Delegating tasks to the outdoor company has become increasingly popular every day. Despite growing interest in outsourcing, many people are still afraid of losing control over their projects and bad quality of service. So how do you save your company before the risk of failure and prepare to collaborate with an outsourcing company?
Outsourcing agreement is a huge step for every startup. Check out what to look for during signing it!
Preparation
Before delegating the right tasks to other companies, there should be taken some important steps. The first of them is a description of the expected scope of service provided by the outsourcer, deadlines for done tasks and required business, operational and financial effects. The second is market and potential partners analysis.
During choosing the outdoor company, clients focus on their experience, adjusting offer solutions to their needs and the price of service. The first talk can show the areas where areas require clarification and possibly additional benefits and risks resulting from the adopted assumptions. Only the final, specific material, can be based on project valuation by an outsourcing company.
Negotiation process
After the choice of the best-outsourced company, has begun the time when you have to start agreement negotiation. You as the CEO of a startup must pay more attention to those meetings because negotiations are not easy. Negotiating a deal takes care not only of the matter connected with starting collaboration and realization of the job but also provisions on the terms and conditions of termination of this cooperation and any additional costs related thereto.
Every contract should be adjusted to a specific service. Furthermore, there are some common elements that should be in such an agreement. The crucial aspect is a clear definition of the scope and nature of the engagement, and the roles and responsibilities of each party. It is very important to define the measures that will be used to evaluate the results of cooperation and to monitor the quality of the services provided. A good agreement not only protects the company’s interest but also is flexible and doesn’t restrict the development process.
The hardest elements of the contract
In the context of an outsourcing agreement, the most challenging aspect often revolves around negotiations related to SLAs (Service Level Agreements) and KPIs (Key Performance Indicators). These are crucial parameters that significantly impact the quality of services.
Clients pay particular attention, especially in projects involving contact centre operations. They seek assurance regarding data security when utilizing logistics services, and expect the timely and precise delivery of products to designated destinations. In agreements related to document management, data security and efficient access become paramount. Every client desires complete confidence in the accuracy and punctuality of tasks assigned to outsourcing partners. Fulfilling this commitment is possible but comes at a high cost. Consequently, companies set maximum error thresholds or KPI benchmarks agreed upon by both parties. They also establish protocols for addressing irregularities, defining corrective actions, and implementing procedures to minimize future errors.
When calculating the SLA for a specific agreement, it’s essential to consider all potential risks associated with the specific type of activity. However, it’s advisable to begin by addressing fundamental questions:
- Who are the clients, and what are their specific needs?
- Which agreement parameters should be subject to measurement?
- What insights will each indicator offer to the organization?
- What strategies will we implement to enhance performance in specific areas?
In each scenario, SLA and KPI values should be collaboratively developed by both parties to the contract, tailored to the specific service type.
What to look for
During the signing of an outsourcing agreement, note the proposition of the so-called “exit costs” from the project. They should be related to real outsourcing expenses connected with ending collaboration with the clients, giving documents or databases created while working with a startup or company. Some companies define the cost as so high that ending the cooperation is very difficult. It also limits the possibilities of clients in case of renegotiation of the deal.
The outsourcing company can take care of the implementation of a specific, time-bound project, as well as ongoing support for the business process. In the latter case, contracts are usually long-term – most often they are signed for a period of 3 – 5 years.
Feel free to reach us if you have any outsourcing questions. In your free time, listen to our podcast Startup Stories, where we talk about startups and what makes them work.