How to Benchmark when Outsourcing

On December 13, 2011, in Outsourcing, by Business Development Group

Benchmarking an outsourcing agreement provides the needed dose of market realities and helps clients be more objective about the benefits and outcomes. More specifically benchmarking can re-focus the organization on the state of the art technology and clarify assumptions and projections regarding future hardware, software and personnel costs. This is more so in offshore outsourcing where processes are being out in another continent.

No outsourcing discussion is complete without an adequate focus on benchmarking. Benchmarking has been one of the key drivers in bringing comfort levels to business process outsourcing (BPO) client-vendor relationships. Independent benchmarking data can be used to validate the service offerings of BPO vendors. At the same time this becomes a standard that vendors use to identify and improve new opportunities.

Benchmarking an outsourcing agreement provides the needed dose of market realities and helps clients be more objective about the benefits and outcomes. More specifically benchmarking can re-focus the organization on the state of the art technology and clarify assumptions and projections regarding future hardware, software and personnel costs. This is more so in offshore outsourcing where processes are being out in another continent.

Read related article: Knowledge Process Outsourcing

Given the integrated but loosely coupled value chain in the healthcare industry, benchmarking can be conducted based on the decision of which processes to outsource and which not to. Processes can range in complexity and their degree of strategic impact. It is hence necessary to keep these functions separate while conducting benchmarking. Bundling them together may conceal significant costs and improvement opportunities.

Read related articleOutsourcing Services Effectively

As the majority of outsourcing deals are unique, benchmarking will provide a market comparison and an objective understanding of the costs/time/quality/paradigm. The optimal time to benchmark is prior to negotiating an outsourcing agreement.  Once the strategy has been developed it enables the client organization to set a clear future direction and understand the landscape. While benchmarks are primarily management tools, outsourcing vendors find clearly understood performance targets to be useful and a yardstick to measure themselves by.

Hereunder are the factors to consider while conducting a benchmarking study;

a) Economic models and return of investments

b) Service management performance

c) Disaster recovery

d) Customer service and support

e) Financial stability

f) Nature of business

g) Hardware and software infrastructure

h) Staffing levels and scalability

i) Transition strategies

j) Number of existing clients

k) Telecommunications infrastructure

l) Internal organization of resources

m) Internal performance measurement

n) Change management

o) Third party management

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