Camouflaging Outsourcing Expenses in today’s Uncertain Times

Camouflaging Outsourcing Expenses in today’s Uncertain Times

Whenever IT leaders decide to outsource their project to make it more efficient at a cheaper rate, outsourcing has been the choice of business operations. However, the real cost of outsourcing has always been different than the one that the leaders accounted for. And the spread of the novel coronavirus has only made it difficult to identify the unknown outsourcing expenses.

IT enterprises have always struggled to effectively outsource at an expense that enables them to deliver their services with less investment. It is mostly due to the hidden costs that never see the light of day until it is the urgent—and costing businesses more than they accounted for.

In the wake of the COVID-19 crisis, enterprises are struggling to keep their business afloat, and the hidden cost of outsourcing can put a heavy toll on the already constrained budget. Therefore, it is time for enterprises to be responsible and identify these additional expenses to manage or eliminate them.

Enterprises must negotiate a deal which clarifies the inclusions in the services and expects the engagement to be flexible or scale, with their vendors. The entire outsourcing industry needs to abandon the legacy of past transaction and start leading to a process that delivers mutual success for the vendor and their respective enterprises.

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Below are a few examples that increase the hidden expenditure on Enterprises with their respective Outsourcing vendor.

Disruption in Emergency

COVID-19 has shown a glimpse into the loopholes in the outsourcing agreement that enterprises had failed to account for.  Since remote work has gained increasing acceptability, indeed- as the last resort to keep businesses afloat in these times, enterprises not only had to accommodate their staff but also had to deal with the consequences such as extending the projects’ timelines. This has also had an impact on the delivery schedules and costs, and enterprise control was compromised. Hence, to further mitigate the issues, enterprises must have clear and relevant business continuity and disaster recovery plans to sustain their business operations.

Issues While Consulting

Many enterprises complained that the unpredictability of cost is due to the cost of consulting during the engagements. Since most digital meetings have become consulting-led, there is a distinct increase in price.

To get a hold on the unnecessary investment, enterprises must embrace the outcome-based pricing rather than still opting for consulting, which is heavily charged on a time and material basis. Even though some enterprises still prefer the consulting model to get their engagements correct for the first time, enterprises must look for alternatives that justify this additional cost.

Lacking Governance

Enterprises are always on a lookout to implement new services to streamline business operations. This results in enterprises investing heavily in hopes of delivering a better experience. But many don’t realize that the lack of effective governance is the root cause of inefficiencies, even at a higher cost. As a result, most organizations suffer with inefficiencies in delivery processes, and remain unaware of the real issue. Hidden costs rise, and delivery excellence of the outsourced project falls!

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As outsourcing depends on defining, perfecting, and implementing the new processes and the roles for process owners and stewards, neglecting the importance of effective governance can contribute to a huge loss in the long run.

The COVID-19 is disrupting every dimension of outsourcing. Giving priorities to the wrong things and shying away from hard conversations in today’s time can cost enterprises dearly.