Five Factors to Consider when Outsourcing

Whether you are hiring a vendor, or you are a supplier who is going to work for a company, there are some standard questions and issues to be addressed up front. One of the main reasons that companies and providers suppliers may have difficulty getting along are they do not deal with questions in advance. Research across the internet indicates that factors considered when outsourcing can vary widely across industry lines and from company to company as alluded to in articles by Intercore Technologies and by FacilitiesNet. In my opinion, here are five points that must to be discussed before the project begins.

1 Both the hiring company and the supplier should ask each other for a profile or a resume prior to signing any agreement. You may find that the hiring company isn't financially stable and may have difficulty paying according to terms, or that the supplier may have difficulty in performing, for that matter.

2. All the financial and performance conditions should be clearly stated in the written agreement so that both sides understand. Throughout the project, funds are going to be paid, mostly likely at agreed upon project milestones. So, a priority is to agree on a fair price. In many cases, it takes a couple of offers and bids to reach a good negotiated price. After the two sides have mutually agreed on a price for the project, a written agreement must be signed off only by an authorized representative of each party. Each year, hundreds of outsourcing projects entered into without a written agreement, putting both parties at risk.

Your consent should include the total project cost, as well as payments for overtime and/or other fees agreed upon. In addition, make sure the agreement specifies when payments are to be made, as well as the method of payment. This is key as there are a number of payment options available. Of course these commonly include check, bank deposit, or online systems like PayPal.

3. There are at least 2 options in cost determination. Initially, you may decide that the cost of the project includes all the changes and extra work every hour that may be incurred. If either party is not comfortable with this arrangement, simply discuss other options. Agreement can focus on a flat fee, an hourly rate, or a myriad of other options. Each has its pros and cons to both sides, and needs to be outlined in advance.

4 Reasonable timelines for deliverables and project completion needs to be setup. This helps to clarify expectations for both parties as well as resource allocation.

5. The method for delivery of goods or services is an important issue to be discussed beforehand. The firm that is outsourcing the project needs to have a solid idea how the work is to be delivered, and then cooperate with the supplier to ensure that this is feasible. Throughout the project and at project completion, it's a good idea to periodically and openly discuss performance satisfaction. This is important in lining up referrals and recommendations for future business transactions.