Today, more and more businesses understand the benefits of working with outsourcing companies. Although having a business relationship with an outsourcing vendor can be a smart move, it is important to minimize the risks associated with this type of business partnership. Let's look at some in-depth suggestions on making good outsourcing decisions.
Why Outsource at All?
Without a doubt, the most important positive aspect of working with an IT outsourcing company is the ability to save substantial money. Cost reductions occur because outsourcing vendors usually spend less on both labor and overhead. For example, offshore outsourcers typically enjoy lower energy costs than onshore vendors," says Darin Stahl, Lead Analyst for Info-Tech Research Group.
Stahl believes that successful outsourcing engagements must yield savings of at least 15% to 20%. And enterprises should avoid contracts that can't deliver a minimum savings of 10% in headcount and technology costs, he says.
Another benefit of outsourcing is the ability to increase service availability. Specifically, businesses that provide 24/7 services will especially appreciate the inherent value that outsourcing can provide. For outsourcers, the cost of providing a wider array of technical support/management tools is spread out among all the vendors' clients.
"The challenge is to ensure that the long-term enterprise technology strategy is aligned with the skills and competencies of the outsourced vendor," says Stahl. "This requires at least a 5-year view of the enterprise IT strategic plan compared to the vendors' capabilities."
Another advantage to outsourcing is that companies gain access to scarce skills or resources. Stahl recommends that enterprises should target a minimum savings of 25% from deferring additional headcount in-house for the outsourcing to be successful.
Using outsourcers also allows enterprises to substitute fixed IT costs with variable costs (e.g., pay for usage). Businesses may choose to avoid large capital expenditures in favor of lowered variable costs.
According to Stahl, companies must examine any opportunity of this type through a very long lens. "Enterprises must quantify and track savings against expected in-house costs throughout the life-cycle of the engagement and take into account switching costs that would occur if the relationship sours or business conditions change," says Stahl.
Finding Offshore Outsourcing Companies
There are several ways to minimize risk when researching outsourcing vendors. One way is to find a dependable outsourcing company by referral from colleagues who have experience working with outsourcers. While this method is good to determine reliability, you must also ensure that the company is qualified to work on your particular project.
Businesses can find relevant outsource partners via search engines. Trade associations are other good places to find information about outsourcing vendors.