"Will I be able to manage it?" This is the first and the most important question that every CIO should ask himself before outsourcing. In a study conducted by Deloitte Consulting, 62 per cent of respondents said that outsourcing required more management than they expected. Managing your outsourcing venture is critical to the success of your project, but is an area that has not been given its due importance.
The costs involved in managing the outsourcing process could be a cause for worry. But this expense is worth the money to ensure that the whole purpose of outsourcing is met. Make sure you clearly plan out your management strategies and adapt them to outsourcing. Whether your business is small or big, a systematic management framework will produce the following benefits and improve your outsourcing business.
• Better performance
• Systematic business
• Reduction in overall costs
• Managed risks
• Better control and co-ordination
• Reduced chances of failure of outsourcing projects
What are the core functional areas I need to focus on?
There are certain areas of your outsourcing business that need consistent attention. Concentrating on these areas will greatly increase your control over the course of the outsourced project.
Cost Management
The main attraction of outsourcing is of course the cost benefit element. However, cost is a very deceptive phenomenon. Companies might offer to do your project at very low costs, but there are chances of the initial cost running up to a much higher overall cost. To avoid this risk, analyze the scope, the long term cost and other benefits right at the beginning of your project and arrive at a reasonable consensus on cost.
Performance Management
You'll have to strike a balance between the actual performance levels and the ideal performance standards of your outsourcing project. The core issue in performance management is the time factor. Make sure that the project does not lag too much. To ensure this, targets have to be specified, review and analysis has to be done on a regular basis.
Communication Management
The process of making the decision to outsource your business to actually getting your work done is a long one. This demands constant and effective communication between the outsourcing partners. You will have to establish proper communication channels that facilitate open communication. The main advantage of maintaining good communication with your outsourcing partner is transparency in all activities.
To ensure better communication management, ensure you:
• Establish good communication systems
• Regularly contact your outsourcing partner
• Give clear instructions and feedback
• Clarify all possible doubts that can arise
CIOs and other top level management need to get themselves involved in the process. Though it might be difficult to keep a complete track of the project, regular check on the progress of the project by the top level management will dramatically help in ensuring the successful completion of the projects.
Risk Management
The risk factor is the biggest concern in outsourcing. A complete assessment of possible risks will give you an upper hand in being aware of your risks and covering them for better efficiency.
Crisis Management
Ensure that your management is financially and professionally equipped to deal with contingencies. With a good outsourcing partner, crisis management will not be a difficult issue.
Knowledge Transfer Management
Knowledge transfer has a direct influence on productivity. When you are transferring knowledge about the proposed project, make sure you give adequate information and knowledge to your outsourcing partner. This process of knowledge transfer should be constantly monitored and effectively carried out to ensure better productivity.
Relationship Management
Once you are sure that the outsourcing vendor you have chosen is a credible outsourcing partner, work towards founding a strong long term relationship. For this you'll have to create scope for the following.
• Transparency
• Scope for discussion
• Constant monitoring
• Mutual understanding
• Build flexibility to contracts
• Openness to intermediate scope and price review
How to organize your in-house management?
A CIO’s responsibility in an outsourcing scenario also involves a lot of work with equipping in house capabilities to match your outsourcing requirements.
• Evaluate your in house capability
• Distribute the workload between in-house and offshore processes
• Entrust a responsible person or a team to monitor the outsourcing process
• Train your employees on how to manage and organize an outsourcing business
• Follow an organized business strategy to ensure the development of your business through the four stages of outsourcing business. The four stages are:
1. Outsourcing Strategy building
2. Evaluation and decision making
3. Contract development
4. Outsourcing management
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