7 Important Questions to Ask Before Outsourcing

November 21, 2014



In its simplest form, outsourcing is just delegating. You can hire someone to make a logo on the fly while you check your online business on a fancy tablet as you stroll around with the kids. It’s not as easy as that, but totally plausible.

Before you dream about the cost savings for hiring that $ 8 per hour customer service rep, here are important questions that you must ask yourself before outsourcing:

Can you quantify your project goals?
You need to be specific about your service level requirements to achieve exactly what you want.

What kind of pricing structure do you want?
Pricing affects the direction of the outsourcing engagement. Input-based pricing focuses on tasks such as volume of work. This provides cost savings but does not promote transformational change. Output-based pricing focuses on desired outcomes. This provides strategic value but can be challenging to set up.

Do you know the exact timeframe needed for the outsourcing contract?
The timeframe of a contract has a big effect on the value of the engagement. Currency fluctuations, technology, consumer buying behaviour, and industry trends can all impact your business needs.

Do you have the resources to manage the outsourcing engagement?
You still need to liaise with the service provider and engage your offshore team. You need to ensure that requirements are met but you can’t micromanage. You need to trust your offshore staff but you also need to motivate them to work for a virtual employer.

How will you deal with potential setbacks?
There are plenty of scenarios that can throw a wrench in the gears:

  • If you get project overruns and delays, would you still be able to achieve your calculated cost savings with $ X per hour offshore worker?
  • What if the cost of labour suddenly increases?
  • What if a breach of contract occurs?
  • What if you score a big client and you need to suddenly increase your requirements?
  • What if you need to terminate the contract early?
  • What if your service provider subcontracts work without your knowledge?
  • What if your service provider is not delivering the results you need?
  • How will you retain the knowledge gained from the outsourcing engagement?

On top of these, you also need to consider areas that are vulnerable to issues such as intellectual property rights and data security.

Do you know how to handle disputes?
It’s nearly impossible to pursue litigation overseas. You can use a binding arbitrary clause, but this is very time-consuming for small businesses. You need to come up with a security, contingency, and business continuity plan to reduce risks.

Are you willing to deal with extra commitments?
Outsourcing engagements such as vetting service providers, on-site visits, culture awareness, and due diligence need to be set up and managed well.

Before setting up an outsourcing deal, you must first consider if you are suitable for it, rather than just finding outsourcing companies that fit you.

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