Disadvantages of Outsourcing
However, outsourcing does have its disadvantages:
The fear of the service provider ceasing to trade (bankruptcy, etc)
You may lose control of the process
Creates potential redundancies
Other companies may also be using the service provider. Therefore in some cases, the best interests of the service provider may be diluted with other users
You may lose focus of the customer and concentrate on the product (the outsourced process)
The loss of talent generated internally
Employees may react badly to outsourcing and consequently their quality of work may suffer
Many of the disadvantages can be avoided if you research the service provider and you do not regard outsourcing simply as a money saving scheme - this is not always the case.
Consequently, you should be certain that you have a valid reason for outsourcing and that you intend to liaise regularly with the service provider to avoid loosing all control of the process.
However, the disadvantages are valid reasons why not to outsource - it is therefore a common case of weighing up the pros and the cons for your particular situation.
Who Should I Outsource to?Many businesses choose an outsourcing partner (service provider) on instincts, without initially matching their needs with the partner's capabilities.
"take the time and effort required to find the perfect partner"
The two most important factors in a successful outsourcing relationship are trust and security - without these the relationship is destined for failure. It is therefore important that you take the time and effort required to find the perfect partner.
Firstly, acquire a list of potential partners. You should then find out if their service (capabilities) can cater for your needs. Speak to an employee of the service provider, as their service may extend from what it initially suggests on their web site or information supplements - there could also be hidden terms and conditions that may affect your decision.
Find out who their current/past clients (if at all) are so that you can obtain references on their service quality.
Finally - and arguably most importantly - ensure that the service provider has long-term financial stability. Obtain a company report or bank reference to solidify your perception.
Once you are happy with your choice of partner, revise their contract to ensure that they are liable to live up to expectations (service quality). Find out the procedure for negotiating any issues and how much control you will have over the process - contracts are a grey area where businesses slip up when outsourcing.
You should also clarify the costs - are there any hidden extras, bonuses or penalties?
Terminating Outsourcing Contracts
Contracts are usually up for renewal after an agreed time, commonly 1 year. However, the occasional relationship may not work out and one of the parties may want to terminate the contract with immediate effect.
The contract can only be terminated if a party has a legitimate reason and is not simply requesting on the basis of "I don't need you anymore". For example, a breach of contract is an acceptable reason for termination. In some cases, if stated by the contract, the offending party has up to 30 days to rectify any issues on their side, before the other party has a legal right to terminate the contract.
Nevertheless, should you want to terminate the contract or the service provider is requesting termination (on unlawful grounds) you should contact a solicitor for advice.
"build exit strategies into the contract"
To avoid any disputes, you should build exit strategies into the contract highlighting on what grounds a party can terminate the contract (on 'friendly' terms).
