The outsourcing debate rages on

Gerrit-Jan Albers, Service Delivery Manager at RDB Consulting gives us his opinion on the outsourcing debate.

May 17, 2011

Many companies were quick to adopt the outsourcing model in recent years as its popularity climbed alongside an increasingly volatile market. Some have benefitted from this enormously, cutting costs and enjoying greater efficiencies all round – but others have had a less than satisfactory experience, finding frustrations around every corner and inciting them to repatriate services. As such, the ‘outsource versus in-house’ debate has been reignited.

There are three main drivers for businesses to outsource – namely cost containment, a shortage of skills and a focus on the organisation’s core business.  Outsourcing saves organisations money as it means they don’t need to take on permanent employees – who bring with them a myriad of HR and training costs. Additionally, these resources, which are typically expensive, are better experienced when they have worked in the outsourcing context; and can offer your organisation an objective and highly specialised view. The outsourcing environment facilitates a high degree of cross-pollination in terms of ideas, challenges and solutions,  and perhaps one of the most compelling reasons to outsource is that it enables companies to wholeheartedly restore their focus on what they do best – their core business.

And there is perhaps no better example of these drivers at play than in the context of the modern day SME. As such, outsourcing is becoming increasingly attractive to SMEs, who now face the same challenges as their corporate counterparts in many regards yet don’t have the budget to employ full time specialist resources. Due to their nature, SMEs require greater flexibility than larger companies, which is one of the key benefits of outsourcing. They can outsource on a ‘pay as you go’ basis – cutting back on services when need be (which is far easier than ‘cutting back’ on staff). The Software as a Service (SaaS) model is particularly appealing to this market, which allows technology to effectively be ‘shared’ several companies, meaning that the customer does not need to worry about upgrades or employing a Database Administrator (DBA) to maintain their database.

While the benefits of the outsourcing model are clear, many organisations have been left disillusioned. One of the most common causes of the failure of the model is bad Service Level Agreements (SLAs).  And when it comes to poorly constructed SLAs, the fault can lie with either – and often both – the service provider and the client. Often the client does not disclose enough information to the service provider – making their job difficult and causing confusion down the line. Or, the service provider short sells the client by for example, providing a junior resource that is not experienced enough to handle the scope of the project. One way to prevent this situation is to devote considerable time and focus to the drawing up of the SLA, to conduct the necessary analysis, establish volumes of transactions and take all critical functions into consideration. Open communication, right from the beginning, is key – the service provider should ask the right questions and the client should be forthcoming with the necessary information.

Outsourcing service providers face unique ‘HR issues’ themselves in ensuring that their staff are happy as they work between different environments and within different corporate cultures. Service providers are often guilty of not motivating their staff with positive feedback. It is understandable that clients often won’t give outsourced resources positive feedback and encouragement when they do their jobs well -so it is up to the service provider to communicate regularly with their clients in order to know how their staff are performing and to update the resource with this feedback.

Outsourcing is not a sure-fire solution – whether the model fails or succeeds in any organisation depends on the approach, and often, on how well the service provider and the client communicate from the outset. However, if the client is transparent about the company and its requirements and the outsourced service provider has a clear understanding of the company’s requirements and how they operate, much of the disillusionment can be prevented, positioning outsourcing as a beneficial and cost effective alternative to companies perpetually having to find skilled, experienced staff whilst facing the challenge of containing costs.
By Gerrit-Jan Albers, Service Delivery Manager at RDB Consulting