According to top IT spenders in Australia, there are almost 75% of organizations that have already outsourced some of their software applications, while there are 85% who have outsourced technology infrastructure. These numbers are likely to be increase in coming years. Reason being, outsourcing provides resources, reduction in production costs and promptness in augmenting the business output with respect to demands.
Owing to the technology advancement in 2013, analysts have predicted that Australian IT organizations will become more vigilant about outsourcing their IT staff, and will be more careful on the services they choose to outsource. But, often in an attempt of getting quality services, firms end up encountering poor outsourcing clichés. Hence, for reaping the benefits offered by outsourcing, there are some gaffes that one should avoid.
How to Avoid Outsourcing Blunders
Do not Bargain for Low Price
Although the beauty of outsourcing IT services offers you the cost-effective solutions, but one should never keep on bargaining for lowest price. As said by Gartner’s research Vice-President, if the project deal is too cheap, the services rendered will have minimum to no quality level. Such services will come in inflexible conditions and with rigid working conditions.
Also, if the cost for your project is low-priced, possibilities are that your project may be delayed. It is because delays are inevitable when the price is low (in most of the cases, yes it is). To keep the outsourcing dealer motivated and keen on project delivery, there has to be some logical money that one is making out of your deal. So, if you want to enhance your resources and technology, avoid bargaining for low price.
Give Importance to Relationship Management
Signing the outsourcing deal with the vendor is not just enough for getting the required services. It is the part of the vendor’s job to be in constant touch with their clients. They try to develop a friendly connection with you, hoping for long-term business relationship. So, in this case give importance to relationship management.
Issues have potential to escalate much faster when both the parties have great relationship management. Intelligent Business Research Services (IBRS) shares his advice that suppliers always allot a skilled and troubleshooter individual to the contractors. This individual is the part of higher management team, who takes care of all the fall-outs and provides immediate negotiable solutions. So, give importance to relationship management for the success of your project.
Provide Cohesive Effort
Often, when you outsource the business requirement from new supplier, you encounter major changes in working operations. As you are well-acquainted with your previous supplier, dealing with the new one often becomes troublesome. Some are very quick to adopt this change in outsourcing model, but some experience tough time in dealing. And, the cases are you end up with undesirable and degraded project quality.
Reason can be anything, lack of communication, transparency, non-compliance, or support. So, in order to have smooth transition, you need to be backed by cohesive efforts. Especially in the initial phases of your project, you have to be positive and firm in making decision for your deal.
Leverage the Penalty Option for Insignificance
It is very essential to strike the right balance between your power and supplier’s level of work. You have the power for charging the penalties for poor or degrade work performances by your supplier. There are times, when contractors are forced to accept the low-level project results from the suppliers. And, accepting such work is the biggest blunder of outsourcing.
Hence, you can leverage the penalty option for insignificance performance by the vendors. It has to be relatively harsh, so that the suppliers actually address your problem rather than just paying you up. Moreover, it has found that penalty of 10-20% of the monthly fee make sure that your project has quick remedial action.
Avoid contract being too long or too short
Outsourcing contract is neither a short-time fling nor a long-term marriage contract. Hence, determine the optimum length of your contract. Long-term deals offer major discounts, but with this come the risk of being locked for too long with one such supplier. Also, change of supplier will bring overhead costs and will possibly hinder the flow of business. However, rolling contracts with the base of three-four years is answer for many contractors. Your deal must include the flexible terms and conditions, allowing you to part ways if circumstances are unfavorable.
Following these guidelines, an Australian firm can ensure flawless outsourcing activity. As predicted by analysts, the Australian outsourcing will increase by 8 billion dollar by 2013. Hence, owing to this, it is important for you to avoid above such blunders for enjoying the leverages offered by outsourcing business.