What is Outsourcing and How Does it Work?

Outsourcing is defined as the transferring of some job functions to a third-party provider. It involves an agreement between two parties; the client and the provider. The client is an individual or a company looking for a service provider any that executes the day-to-day management of the outsourced tasks.

Contract Agreement

The most direct and simplest outsourcing agreement is between the client and the service provider. In a larger context, a broker negotiates an agreement between clients and providers. A broker is a middleman who finds the right provider for the client’s need.

The most effective contract management is based on trust and a collaborative relationship between the vendee and the vendor. The agreement is subjected to outsourcing governance that ensures enforcement of the terms and conditions of the two parties.

Negotiating Terms

Negotiations with the outsourcer should be clear from the very start. The goal is to balance the benefits and risks. Both parties want to earn and gain each other’s trust for a long-term working relationship.

The client usually has the upper hand and lead the negotiation. It is important to create a timeline and a due date for negotiation to avoid delays in the tasks to be outsourced. While negotiating for the best outsourcing deal, do not transition the job to the outsourcer.

The Outsourcing Transition Period

This is the period where the new outsourced partner will go on the process of speeding up the efficiency and growth of certain aspect of the business. During this period, the client looks for change, growth, and gains. Thus, it was called the “valley of despair” period.

The bottom line is to be open-minded and knowledgeable about the pros and cons of outsourcing before signing the dotted line virtually or face-to-face. If you believe that it will help you expand your business and increase your profits, go for it!


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