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Historically, many businesses chose a single vendor to outsource too, but the trend is now to have multi-sourced agreements which are more challenging to manage and control.
Whether you like it or not outsourcing has become a feature of business life. We have seen an increasing number of companies that are either seeking to outsource complete business processes or looking to use managed services to support their core business functions. It is most mature in the IT sector, but has developed into areas such as HR, Procurement, and customer service, payroll services and more.
There can be a number of benefits to this approach which might include:
- Lower costs due to economies of scale and flexible capacity.
- Allowing you to focus on your core competences.
- Getting access to skills or resources that you don't have within your organization.
- Accelerating speed of development and time to market.
- Increased efficiency.
- Lowering ongoing investment internal infrastructure.
- Increased flexibility to meet changing business and commercial conditions.
However, this strategy is not without risks, including:
- A lack of control.
- Slower turn-around times.
- A lack of specific business or domain knowledge.
- Quality control issues.
- Increased efficiency.
- Costly variations from the contract.
- Multiple lines of communication.
What is IT Outsourcing?
IT outsourcing is the use of external service providers to effectively deliver IT-enabled business process, application service and infrastructure solutions for business outcomes.
Outsourcing, which also includes utility services, software as a service and cloud-enabled outsourcing, helps clients to develop the right sourcing strategies and vision, select the right IT service providers, structure the best possible contracts, and govern deals for sustainable win-win relationships with external providers.
Outsourcing can enable enterprises to reduce costs, accelerate time to market, and take advantage of external expertise, assets and/or intellectual property.
The failure rate of outsourcing still remains high. At the heart of the problem is the inherent conflict of interest in any outsourcing arrangement. Whilst the customer seeks to get a better service, and looks to lower their costs, the vendor is focused on making a profit and delivering the service with the least possible expenditure. Managing change requests and variation orders on the contract is critical. This has to be based upon a strong relationship and requires clear service level agreements, a strong governance processes and having the right management system in place to keep track of the services being delivered, all communications and decisions made, and of course, the financials. Any change orders must have the appropriate levels of approval and documentation, and a clear audit trail. The financial implications of requests, or delays should be understood. Service quality and responsiveness should be visible. Incidents should also be processed within the central management system, that should also provide executives with dashboard views of key performance metrics and financials. The aim must be to achieve a situation with no surprises.
Historically, many businesses chose a single vendor to outsource too, but the trend is now to have multi-sourced agreements which are more challenging to manage and control. Establishing a management function to oversee these agreements with the tools to support them is essential, however there are a limited number of software solutions that provide the range of functionality required. InovaPrime’s Governance.Business solution is one of these. Get started with free trial and discover
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