Governed by the motto “Do what you do best, outsource the rest”, companies have been outsourcing their business needs in the last 15 years. By doing that, they are able to focus on their business strategies and execution without having to worry about the details of their daily tasks. Outsourcing enables you to reduce time to market, save money, scale quicker, and increase your access to expertise.

Does outsourcing always pay off?

There are companies that decided to outsource certain functions at one point, but eventually brought them back in-house. The reasons for this can vary: the outsourced partner did not deliver the promised cost savings, they’ve grown lazy over time, or the transition simply didn’t go well. Initially, the company may see greater efficiencies and lower costs, but there was no continued improvement.

It often happens that the disappointments are rooted in the fact that the outsourcing partners fail to understand the company’s long-term goals and company culture. Outsourcing is about increasing operational efficiencies on an ongoing basis rather than just about cutting in the short term. When you realize that things aren’t going as planned, it’s important to reevaluate your outsourced partners, and understand why they fail to deliver properly.

Outsourcing contract mistakes

If you fail to define all the details in your agreement with outsourcing partners, you’ll quickly blow your budget. Whether you outsourced for IT, HR, or customer service help, not specifying budget limitations, delivery deadlines, and clear requirements will most likely result in spending more money and time than expected. All the guidelines can be difficult to establish, of course, so instead of getting yourself into a position to have to reevaluate their contribution and eventually change the outsourcing partner, you should start with a temporary agreement that can be renegotiated when needed.

For example, you’ve outsourced your IT department, to perform your website maintenance, security and hosting, telecommunications, database management, or technical support. Take time to check upon their services from time to time, to see how your software development is taking place or what kind of hosting features you really get.

In case that they’re not delivering what’s expected, you should be able to push back on contract terms. When signing an agreement with an outsourced partner, insist on including a clause that allows you to break the contract in case you realize (and are able to prove) that they haven’t been fulfilling their part job determined by the contract.

Is your relationship built on trust?

Assuming that you can enter into a smooth working relationship with an outsourced partner would be a mistake. In recent years, the approach where work gets simply assigned to an outsourced team has been replaced by efforts on creating a true partnership with them.

Reevaluation of your outsourced partners is necessary if you’re not committed to outsourcing as your company’s business strategy and are not comfortable with all the processes involved. Believing in the gains of outsourcing beyond the ones determined in the service level agreement and contracts is also necessary, but on the other hand, you should stay in control by managing the projects on an ongoing basis, developing project management plans, and monitoring deliverables. Always be prepared to implement changes.

Keep track of changing circumstances

It may be necessary to recalibrate or renegotiate the service level agreement as circumstances change. Is the composition of the team changing from time to time? Are new members joining the team or is there a staff turnover? Whenever it happens, retain your right to reject them as team members if you don’t think they meet your requirements (after evaluating their CVs or after a Skype interview). It is not common, but it happens that outsourcing service providers attract companies with skilled workers, replacing them with inexperienced ones after the commencement of the contract.

Adjust service levels every now and then in order to align goals and increase mutual understanding, which will contribute to a better relationship with your outsourcing partners. After all, the most crucial part of having a service level agreement is the two-way discussion that revolves around its contents.

Outsourcing service providers need to show their clients that they’re able to provide more than just providing basic operational support, meeting cost reduction goals, and staff augmentation. Today’s directive requires them to try to add tech support and innovations, as well as valuable and niche skills. On the other hand, you should remember that taking risks, monitoring the work of your outsourced staff, and eventually changing some of your associations is required for your business growth.