Outsourcing

Outsourcing has become a concept that is permanently inscribed in the reality of the Czech economy. More and more companies are looking for this type of solution to secure non-core business activities, which allows internal resources to focus on activities with higher value-added. While the greatest interest is in outsourcing of IT services, accounting and HR and payroll services, it is becoming increasingly clear that this type of solution is also present in widely recognised logistics and manufacturing processes.

Nowadays, it is possible to outsource almost all business activities. The growing demand for outsourcing in more and more areas plus the increasing number of entities providing such services give rise to the need for continuous improvement and quality enhancement of the outsourcing solutions offered by their providers. More and more organisations today are looking not only for process reproducers operating in accordance with accepted standards and procedures, but also for professional outsourcing companies offering tailor-made business solutions and participating in creating value-added as part of the services provided.

Pros and cons

Outsourcing provides companies with many benefits such as flexibility, as well as access to the knowledge, experience and know-how of external experts. There are also risks that must be assessed – the most frequent ones relate to losing direct control over the process and the quality of the process, as well as possible security risks associated with direct access to the given company’s internal network. Therefore proper actions must be implemented to mitigate possible impacts on the business. Companies should focus on concluding a proper contract with the outsourcing provider. A key part of the contract is the SLA (Service Level Agreement), where the main service KPI’s should be defined: availability, quality parameters and price of the service as a minimum.

How to create value-added as part of the outsourcing service?

The first step should be definition of expectations and translating them into specific goals for the provider. These KPIs should be the benchmark for measuring the quality of the service and monitoring of service delivery. They are also a helpful tool for identifying losses and a starting point for identification of areas requiring improvement. Additionally, the degree to which the set KPIs are achieved should determine the level of remuneration paid for the outsourcing service. Only a supplier who is not afraid to make its remuneration dependent on the degree to which the set KPIs are achieved can earn trust and the confidence that it will not be merely a process reproducer, but will act in the spirit of continuous improvement and will deliver the expected value-added.

Remuneration options

Remuneration in outsourcing can be done by means of two main models. With the fixed cost model, the price is not affected by KPI results. Conversely, with the cost-plus model, the provider’s margin is dependent on the performance measured by the KPI results. In both variants, the remuneration can be paid by the hour, by service or by unit.

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Luboslav Cimbák
Country Sales Director
Adecco spol. s.r.o.