Your Next Outsourcing Deal

In the current economic condition, every penny saved is a fortune. As most of the medium and big business already out sourced their IT related operations and small businesses are also looking into outsourcing, it is imperative that lots of new outsourcing deal will be signed. So while considering outsourcing deal pay attention to following points which will enable you to extract maximum out of outsourcing deal:

1. Scope must be defined: Scope of deal must be well defined with flexibility of changing if required via formal process.
a. Pro: Expectations are set
b. Con: Very difficult to do
2. Adopt multi sourcing strategy: If your deal size is sufficiently big ( how to define!), consider multi vendor approach. In a simple IT project, let one vendor develop the application and second one do the QA.
a. Pro: Risk distribution, vendors will be at toes so better response
b. Con: More management time
3. Interlink your service lines to motivate your provider: In your deal, interlink the service lines with the clause of additional work to service provider. This will keep service provider motivated in anticipation of additional work.
a. Pro: Motivated service provider
b. Con: If additional work is not awarded to service provider over extended period, he will be irritated.
4. Cost cutting for future: In deal make sure that service provider is asked to cut cost and increase productivity. This will automatically reduce over all expenditure.
a. Pro: Reduction in expenditure and increased productivity
b. Con: Risk at quality front. Vendor may replace experienced personnel with juniors.
5. Invest in Monitoring and Governance: Every body tends to relax as system stabilizes. To minimize the risks and surprises hire experience outsourcing manager and develop processes and procedures to manage out sourcing.
a. Pro: Better managed outsourcing deals
b. Con: Increased expenditure
6. Fee structure: Consider various fee models – time and material based, fixed rice, out come based. Chose one with proper mix and match which suits you best.
a. Pro: Each model has its on positives and negative and suitable in specific conditions
b. Con: complex deal
7. Managed Services: Consider managed services model.
a. Pro: Management overheads will be at minimum.
b. Con: Dependency on service provider
8. Keep it Simple: Try to keep the deal simple for over all benefits.