Outsourcing Factors to Consider: Everything You Need to Know
Know the outsourcing factors you need to consider for any of your outsourcing decisions.3 min read
The seven outsourcing factors to consider are:
- Pricing and Quality.
- Technology and Resources.
- Meeting Deadlines.
- Visiting Your Vendor
- Service Level Agreement
Seven Factors to Consider for Outsourcing Decisions
1) Savings: Outsourcing must reduce operational costs and therefore improve your bottom line. To see if outsourcing will be cost-effective, analyze whether it will reduce the capital you need to spend on purchasing equipment and hiring employees. Make sure you take into account the quality as well as the quantity of services provided by the outsourcing firm.
2) Pricing and Quality: Outsourcing can give you access to a number of different vendors who can offer products and services at a competitive price. But don't just go for the least expensive vendor: compare vendors to see what you will get from each by price as well as quality and additional services.
3) Technology and Resources: Make sure you check the technologies and other tools each vendor plans to use on your project. Are the employees appropriately trained for your assignments and capable of handling your needs? Asking this will help you assess vendors to determine who has the technology and resources to handle your business functions in a seamless manner.
4) Meeting Deadlines: Timeliness is another important factor to consider in addition to cost. Missed deadlines on the part of the vendor can generate major bottlenecks for you that could reduce your cost savings. Inquire about a vendor's quality control and backup measures in the case of missed deadlines before signing a contract.
5) Visiting Your Vendor: Visit the vendor's site before finalizing the contract, and do additional due diligence research to learn as much as you can about the reliability of your vendor, as well as the safety practices of the team and the vendor's infrastructure. If possible, contact past clients of the vendor to gather references.
6) Service Level Agreement: The Service Level Agreement, or SLA, is a critical document for outsourcing partnerships. Make sure that each detail in the document is clearly spelled out so that there is no ambiguity. Consider hiring a lawyer to review and possibly amend this document.
7) Communication: Make sure that your vendor is able to reply promptly to any questions or concerns, especially if you are working with an offshore team in a different time zone. The vendor's communication skills also need to be up to par to ensure that they are able to understand and address your business requirements.
4 Non-price Factors to Consider when Choosing Outsourcing Destination
1) Geopolitical Risk: Assess the political environment of the outsourcing destination, including whether the government supports the outsourcing industry through investment or other means. A sudden change in the destination country's political arena could lead to significant disruptions in your business.
2) Resource Quality: The quality of the workforce will directly affect the success of your outsourcing initiative. Assess whether the talent pool is adequately certified and trained to meet your requirements, while keeping in mind the potential to meet growing staffing requirements in the future.
3) Technology Infrastructure: The reliability of any technology infrastructure will be critical for continuity in the case of unexpected equipment failures. Take factors like security, including continuity solutions and backup infrastructure, as well as availability and connectivity into consideration.
4) Legal Considerations: Legal protections vary by jurisdiction and national legislation. Research legal protections for your specific outsourcing initiative. It is especially important to consider regulations regarding preserving client confidentiality and other sensitive information.
How do I Outsource?
- Investigate Recruiting Venues: There are different kinds of venues you can use to recruit outsourcing professionals for your business initiative, including classifieds, online job boards, and staffing agencies.
- Cancellation Clauses: Some business relationships just don't work out for various reasons. Consider whether to include a cancellation clause to deal with the contingency of one or both sides trying to exit the contract.
- Intellectual Property: Make sure you clarify who will own and be able to use the product once the project ends. Your intellectual property agreement also needs to account for modifications and improvements made during the course of the relationship, as well as nondisclosure and confidentiality agreements when required.
- Security and Privacy Measures: Your outsourcing service provider may have access to sensitive information, such as customer data or your software. Make sure to discuss steps to ensure the security and confidentiality for such information.
If you need help with outsourcing factors to consider, you can post your job on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.