The best Outsourcing Readiness checklist in 2021

In outsourcing, much like in life, a successful relation needs preparation.

She said yes … and they lived happily ever after. If a successful marriage could be achieved by simply signing a certificate or taking a vow, divorce wouldn’t exist. But this is not a story about marriage, it’s a story about outsourcing. What’s the connection? Similarly, a contract alone does not guarantee success when a client engages with a remote team in an outsourcing arrangement. In both cases, you should be ready for this step and know your partner better.

Outsourcing can come with its risks, much like everything else in the world, as we stated in an earlier post- 2020 Pros and Cons of Software Development Outsourcing. The good news is that it’s a risk that can be either diminished or at least controlled. So, a decent level of preparedness for this process is not only desirable but highly recommended. Outsourcing readiness assessment puts a zoom in on your objectives, tools and resources in order for you to grasp the full benefits of embarking on an IT outsourcing journey.

Why Outsourcing Readiness Assessment is crucial

Motivated by the well-known benefits of outsourcing (workforce savings, access to highly skilled resources, scalability) many organizations start this process with high expectations. But usually, they are not ready for outsourcing from a strategic and operational perspective, so the benefits might not be as relevant as anticipated. That is why we recommend an Outsourcing Readiness Assessment before starting any partner selection and negotiation. Whether we are talking about BPO, nearshoring or dedicated software development teams.

Outsourcing is a strategic initiative that needs proper preparation to be successful. The failure rate in IT outsourcing projects is moderated but exists. Dun & Bradstreet’s Barometer of Global Outsourcing states that “20 to 25% of all outsourcing relationships fail within two years”. Causes? According to PMI’s Pulse of the Profession , the global survey of project management practitioners, strategic projects fail due to a lack of clearly defined objectives and milestones to measure progress (37%) followed by poor communication (19%), employees resistance, insufficient funding, etc.

But that doesn’t stop the market. According to Flexera 2020 State of Tech Spend 51.5% of companies with 1.000-10.000 employees are planning to increase their use of outsourcing or outsource for the first time (24.5% average value for the entire market).

Readiness checklist

Outsourcing Readiness Assessment helps your business evaluate the status quo and prepare the work environment for collaborating with external contractors or remote teams. Such assessment involves a checklist with strategic, operational, and technical elements. You have to consider all this before starting an outsourcing initiative:

General Objectives: Have you defined some key objectives for this strategic move? What do you intend to obtain: faster development, higher quality, cost reduction?

Financial Goals: Have you determined the financial projection of the outsourcing decision? Is it based on anticipated or targeted cost/benefits?

Dependencies: How complex is the process that you plan to outsource and what is the risk of not having full control over this process. Do you have a smaller project to conduct a pilot test?

Time frame and deadlines: Do you have time limits for this project?

Risks versus Benefits: Have you methodically evaluated the risks involved and related mitigation actions? What are the risks of keeping this process internal versus outsourcing it? Are you sure that an external contractor is capable of doing it faster, better, or cheaper?

Rollback plan: How easy is it to roll back the process if the outsourcing plan is not delivering the expected benefits?  

Limitations: Do you evaluate any limitations due to: GDPR and use of sensitive data , cybersecurity, internet latency, etc. 

Workforce Analysis: Have you conducted a workforce analysis by job category for  outsourcing scenarios? 

Cultural/organizational/geographical alignment: Have you formally assessed your organizational and cultural readiness for your sourcing initiative? What are your expectations in terms of time zone, language skills, travel distances?

Partner selection: Have you set the criteria for the selection process?

Alternatives: Have you established an alternative scenario like hiring or training the required staff, partial outsourcing, phased outsourcing?

Support: Have you identified the necessary tools to support the outsourcing process? (tracking, ticketing, etc)

Evaluate SLA: Do you have the capacity to evaluate the Service Level Agreement to be signed with an external contractor?

Transition: Have you documented a transition plan? How long do you think this process will take?

Governance: Have you prepared yourself to manage the new setup, with an appropriate team within your company, as well as from the outsourcing partner?

Communications: What communication channels do you plan to set up and use in relation with contractors for information and knowledge sharing?

As you can see, there are a lot of aspects an organization should evaluate and prepare in order to deploy a successful outsourcing process. Moving forward without having answers to all these questions is a risk for all parties involved. Nevertheless, hundreds of organizations from all over the globe harness the benefits of outsourcing, from software development to dedicated teams, maintenance and support.

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