Balancing the Outsourcing Equation
Business managers are often faced with the dilemma of making a choice between a
professional BPO Company and an in-house team to take care of their projects.
Typically, the very first question that arises in their minds may be ‘Which services (if
any) are to be outsourced.’ Before making a decision, they should be clear on which
option is more profitable, the cost of running that service in-house or outsourcing it
to reliable partner --- provided the quality of the service remains outstanding in both
Evaluating In-house and Outsourcing Costs
To get a clear picture regarding the cost, evaluation should be done by applying the
same set of specifications to both internal and external services. This principle can
also be applied when evaluating supplier catalogues. Organizations use evidencebased measurement and price/performance comparison to assess the functionality of
their IT departments. This helps them to understand where price cuts can be made
or improvements can be achieved.
You may come to a decision as regards outsourcing vs. carrying out the tasks inhouse by comparing the data obtained based on the cost factor alone. However, it is
very important to understand that cheap services are very likely going to be of a
lower quality, less efficient and end up costing more in the long run. The right step
would be to evaluate the cost in terms of performance – consider whether the pricing
is affordable taking into consideration the quality of service.
When Selecting a Service Provider
You must be vigilant on certain factors, when selecting a service provider. Here are
some questions to ask when looking for a reliable outsourcing partner:
What can be expected from the supplier?
How to approach a supplier?
How to ensure the service provided is worth the amount you pay?
How to make sure whether the contract or service level agreement (SLA) is
In case you already have a service provider and they are approaching you for service
renewal, then consider factors such as whether their service delivery still match up to
SLA promises, whether the prices are still competitive, whether they are proactive in
introducing technological innovations, and whether they are still listening to and
responding to your needs. It is advisable to look for another option if your provider is
working on obsolete systems or offering low quality services.
How can you figure out whether the services you are hiring are really worthwhile for
the cost you expend on them? Here are some guidelines.
• Look for service catalogues that include itemized costs, which will help you
have a clear idea of what is available, assess what you actually need and
Outsourcing services must be transparent in all aspects. Typically, these
services are priced on the basis of five factors:
Quality of Service
Why Outsourcing May Prove Costly
If you feel that your provider’s services are overpriced, there may be reasons for the
• Many outsourcers rely heavily on low cost support centers located in
India or Eastern Europe to contain costs. However, increased labor
cost in these locations has led to a corresponding increase in the
service providers’ costs. Another factor that has an impact on pricing is
infrastructure complexity, with many organizations working with a
combination of legacy standalone systems and newer applications (like
ERP) to handle operations. Linking all of these together is rather
complex and can prove costly.
You may have opted for round-the-clock support that is not always
necessary. If you are outsourcing non-core back office tasks, you
surely do not require 24/7 support. Usually, service providers may not
specifically point out this fact to you. Anyway, you must review the
service levels you need and make orders accordingly, to obtain full
value for the money you pay.
What Outsourcers Can Do to Ensure Transparency
Outsourcers can take a proactive approach when dealing with their customers, by
guiding them on where they can save. They should make SLAs transparent and
produce easy-to-navigate, clearly-priced service catalogues, which can create an
environment of trust and cooperation between the customer and the service
provider. It is a welcome move on the part of some service providers who take the
effort to understand their clients’ businesses more thoroughly and rise to the level of
a partner or expert advisor by providing constructive business recommendations.
Professional BPO companies should have the capability to gain a deeper
understanding of their customers’ servicing needs, and provide the right counsel. A
dedicated and reliable outsourcing company can prove to be a pillar of support to
organizations looking to improve performance while controlling costs. Moreover, the
awareness that their outsourcing partner has their best interests in mind is surely
the number one reason that will encourage organizations to outsource.