Cost Control - Outsourcing

Outsourcing originated when some management consultants realised that it was sometimes less expensive to contract a third party to undertake some of the tasks that had previously been managed internally within the organisation. The outsource supplier may have better managers, economies of scale or cheaper resources. So it may be possible for the outsource supplier to offer lower prices yet still make a profit. This process has also branched out with a process called “Offshoring” where the services are imported from another country where wage costs are lower, thus replacing local employees.

There may be situations where an outsourcing company can offer a lower cost replacement service for some of those currently undertaken by your own organisation. We have experience of preparing an organisation for outsource engagement. This process needs to be carefully planned and researched if your organisation is to gain from the process.

There are downside costs to the outsourcing process. We can help you to be aware of the downside and to be able to plan for those issues. For example; there will need to be a substantial resource for managing the relationship with the outsource supplier. A figure of 15% of contract cost is not untypical.

We can help negotiate the contractual details so that you can change the service requirement without cost penalties. We can help you ensure that there are sensible contract termination provisions.