The first thing that comes to mind when thinking about why a large organization would outsource is "cost savings". However cost savings should be only one piece of their motivation. Organizations are looking for ways to streamline and provide opportunities to refocus on core competencies. In order for outsourcing to make sense, an organization should identify those services that must be done to manage the business but are not "what they do best". For instance, a Health Plan is in the businesses of providing stellar services to customers (members & providers). Core competencies definitely include developing state of the art products with flexible benefits and contracting comprehensive provider networks. However, core competencies may not include handling mail, imaging, and claim data entry.

Outsourcing must support an organization's business model and deliver at least the same if not better quality than what was produced in-house. Savings is an expectation, however, easily lost if the outsourcing engagement is not carefully structured to deliver the turn-around and quality required to meet internal business expectations. So, savings? Yes definitely a target goal! But ... the selected BPO must deliver more than "we will do cheaper". They must deliver the highest level of quality within a specified turn-around time. Imagine the frustration if an outsourcing engagement is built strictly around savings, without the proper attention placed on quality for instance. Let's use our Health Plan as an example again. There certainly are opportunities for significant savings to have an offshore team key from image for claims and enrollment. However, it is important to remember that health plan customers care about turn-around and quality. Customer abrasion due to less than stellar quality or delayed turn-around is significantly more costly than any savings the vendor may have provided both financially and in reputation.

Keep your eye on the ball! Organizations should carefully evaluate their processes prior to planning an outsourcing engagement and if the decision is made to move forward, careful attention should be given to developing comprehensive requirements. Appropriate Service Level Agreements (SLA's) must be negotiated to ensure expected performance. And, once the engagement is underway, rigorous monitoring of the vendor's performance must take place. Contract governance is an expense worth investing in to ensure outcomes meet or exceed expectations and should definitely be a line item in the outsourcing budget.

Source : ezinearticles