Outsourcing is considered one of the best ways for a startup company to meet its business needs. However, while the method indeed produces good results, you might still not be getting the most out of it. Here, you need to look into a new approach to doing it.
This is where outcome-based outsourcing comes into play. But what is it exactly and how do you make it work? Let’s find out.
Defining Outcome-Based Outsourcing
The most commonly used outsourced models are input-based. What this means is that the customer defines the inputs used for the delivery of a service. For instance, if you are outsourcing software development, you will often focus on getting the resources needed to build it according to a predetermined specification.
Image from LinkedIn.
Note that this model still works. However, you only get the means to deliver your desired result. Getting that result is still another matter. Your startup company still needs to determine how to use these resources to achieve those.
Outcome-based outsourcing comes from the other end of the spectrum. Here, you already share the vision of the results that you want to achieve. Going with the above example, in outcome-based outsourcing, you tell your provider that you want to increase sales by a given amount with the software. With that, the outsourcing provider can build the software in the best way possible to reach your target growth.
The Benefits Of Outcome-Based Outsourcing
While both outsourcing models are valid, outcome-based outsourcing offers some fascinating benefits. These benefits are why startups are considering a move toward this model.
Increased Flexibility
As you have seen, input-based models rely on the initial criteria and details provided by the customer. While this gives the expected service, it only works for the given circumstances. That makes them less flexible solutions.
Image from Workflow.
On the other hand, outcome-based outsourcing encourages the provider to come up with solutions for the end goal. That encourages innovation on their part. With that, you can expect a more flexible solution that can match the changes in your business needs.
Higher-Quality Output
Since the contract hinges on delivering the desired outcome, you can expect higher-quality outputs. That is because they have incentives to deliver the best possible results to customers. You can also more effectively tailor these solutions to fit your needs.
Better Cost Savings
Using an outcome-based outsourcing model can also help you save more. That is because you won’t have to shell out funds for an unsatisfactory outcome. Instead, all the resources are geared towards delivering the specific results desired. With that, you can then use these savings for other business operations.
The Challenges Your Startup Company Might Encounter
Of course, while there are benefits, there are also challenges your startup company will face. That is especially true if you are transitioning to this model for the first time.
- Differing definition of outcomes: You and your provider might not readily agree about what outcome you should aim for.
- Adversity to change: Your internal team might not readily adapt to the change in the model. That is mainly due to it disrupting the culture already in place.
- The challenge of transparency: Here, you and the provider should establish mutual trust that they will deliver the desired outcome. For that, both parties should be transparent about what you do to meet the target.
The Key Elements Of An Outcome Based Outsourcing Strategy
To overcome these challenges, you need to have the right plan in mind. Several elements come together to define that plan. By taking time to build each of these elements, you can get a clearer idea of the direction you want to go with this approach.
- Vision: Your vision is the main goal you want to reach for the business. Often, it is the future you want to achieve for the company.
- Outcome: The outcome is the results you want to achieve. These support the vision you have.
- Incentives: You should be clear about what the outsourcing provider will gain by helping you achieve your desired outcomes. Here, you should choose the correct pricing model for the job.
- Culture: Your company culture should foster trust between you and the provider, while also encouraging the achieving of goals.
- Evolution: Create a system for reviewing your process and discussing how to improve your current strategies and meet the desired outcome.
Note that you won’t be laying these elements down single-handedly. Instead, work closely with your provider in defining and developing them. That back and forth will ensure you are on the same page on meeting the desired outcome.
How Your Startup Company Should Make The Transition
If this is your first time using an outcome-based outsourcing model, it can significantly upend your operations. Thus, prepare for the move. The first thing that you need to do is create the relevant service-level agreements.
Image from Trinity P3.
Here, ensure that there are no ambiguous parts of the SLA. Break it down into well-defined metrics. For instance, you can focus on metrics like response and delivery time. By clearly defining these metrics, you and your outsourcing partner can agree with your desired outcome.
Adding Change Management
It is also essential that you have a change management strategy in place. Your focus here is helping your team adapt to the new business orientation. In particular, you should provide a single point of contact for all the questions about the transition. That ensures that the process will be more streamlined and go smoothly.
image from Smartsheet.
It would also help to get proactive support from within your company and the outsourcing provider. The former should know what necessary adjustments to their work routines to enable the transition., Meanwhile, the latter should provide the necessary assistance to make the transition smoother for your company.
Helping Your Startup Company Make The Move To Outcome-Based Outsourcing
Virtua Solutions is ready to give you that assistance and more. Our team has worked with various companies that favor this method. Throughout those collaborations, we have keenly observed what works and what doesn’t.
With that knowledge, we will help you create a transition plan that matches the needs of your business. It covers everything from the initial identification of the relevant outcome-based outsourcing model to the development and implementation of the move.
With our help, your startup business will not only be able to make the transition. You will also be prepared to thrive in this new business model. So, contact us today and be ready to jump into a more successful outsourcing venture.