Manage the relationship well and reap big benefits

Hubert Wentzel, Divisional Director, EOH Consulting, says outsourcing is not just a contract between two parties. It is a relationship, which has to be managed from day one.

Successful outsourcing relationships require a lot of professionalism and good management. Management is so important because it ensures maximum value from the investments made and enables the business to provide world-class services to its customers.

"If implemented correctly, a managed services or outsourcing agreement can mean the simplicity of having one provider, one point of contact and one level of expected quality. The challenge is how to maximise return on investment by creating meaningful differentiation in the market. The focus should therefore be on core competence and prioritisation of scarce resources."

He explains that businesses often outsource functions due to limited human or knowledge resources. By outsourcing these key functions, companies also develop a competitive edge by gaining access to specialised capabilities, experience and expertise to manage business functions, processes or applications more efficiently. Outsourcing partners can give businesses access to industry best practices and a more global pool of experts when modernising systems and transforming business functions. Moreover, the outsourcing vendor`s service and performance levels can be used to benchmark and compare performance, while bringing discipline to internal operations, as well.

But, Wentzel adds, managed services are still generally treated as commodity services, when they need not be. Companies such as EOH have proven that specialist skills, like application database administration services, can be successfully outsourced as an off-site managed service. Testing and performance tuning is, likewise, proven to be very effectively done remotely.

"I feel that the database is one of the most important assets a company has and deserves a higher level of care. Without a functioning database in today`s fast-paced business environment, you may as well shut your doors. The information on your database is one of the most important business assets you have, so if you are going to hand it over to a managed service provider, make sure you understand who is really providing the service and what their commitment to quality is."

He outlines some important points to remember when considering outsourcing or managed services:

* Outsourcing should never get between you and your customer. Access to your firm anywhere, anytime, anyway should be built in.
* Be honest when assessing your current strengths and internal costs.
* Performance standards and business metrics should be established and measured (balanced scorecard). Establish clear expectations and performance standards up front.
* An outsourcing relationship should increase your flexibility or market extension and product expansion, including the ability to respond quickly and efficiently to changes in customer and market requirements.