Appropriate Outsourcing Strategic Brings Enterprise's Success

During January to February in 2004, Accenture consulting company had chosen a total of 565 targets from the database of The Economist to do a series of surveys about outsourcing. These targets of the survey all had outsourcing experience, there were 220 (39%) of the respondents' companies had over 7-year outsourcing experience, and 61% of the respondents' companies had 2 to 7 years' outsourcing experience. The annual income of 78% of the respondents' companies was over 500 million US dollars. This survey targets were mainly distributed in North America, Europe and the Asia-Pacific region.

Why choosing strategic outsourcing?

Making a comprehensive view of these successful enterprises, they have great differences on operation field, strategy and operating mode. Discriminating and analyzing carefully, you will find that almost all of them are the beneficiaries of strategic outsourcing. Moreover, researching and summarizing further, we will find that they can achieve the maximization of outsourcing benefits by using advanced tools and means.

These successful companies know how to manage the outsourcing operations to achieve the most optimal commercial returns, but not only to save the costs simply. The measurement mechanism of their performance is very special; it will regard the reward of good performance as the stimulation of better performance. Overall, the methods of managing outsourcing from these successful companies are quite different, but they all get the results of better operations, higher profits and the good satisfactions of the overall outsourcing effects.

Why do these companies choose strategic outsourcing? This is because it can promote the successful business transformation of enterprises in a greater scope. Business process outsourcing is committed to optimize the efficiency of information technology, financial and other important departments and processes to be the best. Although the costs of these departments and processes account for a small fraction of the total operating costs of the company, the outsourcing aiming at them may bring more lasting and wide-ranging business transformation and process reengineering in the whole company, and the profits brought by transformation and process reengineering will be far greater than those brought by the outsourcing aiming at a particular sector and the process itself.

In the survey, Accenture defined "experienced outsourcers" as those companies which had outsourced one major business process in the recent at least two years. Accenture analyzed and researched to these successful outsourcers, it summarized seven successful secrets of outsourcing, and this is the best practices of outsourcing named by Accenture.

At the beginning of outsourcing, we need to regard the business return as the important yardstick of measuring the performance. Measuring business return needs to answer a series of important questions, first is what I would like to get from my outsourcing partner, the price, speed, quality or all the three? Outsourcing and offshore always mentioned in the media are often confused, but experienced outsourcers won't think so, they consider that the geographical differences should never be the most critical factor of outsourcing. They will state, "We should not ask whether we should choose India or Manila, but what we hope our assets and operating modes would be in the next few years."

Generally, people believe that the only purpose of outsourcing is to cut costs. But this survey showed that although cutting costs was one of the main benefits of outsourcing, experienced outsourcers understood more comprehensively of benefits. 74% of the respondents' enterprises evaluated and managed the benefits of outsourcing with a view of more comprehensive business return. Equally important, the earlier establish the goal of commercial return, the better. 60% of experienced outsourcers have established the clear goals as soon as the beginning of outsourcing.

In the survey, Accenture defined commercial return as the provable result generated by some events, actions or transactions, etc. or the changes in business performances. For those experienced outsourcers, commercial return is very broad, such as the fast speed of the products to access into the market, lower the faulty rate and rework rate, the fixed assets investment is saved, and so on.

Also it defined the standard of the ideal partners providing outsourcing services as being able to provide competitive price, promising to reduce the original budget, bringing a wide range of abilities and strengths, having a long-term record of successful services.

To remember that what you need is a true outsourcing partner, rather than an outsourcing services provider. Experienced outsourcers clearly understand that to choose a true suitable outsourcing partner mustn't only pay attention to the lowest price or the most attractive promise of saving costs. Experienced outsourcers expect the partners can bring them more, such as profession, flexibility, credibility, corporation culture and a range of other capabilities and advantages. In fact, in Accenture's survey, a lot of experienced outsourcers considered these "soft advantages" were more important than the "hard conditions", such as the price and terms of contracts.

In drawing up the contract, we should pay enough attention to the performance measurement system and cooperation quality. The relationship between outsourcing partners is a kind of long-term business partnership, rather than only the two parties of the contract. Although the contract is important, it regulates the important issues, such as the paying and profits, the responsibility must be shouldered, and others, from a long-term perspective, to establish a kind of sound performance appraisal mechanism and harmonious cooperating partnership is more important than the contract itself. It is completely different between choosing a suitable outsourcing partner and signing an ordinary stock contract.

Just as one of the respondent said, "What I bought is more like a travel and a direction, I don't know the exact way, but I am very confident to achieve the end, because I have a cultural understanding with my outsourcing partner."