Benchmarking in Outsourcing

Filed in archive Best Practice on June 30, 2007

Money, as mentioned is very important in outsourcing. In turn, charges and other additional cost in doing this kind of business strategy should not be too cheap nor too expensive because the outsourcing output would certainly suffer.

This is the reason why benchmarking should be considered when outsourcing. Here is one example of a clear description of benchmarking:

Benchmarking provisions typically give the customer a right to require that the charges (and potentially other service aspects, such as SLA performance) are compared with the market by an independent third party benchmarker. The likely success of benchmarking as a tool to achieve value for money depends on the degree of standardisation of the outsourced services: i.e., effective benchmarking is harder for more customised services. For that reason, in large outsourcing projects customers often choose to break down the services into distinct service lines and institute a rolling programme of benchmarking over, say, 2 year cycles.


Though that is the case, benchmarking would be advisable only to contracts that has a longer duration. For contracts less than 5 years, the goal of benchmarking is not evident.