I was once in an outsourcing discussion with a client we were pitching to. The client wanted us to outsource their HR activities but was requesting us to take the processes as is and then also give them a significant cost reduction. My question was how. If we were to take same processes and same service levels, then we would have to deploy the same number of people and use the same technology being used and if that was the case, the cost incurred by us would be the same as what the client was incurring. From where will we get the cost reduction.
This got me thinking about the motive most clients have around outsourcing and why it ends up not giving the requisite benefit that it should. During conversations with a few clients the feel I got is that clients wanted to download their problems onto someone else, who can be blamed, other than ofcource show cost reduction. Due to this the situation never improved for most organization, infact it worsened as now there was another inefficient process of handover between the organization and the service provider.
To me the basic reasons why any organization should be outsourcing is for the following reasons :
- To get better service levels
- To reduce corporate time spend on routine non-core transactional activities
- To streamline processes for better efficiencies and continuous improvement on processes
Cost reduction is an outcome which will accrue automatically if the other three objectives are met. First and foremost we should be looking at improved service levels. More so with respect to the HR processes as we are talking about processes which impact our so called most important resource – people.
For service providers there is a need to ensure that their clients can get higher levels of service to justify the outsourcing decision. Also there is a need to work with the client to streamline the handover process to ensure that there are no additional inefficiencies that get built in at that stage.
Another significant change required for an outsourcing deal to work is for the client to treat the service provider as a partner, an extension of its own organization, similarly for the service provider to think of itself as an extension of the client organization. This will ensure that both the organizations are working towards the same cause of providing higher service levels to its ultimate customer, the employees.