Benefits of outsourcing and how to achieve them

On the web there are many sources talking about the benefits of outsourcing and just as many on outsourcing disadvantages, risks and possible pitfalls. Some organizations are proud to say that by outsourcing their back office have escaped tight margins and avoid long inefficient decentralized and complex procedures. The benefits they have realized go beyond cost savings:

  • Focus on the core business
  • Increased efficiency through standardization and centralization of services
  • Elimination of duplicate procedures and bottlenecks
  • Increased flexibility and decreased time to market
  • Access to up to date technology without investing heavily
  • Acquiring third-party expertise (often industry or country specific)

However, there are also those which have experienced long and painful transfer of their services, bad communication with providers and under optimal results. So, what makes the difference? Why some excel, while others fail?


Who is to blame?
– Everyone and no one.

In the last couple of years industry reports have highlighted the misalignment of client-provider relationship in terms of their expectations (Experts’ insights, 2012). Clients should be more open about what they expect from the collaboration and set realistic time frames, while providers should be able to recognize the readiness of the clients for change and set the pace accordingly. Outsoaring in its core is a change initiative and cannot be forced upon the organization. Commitment of internal stakeholders and creating change responsive environment is crucial for execution of outsourcing projects.

Alignment between the parties’ rewards and incentives
Recent technological advances have increased customers’ expectations. Vendors are expected to delivery more than simple labor arbitrage. But providers cannot achieve much if the receiving company has done little in creating an environment which encourages innovation and rewards excellence. If such environment is not created, vendors will feel intimidated to act proactively and will only deliver what they are asked for. The solution lies in the creation of a structure which proposes a realistic partnership with specific milestones and delivery expectations, in contrast to fixating on final results solely (HfS Research and KPMG executive report, 2014).

Effective communication
The third and maybe most crucial factor which can either facilitate or hinder outsourcing success is open and effective communication. I have talked about the importance of communication and B2B relationship in previous articles and strongly believe that the benefits achieved in successful outsourcing projects actually reflect the level and quality of communication between the buyer and vendor of services.  Healthy and transparent dialog involving stakeholders from both sides can help identifying key concerns. Next, involvement from both sides can help creating optimal solutions and satisfactory outcomes.


Pillars of Successful outsourcing

What is even more interesting good vendor-provider relationship enables knowledge transfers, encourages pro-active behavior and stimulates innovative thinking of the provider of services. In other words a successful outsourcing contract is a mutually beneficial partnership which helps both the client and service provider to grow together.

At Coordea we are achieving this through the extended office model which enables our team to function as a natural extension of our client’s company.