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How to Test the Business Value of Outsourcing

When it comes to outsourcing, before entering into any formal agreement with another vendor it is important to test and understand the business value of outsourcing. All too often organisations jump into outsourcing a component of their business without fully understanding what their action will mean to the company on a large basis. Thus, testing and examining a company from the inside out is the only true way to decide if outsourcing is the correct approach for reducing costs. This article includes some factors to consider before signing up a contract for outsourcing.

Systems thinking vs. Standard vendor outsourcing

When organisations that are not familiar with outsourcing initially consider the idea of sending work outside of the company the first thought that usually enters their minds is to outsource to a standard vendor. While this is the basic idea of outsourcing, this is a dangerous way to approach outsourcing and a very sub-optimal step given that cutting costs upfront is not worthwhile if later the organisation suffers as the whole as a result of the move.

On the other hand, systems thinking outsourcing involves looking at the business value of outsourcing and deciding if there is a better way to outsource that will allow every component of the company to benefit. Goals that should identify before an outsourcing vendor is chosen include flexibility, quality, market time, change, and competitive advantage. Systems thinking outsourcing also mean that the entire company is scrutinised thoroughly across every channel, not just one department such as the customer support area.

Optimizing business value with outsourcing along the value chain

This can be a difficult approach to outsourcing given that fact that within a single organization there are many different departments that each consider themselves a key component of the company. Thus, employees within these sectors will be resistant towards offering suggestions and inputs or helping assimilate companies with their trade. Properly reassuring members of staff and offering incentives is a great way to get more employees on board.

For e.g. DGTL Co. is the company when you are looking to outsource Software QA Testing and/or Rapid Software Prototyping.

The other problem with testing outsourcing along the value chain is that within each department there is a strict focus on how much work can be extracted by each organisation. This involves looking at individual measurements of every employee task within the organisation which can be time-consuming, with or without cooperation from staff.

Objective of business value outsourcing

It is important to keep in mind that at the root of any outsourcing attempt is a fundamental goal. When it comes to business value, the goal should be finding added value for the company and a more cost effective organisation team than the one that is currently in place.

Additionally, for maximum benefits, the outsourcing vendor should be known for its continual innovations and forward movement in the business world so that your company continues to benefit from its new relationship.

Lower the risks with careful study of outsourcing vendor as well as your organisation

The move to choose an outsourcing vendor should be low risk when compared with the benefits that are gained with the new partnership. To properly ascertain that this is the result, a company needs to perform the thorough research of the outsourcing vendor it is considering hiring. Among the questions that need to be answered are if the company has experience, an adequate reputation and if they can respond to your organisation’s needs in the proper, timely manner. A company that offers a trial period is often an excellent choice since they are ready to stand behind their commitment.

Although it will be easier to find a generic outsourcing vendor and will certainly reduce costs much more short term on the budget sheet, it is quite possible that in the long run your business will pay more in other departments and overall performance as the months pass. Thus, it is up to an organisation to choose a responsible team and supply it with the vital information needed to continue to allow all departments both those in-house and out of the house to prosper.

Values to look for from an outsourcing vendor for maximum benefit

There are set qualifications that every vendor should be able to meet. To start, they mostly provide an option value for the vendor such as offering entry into a new market or field and access to new clients. This alone can help propel an organisation along. This will allow a company to move forward with integration along the business value chain and possibly produce new service or product offerings.

An organisation also must look at how it can improve in house services now that the outsourcing company is taking a department out of the budget. They should consider if their best practices are being applied in both locations and redesign their budget to improve other departments now that there are available funds.

Finally, in the case that an outsourcing agreement fails, an organisation should search for an outsourcing vendor that will cover the cost of moving the tasks they took on back in-house. If a decision is made to switch outsourcing vendors, then they would be responsible for promptly transferring all data and related activities to the new vendor. While this may seem unrealistic, a professional vendor will provide this service as part of their guarantee of satisfaction.

While outsourcing is a risk regardless of how well each step is followed and how integral the business value chain is with the final vendor choice, it can be a calculated risk which predicts much more success. Carefully weighing each factor such as vendor responsibilities, overall organisational effects, and outsourcing budgetary requirements can aid a business in finding the proper vendor without experiencing a large financial impact later. DGTL mainly focuses on providing all these factors to our clients with careful and detailed evaluation. What are your thoughts about Outsourcing? Let us know by leaving a comment below.

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