Vendor Centric Blog

Six Tips to Reduce Risk When Outsourcing Key Activities to a Vendor

November 22, 2016

Outsourcing an important component of your business operations is a high risk activity. There are many things that can go wrong along the way, and there is no one-size-fits-all. However, a successful outsourcing initiative can provide scalability, expertise and cost control that you cannot get otherwise.

 

If you’re considering outsourcing an area of operations, here are six things to keep in mind to ensure success.

 

 

1. Get Clarity on Why You Are Outsourcing - and Make Sure You’re Ready

 

Organizations decide to outsource for a variety of reasons. Cost, scalability, expertise and geographic reach are just some of the reasons why. But you'd be surprised at how many organizations decide to get into outsourcing without clarity on why. Outsourcing is a long-term solution, so take time to do it right. Start by conducting a risk and readiness assessment to document and validate your business objectives and, just as importantly, ensure your organization is really ready to make the move.

 

2. Gain Commitment and Buy-In

 

Successful outsourcing projects are led by executives who understand and support the initiative, and who work with other stakeholders to share the vision and gain buy-in. In many cases, this won't be easy. So it's really important to establish and communicate a clear vision, and support it with actual data and business rationale. Some people may resist initially, but if the decision is based on sound business principals it'll make it much harder to fight the change.

 

3. Fix Broken Processes First

 

I strongly recommend against outsourcing ineffective activities hoping that, once they are outsourced, they will be repaired. Chances are high that they’ll not only remain broken, they will be miles away from your control. You must fix the problems first, either on your own or in a pre-engagement with your outsourcing vendor. Your outsourcing initiative has a significantly higher chance of success if you hit the ground running with an efficient set of processes.

 

4. Perform a Thorough Vendor Selection

 

Take your time to select a vendor based on more than just cost. This relationship is going to be a key, ongoing part of your operations. You need to make sure your partner is in a good place to support you over the long haul. Perform thorough due diligence and look carefully at factors like references, synergy, scalability, project and account management, financial stability and flexibility. And be prepared to test-drive the process; it is critical that the vendor's complete program integrates and works well for your organization.

 

5. Build First Class Teams

 

Create internal teams to support the initial vendor selection and, as importantly, the onboarding and integration of your new outsourcing vendor. That’s where the rubber meets the road. The Vendor Onboarding and Integration Team must continue to focus on the business vision while also managing change, relationships and, of course, results. The team will be responsible for the success of the outsourcing initiative, so make sure you have assembled a results-driven team that will get the job done right.

 

6. Communicate

 

Perhaps the 'glue' that holds the entire initiative together is communication. It's where success can be had, or where everything can fall apart. While communication to gain buy-in sets the stage, ongoing communication during and after the transition is what will drive success. Share the plan, report on progress and do not hide failures. Communicate frequently and transparently, and you'll be surprised at just how quickly you can enjoy the benefits of a successful vendor outsourcing project.

 

 

 

Tom is Founder & CEO of Vendor Centric, a consulting firm that helps organizations adopt a risk-based approach to vendor management.  Connect with Tom on LinkedIn or drop him a note at trogers@vendorcentric.com.

 

 

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