Outsourcing – Think it Through

There is a lot to consider when deciding to start or stop outsourcing a data and documents workflow. In the next paragraphs, I’ll share my observations gathered over time providing workflow automation.

Starting with the basics, it is critical that you understand the nuances of the workflow.  You won’t get what you need from your vendor unless you know what you need.  Someone on your staff has been doing or managing the work and they will be your resource.  Don’t rely on the vendor to magically get it right.  If you know how things work and what you need, including required benchmarks, you can communicate all of this critical information to your vendor.  It is important to document your expectations – you will avoid potential future disagreements.

Next, thoroughly review your justification for outsourcing.  If your reasoning is strong, you will likely get the benefits you expect.  The following lists many reasons one might include in the justification.  If you’ll need approval from the higher ups in the organization, a concise justification will help carry the day.

• Reduced costs.

• Reduced management burden.

• Faster turnaround / access to the data and documents.

• Staffing burden – most parts of the country currently have historically low unemployment rates which has negatively impacted hiring processes including the quality of new hires.

• Staff retention – wages are moving up quickly and offering a competitive wage is critical to employee retention.

• Staff training, including training for remote staff and new employees can fall off especially if the workflow is not a critical contributor to the organization.

• Data accuracy – it is remarkable how often management fails to track data accuracy.  In most cases, data accuracy is critical.  Will the vendor provide auditable accuracy calculations?  Agreeing on how accuracy will be calculated is extremely important?  Mark Twain popularized the saying, “Lies, damn lies and statistics.”  Numbers can be twisted to prove just about anything.  Document the formula.

• How much control of the workflow do you need?

• Hidden costs of outsourcing such as technology, supervision of the outsource company, communication with outsourcing company, set and measure KPIs, etc.

Outsourcing is not a panacea.  There will be tradeoffs.  There are inherent risks associated with outsourcing even if you are very well prepared.  The following list of risks are typical, but your situation probably has its own set of concerns.

• Exception processing (how will this work?).

• Loss of a core competence – outsourcing likely means there will be a loss of knowledge and maybe a loss of knowledge workers.  Sometimes, managers don’t know what critical information and knowhow has been pushed out the door until it is too late.  Sadly, the knowledge gap is exposed after it is gone.  Managers then scramble and perhaps spend unbudgeted money to reacquire the critical knowledge.  It is awkward to try to rehire a person who might be mad about being laid off.

  Think about it this way, I have a co-worker that has been in the job a long time and never seems stressed.  It would be a mistake on my part to think this person wasn’t working hard and providing great value to the organization.  They know their responsibilities so well, it only looks easy.

• Risk of data breach – there is no way around the fact that once information leaves your firewall, the risk of a data breach goes up.  One can mitigate this risk by paying attention to protecting the information in transit as well as when it is in the vendor’s possession.  Be sure to understand the security arrangements that are in place.  Ask that anyone working on your data have had a criminal background check.  Some organizations are allowed to outsource but must restrict the work to onshore workers.

• Plan B – depending upon the critical nature of the workflow, it may make sense to have an escape plan in the event the outsource strategy fails.

I am not making a judgement, but for some the decision to outsource (or not) has personal ramifications.  Concerns about careers/promotions or acquiring power in the organization in the form of a large staff or budget can, and often do, shape the decision.

Another alternative

Extract has a unique perspective in the outsourcing world.  Extract provides software to both end users and to outsourcing vendors.  Both sides of the equation benefit from workflow automation.  End users might decide to keep the workflow inside the organization if they use a software like Extract’s to find cost and labor efficiencies as well as faster turnaround times and improved data quality.  Outsourcers might find they can compete more effectively on price/turnaround/accuracy if their staff is more efficient. 

Extract provides dashboard tools that allow managers to professionally manage workflows.  The dashboards provide productivity and accuracy statistics on the workflow as a whole but also on each individual who contributes to the workflow.  For the first time, minor problems can be spotted and resolved before they flare into a disruptive issue.  If you’d like to hear more about our alternative to outsourcing, please send us a note and we’d be happy to get in touch.