How to Find a Suitable Outsource Provider

So how do you decide whether to outsource HR services, and on what basis? Remember that outsourcing is not the only option. All sourcing options should be evaluated against clear objectives and with an understanding of how benefit delivery will be measured. Do not assume that existing suppliers will make good outsourcing partners, and be creative in the way you define projects of 'work packages' to meet business objectives.

A key decision must revolve around the perception of the degree of internal management control which is necessary to protect a vital interest or where the impact of failure is severe.

The treatment of core activities, seen as critical to the organisation or a source of competitive advantage, should be the central elements of any outsource decision. Some organisations may take the view that these should be closely guarded and kept in-house, whereas others would be only too ready to outsource these if the overall cost/benefit analysis proved favourable.

Having decided to outsource an activity, the next step is to establish your contract strategy. This helps you to decide what kind of provider you are looking for, how you make your choice and broadly, at this stage, the nature of the contract you want.

Providers offer the following broad range of capabilities:

• niche skills: for example, recruitment and learning;
• technical solutions: useful where technology is expensive, leading edge or complex such as supporting Web-based HR applications;
• broad-based capability: this is combined with sufficient technology.

There are several models depending on whether you use one single or several best-of-breed suppliers, or a main contractor with subcontractors, and whether you intend to contract out part or all of the function/process. Individual suppliers will probably not be the best at everything and single supplier deals are not always the most cost effective. On the other hand, there is much more work involved in managing multiple contracts and suppliers need to work together to provide the best service.

Also, in recent years, 'off-shoring' has become more popular. In this context, off-shoring describes the relocation by a company of HR services from one country to another. The architectural design decisions that come into play need to accommodate full consideration of both cost and service quality. It is important not to view off-shoring simply in the context of cost savings, as this could have serious service quality and reputational consequences.