Additional Cost in Outsourcing
Avoiding additional cost in outsourcing is inevitable. This is something which companies should realize when dealing with their outsourcing business. The best way to deal with additional cost is to make sure that the organization has already anticipated the appearance of such.
The preparation should also be evident in their outsourcing contract. Here are some of the things which the contracts should have when encountered by this problem:
-has a sufficiently detailed specification of services;
-allows for flexibility and changes in the services/operations;
-identifies who will bear the costs of changes in law and regulation; and
-clearly details any exit costs payable by the customer.
If these factors are not taken into consideration, companies would not be able to realize that the rate which they are offered is competitive or not.
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Do you mean “Incurring” additional costs in outsourcing is inevitable?
Comment by Steve Hamrin on July 2, 2007 10:36 pm
Yes, it is incurring Steve. Thanks for the correction!
Comment by carol on July 3, 2007 9:45 am
Yep, one has to be very cost conscious. With the rising wages, dollar devaluation in the BPO areas, etc…
Gotta change the currency of my BPO contracts.. Hahaha!
Comment by bpo on July 5, 2007 4:19 am
The additional costs in outsourcing that are implied above also apply to in-house work as well.
For example if you are producing work in-house and you change your requirements, or are adversely affected by regulatory changes or you do not sufficiently define the role that your developers should fulfill, then clearly you will still bear the cost.
Companies should not treat their internal development teams or their outsourcing partners as black-boxes with whom they do not actively interact. Successful projects are build out of on-going dialog between all of the stakeholders.
In this way unforeseen costs are predicted earlier. Plans can be drawn up to mitigate the impact of risks becoming true issues, and the working relationship between the parties is much more productive.
Project whether outsourced or in house must be actively managed. It is not enough just to put an extra line-item in the budget for “unexpected costs”
Comment by Bit-Simple on July 5, 2007 9:58 pm