Outsourcing Issues to Consider: Everything You Need to Know

Protect yourself by ensuring the contract with the outsourcing company covering many potential scenarios.3 min read

The top 4 outsourcing issues to consider are:

  1. Understanding Decision Rights and Post-Contract Processes
  2. Lack of Buy-in from Senior Client Leaders
  3. Poor Mutual Understanding
  4. Inadequate Client-Retained Team

The Top 4 Problems with Outsourcing Implementation

1) Understanding Decision Rights and Post-Contract Processes: In many cases, service providers and clients are underprepared to begin working together after signing the contract. This could lead to issues like stalled implementation of activities, staff frustration, and a delayed schedule for achieving business benefits. The new decision rights and processes must be carefully communicated to the appropriate stakeholders within both the service provider and client organizations.

2) Lack of Buy-in from Senior Client Leaders: If client leaders are not fully on board, this could lead to resistance to the outsourcing model. If leaders do not receive communications regarding the status of outsourcing or participate actively in outsourcing evaluation, they may be unprepared.

3) Poor Mutual Understanding: Once a contract is signed, both the service provider and client have staff who will be tasked with managing initial implementation as well as ongoing operations. On the client side, staff may just be learning the details of the agreement and may feel skeptical toward outsourcing, while on the service provider side, team members may not fully understand the details of the new agreement.

4) Inadequate Client-Retained Team: If the client-retained team is too small or even nonexistent, there are likely to be issues with implementation. Clients can put off decision-making around the retained team for reasons like:

  • Exclusive focus on negotiating the terms of the contract, with few resources allocated to post-contract issues.
  • Clients expect they can essentially "wash their hands" of management responsibilities once the service provider takes over.
  • Clients want to postpone decision-making until they are sure about how the outsourcing agreement works.

Actions to Mitigate the Top 4 Problems

Understanding Rights and Processes: You must adequately prioritize resources for designing new processes.

Engaging with Leaders: Create a dialogue between the client and service provider. This will help build mutual understanding and buy-in. For example, the service provider executive who is responsible for delivering outsourcing services should meet with the business unit lead and the client sponsor.