourcing service provider located near your vicinity) or off-shore (a service provider located in another country)?
•    When are you and your company going to implement this?
•    How are you and your company going to implement this?

Once you determine these 4 W’s and 1H of what is to be outsourced, it can help to build a business case to justify the decision. Once a high level business case is established for the scope of services, your search can begin to choose an outsourcing partner.

You locate a number of BPO firms that are out there and find that there are too many! Prepare a short list of potential suppliers guided by your company’s rudimentary needs then you can issue a Request for Proposal (RFP) to the candidates in the short list, requesting their business proposals and price.

2 – VENDOR SELECTION

Now at this stage, with your short list of potential outsourcing partners and their business proposals before you and your board, you can engage to answer the question TO WHOM should you get as your outsourcing partner.

You and your company, as the seeking client, screen and evaluate the BPO provider proposals.
This may require meeting representatives from the BPO candidates to clarify what you and your company requires and how can the BPO provider can respond to your requirements. Then you “down select”, this is where the BPO providers are qualified out until only a few of them remain.

It is the industry norm to come into a “due diligence stage” with two BPO candidates to maintain the competition for your company’s benefit. With due diligence the potential BPO partners submit their “best and final offer”(BAFO) for the client to make the final down select decision to one whose “best and final offer” is determined as viable for your company.

Now you have selected your outsourcing partner company to alleviate your company’s business processes.

It is not uncommon for a client and a BPO provider to engage in negotiations where the original RFP, the supplier proposals, BAFO submissions and convert these into the contractual agreement that is mutual beneficial for both parties.

At this stage, the documentation and the final pricing structure is finalized between your company and your selected BPO provider.

A most important and legally binding document is the contractual agreement that defines how the client and the supplier work together in achieving mutual objectives. This contract is the core to the governance of the business relationship between your company and the BPO service provider.

There are three significant dates that each party signs up to the contract: the signature date,      the effective date when the contract terms are enacted and a service commencement date when the BPO provider takes charge over your company’s services.

3 – TRANSITION

This stage starts from the effective date and normally runs until four months after service commencement date. This is when transfer of staff jobs, knowledge, assets, technology and the take-on of services occur.

4 – RELATIONS MANAGEMENT

This is when your company “manages” your business relations with your BPO provider. This can be considered as mutual since your company and your BPO partner can monitor and manage each other’s performance, assuring that both of you work according to the terms of your contract and also to progress in solving problems and achieving your goals.

This can be done through transformation or adjusting each company’s operations to complement and support each other. This is where a set of projects can implemented between your company and your BPO provider in order to standardize services and centralize responsibility of assets and liabilities.

Once job functions are centralized (people know what work they’re supposed to do), processes are standardized (and they know how to the work right) then the delivery of service between your two companies can begin and keeps on going for the agreed term of the contract.

5 – RECONSIDERATION

This fifth stage comes near at the end of the contract term when your company must answer the question, What now? Has the BPO provider’s services reached your expectations? Has the partnership achieved the desired results and goals your company has set out?

Your company can decide to terminate or renew the contract with your BPO service provider for another term. If your company decides to terminate, this can involve taking back of services and hardware that your company outsourced (in-sourcing) or transferring your outsourcing requirements to another, more qualified BPO service provider.

Outsourcing Solutions, Inc. – your outsourcing partner!

References:

  1. Perunović, Zoran & Pedersen, Jørgen. “Outsourcing Process and Theories”. May 2007. Production and Operations Management Society. Accessed 25 June 2008. Link here
  2. “Outsourcing: The Process ” 28 May 2003. Wikipedia: The Free Encyclopedia. Accessed 25 June 2008. Link here

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