Outsourcing is a powerful business strategy. Companies that make outsourcing a core competency will be better positioned to compete in the global marketplace. Yet, like any other business strategy, it is important to thoroughly identify potential risks and develop mitigation strategies.

We encourage our prospects to conduct a risk assessment as part of their planning and we actively collaborate with them to develop mitigation strategies.

Risks can be organized into four categories: strategic, operational, technology/security and financial. Below are a number of questions the management team should ask themselves:

Strategic Risk

  • How do our values compare to those of our potential partner?
  • Are there cultural differences that we should consider?
  • Do we have experience with outsourcing?
  • What is our level of executive commitment and understanding?
  • Do we understand the level of effort required?

Operational Risk

  • Have we clearly defined the scope of work?
  • Have we defined roles for planning, implementation and governance?
  • Have we considered staff transition, retention, and attrition issues?
  • Have we developed out communication plan (all key stakeholders)?
  • Do we have a realistic transition plan?
  • Have we developed clear goals and metrics to define success?
  • Do we have a documented relationship management plan?
  • Do we have an exit strategy?

Technology/Security Risk

  • Have we taken steps to protect intellectual property?
  • Will our systems/architecture support planned changes?
  • Does our potential partner have a disaster recovery plan?

Financial Risk

  • Do we understand our current cost to operate?
  • Have we anticipated all costs required to plan, transition and manage the effort?
  • Is our forecast for work volumes accurate?
  • Is our potential partner financially viable?
  • Does our agreement reflect mutual interest?

We hope this list helps managers plan their outsourcing project. We welcome your input. Are there other key questions we should add to the list?

Author: Pat Keegan

Pat Keegan

Pat is a highly accomplished executive with extensive expertise in operational responsibilities across multiple functions and technologies. He has led large, mature organizations and has planned, launched and managed emerging Silicon Valley start ups. Pat is a decisive leader recognized for consistently delivering bottom line results beyond expectations. Pat has extensive experience and success with global outsourcing. Key areas of expertise include, professional services management, customer service management, process/quality management, corporate strategy, global outsourcing and building sustainable high performance teams.