How Not To Fail: IT Outsourcing Essentials

QArea Team by QArea Team on March 18, 2016

How Not To Fail: IT Outsourcing Essentials

Where to begin with

A lot of small and large businesses worldwide are using outsourcing because it minimizes time-to-market, reduces costs, provides additional resources, and gives access to the most skilled specialists. In other words, it brings them success and confidence. However, if you do it without preparation, outsourcing can be somewhat risky and bumpy. So here is our expert guide on IT outsourcing to make it 100% safe and effective:

  • You need to know what you are going to outsource first, to define your outsourcing priority. Deciding to outsource is not enough. You need to know what resources and processes are most required now and what exactly fits your outsourcing needs.
  • Depending on your requirements and purposes, you need to find the most appropriate outsourcing provider, checking the resources, security, and infrastructure the company provides.
  • Research the company’s track record to ensure it is reliable enough to satisfy your demands.
  • Before you hire an outsourcing provider, make sure it possesses enough resources and capabilities to accomplish everything written in the agreement.

How to choose a qualified outsourcing partner

Selecting an outsourcing partner is a challenging and responsible task which calls for a lot of meticulous research. Multiple factors should be taken into account :

  • Before choosing an outsourcing partner, define what you need outsourcing for (whether to cut costs, obtain resources which are not available in your company, boost quality, or increase revenue). You need to select the vendor and plan your outsourcing project depending on the main objectives.
  • Choose the right country to outsource to, depending on various factors (costs, customers, transportation, communication, risks).
  • When choosing an outsourcing partner, taking into account security factors is of paramount importance, especially when dealing with sensitive data.
  • The outsourcing provider should have additional resources and capabilities which you are lacking in-house and which you are actually looking for.
  • The customer track record. To ensure the vendor is reliable, learn about the previous vendor’s clients and find out whether the clients were satisfied with the quality the vendor provided.
  • The outsourcing company should be able to provide you with the pricing model which will suit you in the best way and provide you with the best cost reduction opportunities.

IT Outsourcing - Legal aspects of outsourcing Essentials

Legal aspects of outsourcing

All the legal aspects should be carefully discussed and agreed upon before the cooperation starts. Here are some of the key legal aspects worth considering:

  • Scope of the services to be delivered. Here the customer describes in as much detail as possible what services he/she expects the provider to deliver, what are the criteria by which the work would be assessed, and what are the Key Performance Indicators. The more specific this information is, the more accurately can the output quality be measured. The customer should also take into account any changes that may emerge and ensure the contract covers the possibility of such changes and ways to handle them efficiently.
  • Ownership rights. It is necessary for the parties to define and divide ownership rights for the Intellectual Property assets before the outsourcing starts. Another crucial issue which needs discussion and agreement upon is determining ownership rights for the Intellectual Property developed during the cooperation.
  • Force Majeure (mostly, natural disasters) may suspend the activity, and in this case a party is liberated from liability. They generally cover one to two months.
  • Term of the Contract. An optimal period during which the outsourcing services are provided. It may also include the termination rights allowing one of the Parties to end the agreement prematurely. The contract should also include the provisions covering cooperation of the Parties upon the termination of the agreement to ensure successful transition of the operations.
  • Assurances that the provider will deliver the services in correspondence with the standards of quality as described in the agreement, and that liabilities are incurred by the provider if the services are not delivered or are delivered inadequately.
  • Pricing. You should negotiate various pricing models, choose the most appropriate one, and discuss all the details of the pricing charged for the services, including what is included in the pricing scheme and what should be paid additionally.
  • Client’s obligations. The contract should include what is demanded from the client for successful and effective cooperation.
  • Employment Issues. The client may want to have some control over who provides the services and may want to replace this employee in case the standards are not met. Such a need should be anticipated.
  • The contract should also include provisions covering confidentiality and data protection.

IT Outsourcing - Essential outsourcing questions and answers

List of questions you would want to ask a potential partner:

Here are some of the questions, answers to which will provide you with more clear understanding of whether the outsourcing provider will make a good partner for your business:

  1. What are your special skills and resources? If you want to outsource, you are most likely looking for resources and capabilities you are lacking in-house. To ensure future cooperation will turn out beneficial for you, make sure the outsourcing provider possesses the special skills and resources which will fit you.
  2. What is your track record? Who are your previous clients? What is their feedback? To ensure the provider is reliable and can deliver an adequate client satisfaction level, learn about the company’s track record. Ask about the previous clients and ask to provide a few of the most recent references.
  3. What are your successful projects? The answer to this question will help you understand what the provider’s idea of a successful project is and what their criteria for success are.
  4. What is your financial state? Successful business cooperation calls for a stable financial position of the outsourcing provider.
  5. Do you have a transition plan to transfer our processes seamlessly and smoothly? The transition process, which takes place before the outsourcing starts and after it finishes, is an indispensable part of effective operation of your business both during your cooperation and afterwards.
  6. What pricing models can you offer? Different pricing models fit specific types of businesses and projects.
  7. What is your confidential information policy? Security of your data is something which is of paramount importance and can’t be compromised.
  8. What is your management plan? How are you going to manage the resources and mitigate risks?
  9. Which of our problems can you help us to solve? How can you do this? This will tell you how well the outsourcing provider understands the peculiarities of your business and what practical solutions to your problems they can offer you.
  10. How flexible are you? Can you fit my specific purposes?
  11. Ask them to ask you questions. The right outsourcing partner will ask questions showing interest in your particular business. The questions the company will ask will show if the company is interested in your business, has enough expertise in your sphere to ask the right questions, and if you generally share the same goals and visions.
  12. What makes the company different from other outsourcing companies? What are your values and priorities? IT outsourcing is not only about processes and products, it is mostly about people and ideas. You need to share the same business values and priorities. And the best way to learn about those values is to ask about them.

Using all the provided info will help you to make a well-informed choice, ensuring secure, successful and viable business partnership.

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