The key to outsourcing success: selecting the right partner
Choosing a good partner is crucial to the success of any outsourcing initiative. In some ways, it can be like a marriage. You look for a partner that complements you, that brings something different to the table, but who you can also trust and grow with. As mentioned in our last outsourcing article, planning and having a clear goal of what you want to achieve through that partnership is an important part of the process. Usually, once you know the activities to outsource and why, you can then start looking for a partner that suits your needs.
Ideally, you would know your requirements or specifications in advance to help you in your search for a vendor. For example, when you outsource office cleaning, you know from experience the size of the area that needs cleaning, the frequency you need cleaning and the approximate hours it takes to do a full cleaning. If you’ve done market research, you’d also know how much it costs.
However, if you are outsourcing for product development or in a new area of expertise, you may need to spend more time on research to understand the industry. A Request for Information (RFI) can help you to learn what suppliers are out there and what services are available. A non-disclosure agreement is crucial at this stage to protect both sides as you explore your options.
Once you know the market better, you can shortlist potential vendors as part of a Request for Proposal (RFP) so that you can focus on the main skills or deliverables they can provide. As you evaluate the proposals, take care to look beyond just price. Consider intangibles such as their value offering, business outlook and reputation, as this can be just as important as the purchase price. Compromising on quality for cost brings risk in the long term and may cause performance issues or other costly problems.
Negotiating a clear service level agreement (SLA) that addresses hidden fees can protect your company from unforeseen risks that may arise over time. A good due diligence exercise will help you uncover any performance gaps or potential flashpoints. What is their reputation? Check their references as well as any social media flags. How do they address customer service queries? Have they shown any reliability or performance issues? What is their long-term business outlook? Doing your homework will not only help you choose the best offer but also highlight any considerations that need to be reflected in the final outsourcing agreement.
Outsourcing business processes often means sharing systems and data, which opens space for data protection risks. Simply relying on third-party providers, even if they are well-known for their privacy expertise, is not enough. So you must understand what kind of data security measures they have in place, how data flows, how the processing of such information is controlled, and if they have a solid data protection strategy in place. Assessing any data protection risks and agreeing on a plan to mitigate those risks is critical.
In addition to following GDPR (General Data Protection) rules, ensure you have an Intellectual Property or Privacy agreement, as well as a well-written confidentiality agreement.
If you don’t understand and systematically address all of these risks and challenges, you may face unnecessary exposure, fail to achieve your outsourcing goals, and even lose investments of time and money. When well done, selecting the right outsourcing partner will increase your chances of a successful collaboration. By benchmarking the offerings and doing good research, you can protect your company from hidden costs, potential performance issues or other latent risks.
How can Logan and Partners help?
Getting good legal advice during the selection phase can help mitigate exposures and ensure you have a good due diligence in place. For more information on how we can help you with your business outsourcing, please contact Jana King Allen and schedule a free 20-minute consultation.