by Sanjeev Kapoor 02 Jun 2017
Outsourcing Services: Is it time to Quantify and Qualify?
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Outsourcing Services: Is it time to Quantify and Qualify?

Outsourcing services present a great opportunity for enterprises to take advantage of talent, knowledge and skills available worldwide, regardless of time-zone and location. Companies are increasingly turning to outsourcing for a number of different reasons, such as, supporting their strategy, gaining competitive advantages, strengthening their core competencies, reducing costs, alleviating skills or talent gaps, or even gaining access to new markets. As a result, we are witnessing a rapid growth of the number of available outsourcing services, as well as a gradual expansion of their scope.

 

Assessing your Outsourcing Services: The Need

The availability of many outsourcing firms provides increased flexibility and better opportunities for selecting cost-efficient and higher quality services. However, it also makes the vendor and service selection process quite extensive and challenging. Furthermore, it creates a need for evaluating the current outsourcing partners which becomes a vital input for any future vendor selection processes and also helps in assessing their value for money.

Despite the proclaimed benefits of outsourcing, several managers and C-level executives perceive it as risk and associate it with various negative effects. In particular, managers are skeptical of the capabilities of outsourcing vendors to deliver exactly what is needed. Moreover, Outsourcing is often blamed for loss of in-house knowledge, as well as for lack of total accountability. Another risk, often highlighted, is the possibility of conflict within multiple outsourcing partners, and ultimately a high likelihood for poor cost-effectiveness especially when results fall short.

For all these reasons, it is important to assess outsourced services in terms of their quality, cost and other parameters. The assessment should take place regularly and based on appropriate metrics that are representative of the services’ performance. Such metrics are usually the best way for convincing senior managers and C-level executives about the merit and need of outsourcing.

 

Metrics of Outsourcing Performance

The assessment of outsourcing services is a multi-facet process, which should cover the quantity, quality, timeliness and cost-effectiveness of the offered services. In order to cover all these aspects different metrics have to be tracked, including:

 

Beyond Simple Metrics: ROI Calculation and Scoring

The documentation and calculation of the above-listed metrics provide a very good overview of the effectiveness of the outsourced services, while at the same time enabling comparisons of different vendors and services. Relevant information could be integrated and visualized on appropriate dashboards in order to boost managerial decision. Nevertheless, in several cases the comparison of different metrics will not lead to a direct winner and in such cases, companies can combine multiple metrics to form composite metrics that could aid the comparison process and provide invaluable and more comprehensive insights. This combination can take different forms, including:

ROI calculators and scorecards can support managers in taking educated decisions about their outsourcing services. The assessment process is not a one-time activity as outsourcing providers and services need to be assessed regularly whilst the criteria is updated dynamically in-line with the evolving business needs. As part of the assessment process, scorecards and quantifiable indicators, must be complemented with critical feedback from relevant stakeholders. In particular, the opinions of HR (Human Resources) managers, the CFO (Chief Financial Officer) and the people that use the outsourcing resources are very important for the overall assessment of vendors and services. In addition to using the above metrics, it is always important to establish a proper evaluation process, which combines quantitative calculations with feedback from key stakeholders. Such an evaluation process helps in the proper assessment and selection of the right outsourcing partners and also for evaluating the current partners and taking corrective actions. Make the most of outsourcing by quantifying and then qualifying.

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