Strategic Outsourcing

Dr. Kismat Kaur

Associate Professor
CBSA,CGC
What is strategic outsourcing?
Strategic outsourcing involves partnering with an IT
company that provides top-down services. They handle
the entire planning and development processes,
leaving you free to focus more on other aspects of the
business. This is nice for some companies because
they are able to pay prices per project instead of per
hour of work.
 Measures for outsourcing
The first is documentation because you never know what
could happen in the future. If a support issue comes up or
you need new functionality added to an existing product,
you will need proper documentation to know how the
product is supposed to work.
Ensuring that your partner provides proper documentation,
both in the code and out, can be vital to handling these
situations.
You should always provide full technical information about
your requirements to your outsourcing partner.
Leaving out any details could cause severe problems as you
go through the process. Always remember to include all of
your key decision-makers and stakeholders in discussions
to ensure that everybody’s goals align properly.
Repeated changes over time can greatly increase the cost of
any project, so planning everything upfront is vital to a
successful partnership.
You should always examine your prospective partner’s
portfolio, looking for consistent, high-quality performance
over time. Not all outsourcing companies are equal, and
even great companies may not be the right choice if their
goals do not align with yours.
Benefits of Outsourcing
Reduced costs. One of the main reasons why companies use
strategic outsourcing is the desire to cut costs. You can fully rely
on a partner’s knowledge and experience rather than hiring specific
personnel. Automation and optimization commonly go along with
outsourcing, thus allowing businesses to save on operational costs. 
More time to focus on core business. Outsourcing helps
companies get rid of an array of routine and repetitive tasks, thus
giving more time to manage their major specialization and
business challenges that require human interaction and judgment. 
Better risk management. When trying to solve challenges
yourself without the required expertise, you are likely to make
costly mistakes. Even attempts to acquire said expertise could be in
vain. You might hire the wrong person, or there is not enough
consistent workload to keep this person in house on a full-time job.
However, when you outsource the work to experts, you can better
manage risks across the entire organization. 
Improved resource utilization. Many companies employ out-of-box
software and might not take maximum advantage of its use. The reason for
this is that these systems are not adjusted to the specific company’s needs
and goals, and they can’t be. But outsourcing software customization and
integration to third party experts, helps you leverage its full potential. 
Gain competitive advantage. The above-mentioned advantages bring us
to the main benefit delivered with the strategic outsourced services. Every
business desires to be the best in its market and own a competitive
advantage over other players. Transformation across an array of areas in
your business will help you become more flexible, drive growth, manage
costs and stay on top of the competition.
Access to a global knowledge base. You can’t be an expert in everything.
But you can easily access a pool of resources and knowledge when
partnering with various service providers. Companies that specialize in
outsourced services spend their time and money to provide you with the
best specialists in the market allowing you to benefit from their expertise.
Because just like you, they want to stay competitive and provide the best
services at the best possible price.
 Risks of Outsourced Services
Loss of control. Many companies are afraid of losing control over the tasks
that they’ve decided to outsource. However, a good service provider will
stay in touch with your team to provide you with up-to-date information and
allow you to maintain a healthy level of control over the process.
Hidden costs. Outsourcing costs vary between different activities. You
might pay for integration, only then to realize that you need someone to
administer the new system. To avoid unexpected spendings, make sure to
calculate every possible cost with your outsourced partner. 
Low quality. This is probably one of the biggest concerns many companies
have when it comes to outsourcing. While they might not have enough in-
house resources and knowledge to solve existing problems they still believe
that most of the outsourcing companies provide low-quality services. If you
do your research and delegate your tasks to a reliable service provider that
owns specific skills and enables continuous quality assurance, you are likely
to get better end results. 
Why and When Should You Outsource?
The best way to understand whether outsourcing is a
good option for you is to analyze your current business
state and compare the cost and time spent on different
options. Calculate how much it will cost to complete
the task with the help of internal vs. outsourced
resources. Identify whether it’s a one-time job or it’s a
long-term goal that requires continuous support.

If you decide that outsourcing is the most cost-

effective solution for your business, make sure to have
clear goals and deadlines in mind. The better you
explain your needs to the partners, the better results
you get.
What Services Can Be Outsourced?
Sales Operations
Customer Relationship Management
Marketing Automation
 A Strategic Outsourcing Process:
A technology-enabled market
Outsourcing provides access to a highly-skilled global workforce,
which can supply a wide array of services. To leverage these services
effectively and benefit from lower operational costs and higher
service levels, there are several business models to choose from.
These are -
Staff augmentation
This model provides specialized resources, cost flexibility and
satisfies short-term time-to-market demands.
Out-tasking
This model is suitable for short-term business needs, to fill skill gaps.
However, the integration of different out-tasked outcomes may not be
a seamless one.
Project-based outsourcing
Vendors and clients share risks and rewards through this
collaborative model. This model has high client benefits as
it holds the vendor accountable for an entire project, and
allows the application of industry best practices in the
outsourcing process.
On the other hand, working from project-to-project is a
piecemeal approach to outsourcing. A more consolidated
view of the outsourcing initiative is required, within a
unified governance framework. This is provided by the
multi-year managed services model
Managed services model
Making complex decisions to obtain desired business
outcomes requires a high level of sourcing maturity. It
involves an understanding of factors that influence
who should outsource, to whom, why, where and
when.
These partnerships allow the sharing of risks and
rewards, encourage innovation, embrace business
change and contribute significantly to the strategic
goals of both partners.