Importance of standardization of processes in services and outsourcing (SAO) projects

The primary reason for outsourcing an activity by an organization is the belief that someone else, who has that core competency can perform that activity at a much lesser cost. This might happen when after a lot of process changes and process tweaking, the organization realizes that it cannot save any more costs. If the organization feels that it can save costs by outsourcing an activity, it then enters into a contract with a vendor.

The core competency of the vendor springs from the fact that they have resources (processes, tools & man power) which the outsourcing organization do not have and does not have the competency to develop. Processes, which might be industry standard best practices or custom in-house developed processes are the most important of these resources. The vendor, as a part of process engineering, will most likely have benchmarked those processes and would have realized the importance/value of these processes and that is how they are able to achieve the same activity at a reduced cost.

Any time, the contracting party (the customer) requests a vendor to follow non standard processes, there is a likelihood that the vendor cannot achieve the margins necessary to maintain profitability. There is also an increased probability of lower quality (errors, omissions etc) because the there are no available processes by the vendor to monitor the newly requested process flow.

It is imperative that for most, if not all, SAO projects, the processes followed by the vendor be followed by the customer. If there has to be a deviation, then a change request has to be created in the contract, evaluated for cost, designed and tested by the vendor and then implemented. Yes, for the customer there will be increased cost, but over the life of an SAO contract, this will yield better results than asking a vendor to follow the processes of the customer at a lower contact value.

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