Outsourcing has seen tremendous growth over the years. According to a survey by Clutch, more than a third or 37% of small businesses currently outsource a business process. The same survey revealed that the primary reason small businesses outsource is to increase efficiency and to have access to available expertise.
Choosing the right outsourcing vendor can be daunting. With the plethora of choices available at your disposal, finding a reliable outsourcing provider becomes vital. Working with the right provider contributes to the success and growth of your business. But finding the right outsourcing vendor isn’t easy. Finding the right provider to outsource some of your functions offers a wide range of benefits. Working with the wrong outsourcing partner, on the other hand, can be detrimental to your business. This article will guide you in finding the right outsourcing partner.
- Steps In Choosing The Right Outsourcing Partner
- Define Your Purpose
- Assess Technical Expertise
- Do Your Research
- Ask For References and Samples
- Aligned Corporate Culture & Values
- Infrastructure & Technology
- Send A Request for Information
- Initiate Qualifying Process
- Negotiate Contract
- Mistakes In Choosing An Outsourcing Vendor
- Lack of Research
- Ambiguous Requirements and Communication
- Outsourcing To Companies Not In Sync With Trends
- Lack of Basic Technical Know-How
- Underestimating QA or Testing
Steps in Choosing The Right Outsourcing Partner
There are many benefits associated with outsourcing. One of the biggest advantages of working with an outsourcing provider is low cost but high quality. Outsourcing allows you to focus your energy on improving your customer service or company growth. However, choosing the right outsourcing provider isn’t easy. Here are the steps you need to take when choosing an outsourcing partner:
1. Define Your Purpose
Before everything else, you should first ask yourself: “Why do you want to outsource?” There are several reasons companies outsource. According to the Deloitte Global Outsourcing Survey 2020, 70% of the respondents outsource for cost reduction. The second reason for 40% of the respondents is flexibility.
During uncertain and volatile times, it is understandable why businesses would want to cut costs. However, too much focus on pricing could result in commoditizing the outsourcing process. You could end up choosing a vendor with the lowest price and not on capability. When choosing an outsourcing partner, quality must take precedence over pricing.
Also, you need to determine what objectives you want to accomplish from outsourcing. Identify the needs of your business and the results you want to achieve. You need to be clear with your goals and purpose for outsourcing.
2. Assess Technical Expertise
Another popular reason businesses outsource is because their in-house IT team may not have the technical expertise. As automation is expected to dominate businesses in the future, it can become difficult for companies to cope with these trends if they don’t have the capability. The Clutch survey revealed that IT services make up 37% of all outsourced jobs.
When learning how to choose an outsourcing vendor, you should make sure that your future partner will be able to explain the methods it will use to manage projects, track results, and resolve issues to give you an understanding of how they will handle your projects.
Your prospect outsourcing partner should have expertise in areas like project management and quality control. In addition, it should have a business continuity plan in place to ensure that it can provide uninterrupted service or support to your company.
3. Do Your Research
Outsourcing is not for everyone so you need to think it over real hard before jumping in. Do
Comprehensive research about the outsourcing company you plan to work with and their process. Also, conduct a market and feasibility study about the outsourcing industry. Learn about the costs and risk factors.
Talk to individuals or companies who have outsourced so you can have an idea of the pros and cons of outsourcing. Join business groups in social media channels like LinkedIn, Facebook, and Google+ to get valuable inputs from group members.
Another option is due diligence on your part. Do a simple Google search and come up with a shortlist of prospective customers and make a quick background check. It will help you detect any red flags on your potential partner.
4. Ask for References and Samples
Getting feedback from previous and current customers can help you gauge what your prospect vendor can offer. You can check the customer testimonials found on their website to give you an understanding of how the company works.
Ask for work samples from completed projects or marketing prototypes to give you an idea on the kind of output you’ll receive once you agree to work with the provider. If there are any case studies on the website, you can also check that. This will help you gauge the competencies of the outsourcing provider.
Asking for work samples will also help you determine if the vendor suits your goals and objectives. Aside from that, you will be able to evaluate your prospective partner’s abilities, skills, and level of value. You will be able to confirm whether they can help you achieve your business targets.
5. Aligned Corporate Values & Culture
When looking for an outsourcing partner, you want to make sure that your proposed provider shares similar values as your company. From the metrics and goals to your mission and vision, you want to make sure that they are similar to yours. The outsourcing company will not only become an extension of your team but also scale with you.
Having similar corporate values & culture with your proposed partner will help ensure that you will be working towards a common goal and will be working constantly for improvement. Look at their LinkedIn profiles and check the bios of their top managers and executives and see if their background will compliment your business.
Flexibility is important when choosing an outsourcing vendor. There are times when your needs will change so your future partner needs to be flexible to address urgent changes or issues that may arise. This is especially important when your partner is working in a different time zone or geographical location.
There’s always a chance that once the agreement has been signed and the project is already ongoing, the provider will not be able to meet your expectations. Make sure that your prospect partner is willing to add some flexibility to the contract. A flexible provider will give you a fair notice period that will kick in after a month or so. This way, you wouldn’t have to get tied to working with an outsourcing partner without receiving any value.
7. Infrastructure & Technology
In today’s digital age, finding a technology-savvy provider can make a difference. Partnering with a technology-ready provider puts you in a better position to support your company’s needs and demands. Check if the technology of your prospect provider includes the latest hardware and software. Reliability is also an important issue you need to check. If the technology and infrastructure is unreliable, you could end up with a lot of frustration.
