Outsourcing Primer for Small Businesses

Outsourcing, once seen as the sole purview of large enterprises, has been saving time and money, even for small businesses, for some time now. Particularly some tasks such as HR and accounting, among others which SMBs are leaving to the experts these days have helped them to focus more on their core competencies

But, not every small or mid business can afford to outsource functions, though in many cases the benefits outweigh the upfront cost. Also these emerging companies eventually spend a lot of resources on managing IT which builds a strong case for outsourcing some of their IT functions to the experts.

If your organization is entangled in similar situations and outsourcing is on your mind, it is suggested that you to do proper homework and proceed with due diligence before handing over part of your business to a third-party.

Here are a few tips to consider before you choose to outsource..

1. Know Your Requirements and Core Competencies

How much IT should your organization be outsourcing? Evaluation of all your key functions can let you know how much IT you should outsource and for what purpose. It is advisable that you outsource functions that are time-consuming and can easily be performed by someone outside the organization. It should ideally help in enhancing your focus on your core-competencies rather than entangling you in secondary activities. For instance, mid-size companies can choose to outsource key IT functions such as the CRM, ERP, email or analytics application and hence rid themselves from the overhead of managing and running them on their own.

2. Your Goals are Their Deliverables

Defining goals for any outsourcing action should come in handy for an entrepreneur. The goals should be clearly outlined around cost savings, quality improvement, efficiency and augmenting skills, among other things. These goals should not be influenced by what the competition is doing. If set properly, your objectives for outsourcing will aid you in finding and selecting the right outsourcing partner and setting the right expectations.

According to HfS Working Summit, 80% of outsourcing relationships fail to deliver collaborative value because expectations are unclear in the beginning. It generally happens because the SMB owners are in haste to get it off their shoulder and the vendor is too busy selling. It results in a mismatch. Thus, chalking out your goals as well as metrics upfront, which can be measured, proves to be a step towards mutually beneficial and lasting relationship.

3. Selecting the Right Outsourcing Partner

Outsourcing may be a great business strategy but it barely works unless the partner you have outsourced the services to have the requisite expertise and experience in your domain. The market is infested with partners who can claim to address all your woes. Believing them without doing any background verification can be risky. Find out whether or not the partner you are in conversation with has delivered successfully in the past to a customer possibly from your vertical.

There are multiple parameters which you can apply to check their veracity, while making a selection for the right outsourcing partner. We have advocated this issue in one of our blog posts, listing down all key points necessary in the selection process for a partner.

4. Compliance and Security

Compliance and security are critical aspects for all organizations – small or big – and have to be taken care of even in the quest for an outsourcing partner. You need to ask your partner a few important questions to address compliance and security: Is your firewall up to date? Do you have a DMZ (demilitarized zone) installed? Do you regularly audit your workstations and servers? Has your company implemented PCI security standards? How does your company work to maintain these standards? How much, if at all, data control do you wish to transfer to your outsourcing partner?

For instance, organizations have more ways than ever to prosper by taking many forms of payments such as credit / debit cards, e-checks, gift certificates, wire transfers, to name a few. But these forms of transactions also need due diligence. A qualified managed services partner who is familiar with various compliance standards including PCI (https://www.pcisecuritystandards.org) and ISO is a good fit for handling cardholder data of your organization.

5. Uncovering the Hidden Teeth of an SLA

Growing businesses also require extra-care while signing an SLA (service-level agreement). It is probable that you do not comprehend parts of the SLA you are supposed to sign at the time of the deal. Be straightforward and upfront with the partner, seeking clarification on each point which confuses you.
SLAs are a detrimental aspect in the success or failure of an outsourcing deal. Identifying the hidden teeth in the SLA is going to save you from unpleasant surprises.

6. Managing the Relationship

When you sign a deal, it only means that the relationship has begun. To make the relationship work you have to nurture it with time and effort. Constant monitoring and guidance of the partner is essential to ensure the success of your outsourced IT functions. In many cases, appointment of a dedicated person at your end for monitoring and guiding the relationship is suggested. This dedicated person will regularly monitor the progress of the IT functions and provide feedback.

Proper and continuous exchange of requirements will result in a lasting as well as successful relationship.

Conclusion

IT infrastructure and services constitute planning, designing, implementing and maintenance of multiple IT functions and can be a challenge to small business due to the time, effort and money involved.
Outsourcing is a solution, when executed in a systematic way, can prove to be an effective strategy. Feasibility analysis and assessment of business objective can guide the outsourcing plan and mitigate risks associated with it.