Top 10 Outsourcing Best Practices

Posted by Kevin Brady on Thu 5th February 2009 at 11:26 PM, Filed in Outsourcing

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Business is always looking for new ways to accomplish more for less money. One strategy that can help achieve this is outsourcing as much work as possible to skilled, but cost-effective external offshore providers.

Over the years my outsourcing experience has brought me face to face with many outsourcing clients who have successfully outsourced projects as diverse as business process outsourcing, and general software design and development.

When I talk to clients who have mastered the art of effectively managing external service providers, the same themes emerge over and over again. I’ve distilled their advice into the following “Top 10 Best Practices” for working with external service providers. Following this advice can help you get the most out of your relationships with external vendors or contractors.

1. Clearly define the scope and schedule for your project

Define your project requirements up front. Service providers need accurate, complete information to present you with realistic proposals and to quote you a good fixed price deal.  Give vendors as much information as you can about what you need delivered and the way in which you need the work done. Also, be clear and realistic about your schedule requirements - project schedules can have a huge impact on project costs.

2. Conduct due diligence on your service provider

When you’re evaluating proposals from service providers, don’t be afraid to ask questions.  Check their references and ask for feedback from other clients who have used their services. Engage in a dialog – if you have any concerns about a vendor’s specific capabilities, voice your concerns. I have produced a comprehensive “Due Diligence Check List”“Due Diligence Check List”
3. Look for specific best fit expertise

Make sure your service provider has the specific experience your project requires. You don’t want to be somebody’s experiment. This is especially crucial when outsourcing complex software development projects. For example, if you’re looking for someone to develop a website, make sure they’ve actually completed commercial projects using XHTML /CSS /PHP and Java for example.

4. Don’t choose a vendor based solely on price

Experienced outsource buyers who evaluate 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.

5. Review portfolios and samples

Examine the vendor’s previous work (their “portfolio”) and make sure that their previous work meets your expectations for quality and style. If you’ve evaluated a vendor’s portfolio, references and previous experience and are still unsure of their capabilities, consider asking them to do a quick mock-up or provide a basic outline of a work plan. A service provider who really wants to win your business might be able to give you a rough concept so you can better understand their approach to solving your problem. But never cross the line between asking for a mock-up and insisting that a vendor provide you with finished work “on spec.” No qualified professional expects to work for free.

6. 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.

7. Tie payment to clearly defined project milestones

Just as you should be clear about project scope, make sure that you define a work plan for your outsourced project with clearly defined milestones. Having scheduled checkpoints where you review the status of the project as it works toward completion—is an easy way to ensure that you meet your final deadline and that the final product meets your standards. Tie the vendor’s payment to these milestones. A good guideline for IT and software development projects is to pay no more than 20% to 30% of the total project price up front, with the rest of the payments awarded based on the completion of 3 or 4 milestones.

8. Negotiate ownership of work up front

For any type of outsourced project, make sure that you are clear about who owns the resulting work product and any important components of that product. Make sure the service provider understands how you intend to use the deliverables that they are agreeing to provide. For example, the development of a custom software application for your personal use would be substantially different from the development an application that you intend to package and re-sell.

9. Make sure your project is supported once 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.

10. Get it in writing

During the course of a service engagement, the scope of the project, deliverables or even the agreed upon price may change. Make sure that you clearly communicate any schedule, scope or payment changes to your service provider and get confirmation from them - in writing - that they understand and agree to the changes. Similarly, keep a record of any agreement changes requested by the service provider and whether you accept or reject those modifications. Save copies of any email exchanges that you have.

Hope this helps? If anyone out there has additional tips to share then please comment below. 

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READER COMMENTS:

The category above mention are very accurate and relevant to all aspiring graduates who wishes and having a plan on applying in the field of Outsourcing.

Posted by barkley4  on Fri 6th February 2009 at 11:24 AM | #

Thanks for the comment. Outsourcing has a huge and exacting management overhead. Ignore this and you should be prepared to loose your shirt smile

Posted by Kevin Brady  on Sat 14th February 2009 at 04:43 PM | #

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