With both the public and private sectors looking to cut costs and "do more with less", outsourcing is often seen as a solution. This briefing highlights how customers of outsourcing providers can avoid some of the major pitfalls.
Know your supplier
Due diligence on potential outsourcing suppliers often focuses on issues such as skills or track record. In our experience, the following issues can be overlooked:
- How strong is the supplier's financial position? Consider obtaining third party guarantees e.g. from a parent company or investors.
- Will subcontractors be used? The contract needs to give you sufficient control over their appointment and how they are used.
Define your services
It is surprising how often outsourcing contracts do not contain a clear description of what the outsourcing provider is required to do. The result can be disastrous - legally, the outsourcing provider may not be obliged to do what your business requires.
- Work out exactly what is done at present. As a minimum, the outsourcing provider needs to be obliged to replicate this.
- Oblige the service provider to carry out due diligence and scoping on your current processes – that will enable it to find out for itself what is required.
- Produce a service description capable of being understood (and enforced) by a court or arbitration panel.
- Avoid leaving key service descriptions to be agreed after the contract is signed.
Lack of a clear, detailed description of the services can be disastrous.