Outsource definition
A contractual relationship for the provision of business services by an external provider
Reasons for outsourcing (6):
- Financial savings
- Strategic focus
- Access to advanced technology
- Improved service levels
- Access to specialized expertise
- Organizational politics
Financial savings of outsourcing (3):
- Economies of scale from specialized firms who are more efficient at a given task/service
- Cost control
- Decreased capital commitments
Strategic focus relating to outsourcing
outsource non-corecompetencies (secondary functions)
Why use specialized experts?
- outsource to someone who can do it better than you
- experts understand the complex laws and regulations required in HR
- use of experts reduces the ricks and liabilities of an org.
- access to best practices
What are some outsourcing Risks and limitations?
Questions to consider:
Are the anticipated benefits realized?
What are the risks to service levels
What is the effect on employee morale?
Does outsourcing reduce the value of the organization?
Projected benefits vs actual benefits:
- not as cost effective and problem free as expected
- 50 percent found that it was more expensive to outsource
- Incompatible systems and client demands are the reason for excessive costs.
- About 30% of outsourcing contracts not renewed
Service risks with outsourcing(2):
- Contractual arrangements dictate services provided
2. Disruption of service could pose challenges to LR with outsourced org
What does hollow out mean?
Almost everything is outsourced
how do you select a vendor?
- inform staff
- prepare a request for proposal
- invite internal and external bids
- establish a team to evaluate these bids
Negotiate the contract
- customize and negotiate the outsourcing contract
- set performance standards or penalty clauses for outsourcing company
- establish benchmarks for service expectations
- response time, response cost, customer satisfaction ratings