In addition, make sure that the infrastructure & technology of the provider should allow integration with your own technology. If necessary, they may have to invest in technologies specific to your business. Also, make sure that they have a backup plan in case of a technological breakdown beyond their control.
Lastly, check for data security certifications. Make sure that the provider ensures data privacy and confidential information safe. According to the Risk-Based Security research published in the 2019 Mid Year QuickView Data Breach Report, over 3,800 publicly disclosed breaches exposed 4.1 billion compromised records.
8. Send A Request For Information
A Request For Information (RFI) will provide the information you need on the experience and capability of your future provider. The RFI serves as the basis for making the Request for Proposal (RFP) or Request for Quotation (RFQ). In the RFI, you will be required to answer both general and specific questions regarding outsourced projects. It usually contains the following information:
- Year Company was Established
- Number of Clients
- List of Directors and Officers
- Social Media Pages
- Core Competencies
- Current Technology Profile
- Major Accomplishments
- Number of Managers/Personnel
- Current Organizational Structure
- Current Operational Workflow
Make sure to ask your prospective provider to attach a copy of their business papers like the SEC Articles of Incorporation as proof that the company is legitimate. Watch out for potential red flags like no website, inactive or dormant social media pages. The RFI is a standard document in outsourcing. If the provider refuses to comply they should be removed from your list of potential providers.
9. Initiate A Qualifying Process
Choosing an outsourcing provider is like hiring a new employee. You won’t hire the first applicant because there might be more worthy candidates. It does not mean that the candidate is the least qualified. Not hiring the first prospect vendor that you come across provides an opportunity to compare candidates.
When choosing the right outsourcing partner, you should set a criteria for selecting the best provider you will work with. The RFI is part of the selection process as it gives you an opportunity to shortlist the prospects. Once you have come up with a shortlist, invite them for an online interview.
Before the online meeting, list down possible questions you could discuss with the prospective outsourcing partner such as:
- What is their timeline for the commencement of operations?
- How do they hire candidates? How do they source talents?
- How do they protect and secure the integrity of their shared data?
- What is their disaster recovery plan?
- Do they regularize employees?
10. Negotiate A Contract
After the interview, rank your prospects in your order of preference. Start negotiating with the vendor on the top of your list. You should submit the following contracts to your chosen vendor:
- Service Level Agreement (SLA)
- Memorandum of Agreement (MOA)
- Confidentiality Agreement
- Scope of Work
- Schedule of Payments
Although your chosen provider may prefer to use their own contracts, it is best to have a uniform contract which should come from you. You could discuss and negotiate the contract provisions with your outsourcing partner for inclusion in the original agreement.
Your SLA should define pre-termination conditions and possible penalties for any breach of provisions. The SLA serves as your exit strategy should any of the provisions of the outsourcing agreement not be met. Make sure that the copy of the agreement is notarized and a copy sent to your partner.
Mistakes To Avoid When Choosing An Outsourcing Vendor
Choosing the right outsourcing vendor to partner with isn’t that easy. Although there are a lot of benefits, partnering with the wrong vendor can prove to be costly to your business in the long run. Here are some mistakes you need to avoid when choosing an outsourcing partner:
1. Lack of Research
Not conducting thorough research about your prospective outsourcing provider can be detrimental to your business. Don’t base your decision solely on cost savings. Although pricing is a crucial factor, it is not the only one you should consider. You can also check their portfolio, expertise, feedback, and reviews.
Doing extensive research of your prospect vendor will give you an idea of what your potential partner has done. With research, you can easily determine whether the outsourcing firm you plan to work with can fill your requirements.
2. Ambiguous Requirements and Communication
Another costly mistake you can commit is not understanding what needs to be done. If you have a vague idea about your project, it would be difficult to set a clear requirement with the outsourcing firm. It would also be difficult to assess if the process is headed in the right direction.
Before everything else, identify the goal you want to achieve from the outsourcing firm. It is important to ensure that everything is clear with your prospect in order for you to provide the most effective solution based on your requirement.
3. Outsourcing To Companies Not In Sync With Trends
Outsourcing to companies that are not in sync with the latest trends can be disastrous for your business. According to a 2016 SMB owner survey conducted by Babson University, 78% of respondents consider technology, including keeping up with new technology “extremely” or “very” important to businesses. Meantime, according to the 7th Social Media Marketing Industry Report, 96% of survey respondents use social media marketing.
For this reason, it is important that you find a partner that meets your expectations beyond technical issues like legal risks, working ethics, cultural differences, and broadband capacity.
4. Lack of Basic Technical Know-How On Your End
Although you can hire an outsourcing firm for their technical expertise, a lack of technical knowledge on your end may pose some risks for the project. If you cannot manage a project on a daily basis yourself, you need to have a trained internal person or project manager for such.
By choosing to outsource, you don’t have to worry about upgrading your hardware or software. You can leverage the technology being used by your provider and ensure a positive customer journey.
5. Underestimating QA & Testing
Customer needs are always changing so your solutions need to adapt to these changing needs. What worked before with your previous customers may no longer be applicable to your current customers. Quality assurance and testing are vital to ensure that your project will be strong and function smoothly.
During the course of your project, mistakes can happen along the way so you need to constantly debug and test to ensure that your solutions are working.
Why Outsource with airisX?
It isn’t always easy finding the right outsourcing partner. airisX strives to make outsourcing an easier process. Our services are flexible and contracts are based on your specific needs. Whether you only need a one-time project, additional skills for just a few hours a week, or you may need a multi-year contract for long-term support and scalability, airisX can do it. Whatever your requirements, your Solutions Architect can work with you to find the right solution.