Global Services recently published a great piece on the eight worst mistakes in outsourcing and how to avoid them that should not be overlooked if you are outsourcing or considering outsourcing one or more business functions (in your supply chain). These mistakes are all too common — and they don’t need to be, especially since they can be prevented up front.

1. Poor Governance
   A formal governance model, backed by executive sponsorship, is absolutely critical to success. Without a model, which must clearly define the objectives, a collaborative working model, SLAs, and a dispute resolution process, there’s nothing to stop the outsourcer from doing whatever they want, which includes doing nothing at all!
2. Shortsighted Focus on Cost Savings
   This leads to unrealistic expectations for year over year savings. Done right, outsourcing will save you money, but the savings will not increase continually. If you’re 80% efficient, then you’ll get 20% savings … and that’s it. But that’s still better than what the function is costing you now. The real benefits come in the form of process efficiency, improved planning ability, higher levels of operational reliability, and the ability to divert focus to core business areas where strategic improvements can lead to significant savings.
3. Lack of Preparation
   Starting the RFP and contract negotiation process before an outsourcing decision has been thoroughly evaluated internally is the wrong way to go about it. First you analyze the cost / benefits thoroughly, then you outline the governance and model, then you evaluate the vendors, then you start negotiations with the preferred vendors.
4. Outsourcing High-Touch Activities
   Not all processes are ideal for outsourcing. Processes with high business value that you are effective at should be kept in house. Processes that require continual contact with stakeholders are also not good candidates for outsourcing.
5. Failure to develop an Effective Communication Program
   Poor communication is often the top reason cited for failure of an outsourcing project. Regular information sharing is essential and needs to be addressed up front.
6. Improper Evaluation of Outsourcing Providers
   Outsourcing is not an instant solution and proper evaluation of providers is crucial. Choosing the wrong solution provider will give you sub-optimal returns at best, and can lead to the outsourcer abandoning the engagement, leaving you high and dry.
7. Poor Cultural Fit
   At the end of the day, an outsourcing relationship works best when the chemistry between outsourcer and service provider is right. If the evaluation and negotiation process leads you to believe that the working relationship will not be a comfortable one for your people, immediately call off negotiations and move on to the next provider.
8. Inappropriate Metrics and SLAs
   For example, call throughput is a bad metric. It’s not how many calls a rep takes in a day, but how many issues get resolved in a day.