You’re the IT Business partner for one of the largest multinational insurance companies in the world. Your responsibility is to interface with business units and advise them on current and emerging technologies as possible solutions for, among others, product development, managing risk, and service management.
The heads of some business units are wondering why some product launches have been delayed for several months, following the committed launch dates for each product by the IT Department. You’ve been tasked by your boss to submit a proposal on how to improve the process. In your previous job, you’ve worked with Illumisoft for an outsourced job. You have an inkling that part of the issues in your current company could be addressed by outsourcing. But you need to come up with a sound report for your boss. What does outsourcing entail?
Here are a few things to consider:
An Overview of Business Process Outsourcing in America
To gain efficiency and save cost, companies are now hiring third-party vendors to take care of business activities that otherwise would have been handled by the company internally. BPO in America generated $126 billion in revenue as of October 2018. Nearly 156,300 businesses across the country are employing more than one million people.
Before you go external, you need to look first internally and determine your processes and where the bottleneck lies. Here are some checkpoints to consider when deciding to outsource parts of your business operation:
- Analysis of benefits. Your finance department or your chief executive officer might shoot down the idea even before you’re done on your drawing board. The aversion is that it will be an additional cost to the already growing cost of operation. You must provide an analysis of the benefits, dollar for dollar and hour for hour. Efficiency is time saved. Saved time becomes a resource for other revenue-generating or capacity building activities. You need to emphasize the importance of this point, and ultimately how it translates into savings in dollars.
- Decide what to outsource. Project implementation is delayed because personnel onboarding, which includes recruitment of the right talents, takes a long time. It pushes project timelines to a month or more. If the project is, for example, an e-commerce website for a specific product, this might be the type of project which you could outsource. You will not be bogged down by recruitment or training people. It’s a matter of signing a contract, communicating the requirements, and agreeing on the terms with third-party vendors. If the projects from the business require, for example, specialized software that the IT team does not have expertise on, it might be wise to outsource them.
- Vet your vendors. Hire the service provider based on the requirements that you have identified. If you need an outfit that has expertise in .Net and Phyton, get those. Don’t be conned by vendors that say, “We don’t have that capacity right now, but we’re certain we can get them if you hire us.” This raises red flags all over. Vet your vendors properly.
- Strategy for knowledge transfer. If you’re outsourcing your website, which includes customer information intake or payment system, make sure that you’re clear on how you’re going to gain the knowledge from the third-party vendor to manage the system they developed, once the project is completed. You must be able to control and have ownership of the system when it becomes part of the “business as usual” or BAU operation of the company. One strategy is to embed your personnel in the vendor’s project team. Another is to include a caveat of the post-completion project service clause.
Your research needs to be substantial in terms of identifying the operation or activities you want to be outsourced. But your analysis of possible vendors must be equally thorough.
