By Ian Springsteel

Mulling whether to outsource specific processes? Here are a number of questions middle market companies must ask themselves to assure a successful outsourcing experience.

1) Assessment: How much do your various business processes actually cost the company? These costs are found not only in the payroll of the accounting or HR department, for example, but also in the activities of employees in operating divisions, the IT department, and the software and hardware costs associated with the department in question. What exactly is entailed in these processes, from start to finish? Who does them? Are they mapped out and well defined? Does the company have a strategic plan for maximizing the benefits of outsourcing, wherever it may make sense?

2) Benchmarking: How much does this function cost per employee at other companies in the same or similar industry, at a similar scale? What about the biggest companies – the best of breed? How does your company compare qualitatively – what sort of detail, analysis and service do you have versus others? What do various outsourcing vendors charge per employee or per transaction? How do they make a profit on this, and will the outsourcer be there in two to three years when the contract is up for renewal?

3) Engagement: What processes and tasks exactly are included in the outsourcing arrangement? What sorts of new services or data will you receive from the outsourcer that you did not have before? What are acceptable “downtimes” or service level declines before discounts kick in? Will the outsourcer hire some or all of the employees that once did this work internally, or will it all be sent to a service center in a low-cost location, like Nevada, Alberta or India? How will that affect your company’s morale?

4) Review and revise: If your business doubles in the next two years, will your outsourcer be able to handle the extra work flow, and does the pricing agreement anticipate that? If your business is halved next year, is there a “decline in business” clause that will lower your costs or excuse you from the contract? If the relationship is plagued with problems, how do you get out? Finally, what is the plan for rebuilding that function if necessary?

Clearly, successful outsourcing requires critical, specific answers to one difficult question after another. And even when the best plans are laid and precautions taken, one needs to consider the possibility that a BPO relationship won’t work as planned.

But, if the decreased hassles, lower costs and improved processes outweigh those risks, it may just be time to explore what outsourcing could mean to your firm.