Entrepreneurs and small businesspeople are always looking for creative
ways to accomplish more of their business goals for less money. One
strategy that can help you save time, money and frustration as you
start and build your business is to outsource as much work as possible
to skilled, but cost-effective, external service providers.

Paul Horowitz is the lead outsourcing manager for PricewaterhouseCoopers LLP and has some great suggestions you should take into consideration before outsourcing any “Work for Work’s Sake”. They are focused around outsourcing technology, but are applicable in many other outsourcing scenarios.

1. Have an exit strategy. Think through what will happen in the event things don’t work out. There could be an operations change, acquisition, financial instability, a shift in business models or other changes — at your firm or the vendor’s. The contract should spell out how a transition would be handled if the work is brought back in-house or handed off to another vendor. It should cover as many what-if scenarios as possible.

2. Meet the account team. Often, business managers are wowed by a vendor’s sales staff, but they don’t meet the person who will be running the project on a day-to-day basis. The contract should include the names of the top three to five employees on the account, how much of their time will be dedicated to your work, and under what conditions their assignments can be changed. Meet the account employees in person and find out about their skills, expertise in your industry and comfort with the technical environment they’ll be working in.

3. Don’t breeze through reference checks. Do more than a cursory check of three referrals. Mr. Horowitz encourages clients to ask for at least 10 references — and to choose those most aligned with their industry or particular needs. Find out what worked about the relationship and what didn’t.

4. Don’t fall in love with one vendor. It’s a good idea to have a second choice — and let the first-choice vendor know that if the deal doesn’t work out, you have a backup. Likewise, let your second choice know that it’s next up should something go awry. Getting into renegotiations at the last minute “puts you in a huge position of weakness,” he says.

5. Be prepared for “scope creep.” This is the gradual introduction of requirements that weren’t part of a project’s initial planning. To minimize it, make sure there is as much clarity as possible around the scope of a service. The contract also should include arrangements for covering additional work, including the need for the vendor and client to agree to the dollar-per-hour charge and the number of hours needed. It’s also a good idea to include an arrangement for an arbitrator to resolve any disputes.

6. Have a plan for disclosing any outsourcing decision to employees. A vendor should be able to help you design a strategy to explain the reasons for the change well before the work is taken outside. Some firms keep the move under wraps for fear of a mass exodus. But often, employees quit en masse when they learn outsourcing has been in the works for months because they feel betrayed.

7. Find out how your data will be protected. Your vendor should have the same kind of security policies and procedures that you follow at your own firm — including information-security audits, physical controls in the workplace and employee-background checks. Learn whether a vendor may expose customer data or your firm’s intellectual property to another vendor, such as one outside the U.S. that may not have the level of security that you would want.

8. Don’t choose a vendor based solely on price. Though it might be tempting, never select a vendor based solely on price. Experienced buyers who have outsourced many projects and evaluated hundreds of proposals almost always recommend discarding the highest-priced and lowest-priced bid. Buyers report that their most successful projects are the ones where they felt the vendor offered a balance of good value and quality results.

9. Start small. When engaging with a service provider for the first time, start with a project that is relatively small and simple in scope. This will give you a better idea of the provider’s style and capabilities before you entrust a “mission critical” project to them.

10. Don’t forget about support after the project is complete. For technology projects, it’s a good idea to specify a warranty or support clause so that you are assured of some amount of continuing support from the vendor after the project is complete. It’s much easer to negotiate a support clause before the service provider begins work, rather than after the completion of the project. Even creative or business services can benefit from a support clause. Suppose you need some changes to a business plan based on feedback that you get from potential investors. Or maybe you find that you need that snazzy new logo delivered in a new type of file format. Specifying some amount of free support or negotiating discounted prices for future modifications can save you time, money and headaches later on.Technorati Tags: , ,