Best Practices To Increase Your Profit Margin Through Offshore Outsourcing

Best Practices To Increase Your Profit Margin Through Offshore Outsourcing
Whenever a company is going to form long-term offshore outsourcing relationships with another company, the base of the success of this venture should be laid during the negotiation period itself. The counterpoint of this negotiation period is the Service Level Agreement.
The aim of offshore outsourcing is to gain value for the host organization. There are several contrasting views however regarding how to maximize value and minimize risk by offshore outsourcing. The following best practices can serve as a guide when structuring your SLA, and then implementing and maintaining a relationship with the provider chosen by you.
Five Golden Rules For Offshore Outsourcing
1. Develop enduring relationships with personnel of key management
The usefulness of the relationship between the key management personnel of both teams depends on developing a good understanding and strong working ties between them. Surveys on offshore outsourcing success stories have demonstrated that working chemistry between management and friendly relations between employees have proved to be important determinants in forming long-term relationships between two parties that yield real value for both parties.
2 Present a Quantifiable Objective.
A useful performance criteria includes quantifiable objectives and clarifies expectations of the quality of service. If you can get a hold of SLAs for comparable projects, they will serve as reasonable starting points but we should take care that these are negotiable. In any case, we must ensure that exact objectives and expectations are included in the SLA and are clearly understood by both organizations prior to implementation.
3. Pre-determine the Incentives and Penalty Schemes.
The provider should be driven to meet the established customer expectations or even exceed it by adopting the performance based pricing criteria. If performance of the service provider exceeds expectations, then incentives should be given conversely, and appropriate penalties should be imposed if objectives are consistently missed.
4. Periodic Review to Maintain Successful Relationships.
Make a habit of organizing formal review meetings often. During the meetings, both sides should discuss the performance of both teams in a particular period and determine the future objectives or future goals of the company accordingly. They can also have a discussion on product reviews and deliverables during these organized meetings. One should positively remember that performance objectives may need to be continually revised according to changing market conditions and the opportunity costs of both the firms.
5.Effective Communication is capable of bridging Cultural Differences.
The firms involved in an offshore outsourcing relationship belong to distinct cultures, These differences should have to be accepted and bridged with minimum of delay. The cultural understanding between the two parties can be enhanced by periodically organizing social events, educating about company background, participating in each others quality programs, etc. Effective Communication really is the key to developing a healthy relationship. A regular practice is sending a loyal employee to the site for a few months to facilitate understanding in the implementation phase.
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This article is powered by A-1 Technology, an offshore outsourcing company