by Phillip Jones, MD of Interchange Group
As the recession bites and company after company is forced to cut back on staff, investment and capital projects, outsourcing is being heralded as the saviour of big business.
Evidence shows that successful outsourcing deals can have a positive impact on a company's share value and there is no doubt that used properly, outsourcing is a powerful tool.
To implement it correctly, though, businesses must give careful thought to the return on investment which they need to achieve to make the whole outsourcing process worthwhile. If they don't, it can all end in tears.
Does it deliver?
Too many organisations are easily persuaded that outsourcing IT will help them save costs, save time, save manpower from in-house teams and, at the same time, be much more effective. Unfortunately, they don't stop to think about whether it delivers against their top level objectives and what it should be adding to the 'big picture'.
In our view, there are four vital questions which we believe CEOs and FDs should consider before signing on the dotted line for any outsourcing projects:
¥ Is the proposal a 'quick fix' designed to deliver short term cost savings with no long term predictions of the benefits for your business?
If so, then send them back to the drawing board Ð you're in it for the long term and you want figures which demonstrate tangible pluses to your bottom line.
¥ Does the proposal simply tackle IT?
Most IT managers like to protect their own domain but IT must not be treated in isolation. Companies must take a long hard look at ALL the tasks and business processes within their operation which could be outsourced, and then look for the solutions that deliver results most efficiently and effectively across the whole organisation. For example, if a task carried out within the business is not a core activity, then it can be outsourced. Similarly, if carrying out the task directly is not core to your customer, then that can also be outsourced. Recognise and understand that changes to one part of the business alone cannot produce the best overall results
¥ Will the proposal add value to your customers?
Whether these are consumers or other businesses, what they want is the best possible service you can provide. They don't care how it's done, as long as it is efficiently and correctly managed and delivers the required results - so unless your outsourcing project can contribute in some way to a better level of customer service, why do it?
¥ Does your proposed outsourcing supplier have the right level of skills and expertise to deliver the right results?
Check their track record, talk to their customers and get to know them - do they share your values and culture? Will they guarantee return on investment? After all, you're going into outsourcing to save money, so you need to be 100% sure that they have got their sums right.
Too many expensive outsourcing projects don't deliver because people have overpromised and underdelivered - find a company which is prepared to be paid against their results and you'll have found one which knows what they're talking about.
No easy answers
Making the decision to outsource is never going to be an easy one. Adding up the figures is in many ways the simplest part of the equation. The human side is usually much harder and tough decisions have to be made to close down departments which have been an integral part of the business for years.
Staff cuts and changes become part of the outsourcing territory and uncertainty among remaining employees can also have a detrimental effect on business.
That's why outsourcing projects MUST be successful. Everyone must see the benefits of what you have set out to achieve, ie: the long term success of the business.
Get the outsourcing recipe right at the start and it will deliver the best results for the long term benefit of the company. Get it wrong, and you could be paying the price for years to come.
With bases throughout the UK and the Netherlands, Interchange Group has been providing business solutions since 1976, including full hardware, software and network support.