Getting more out of outsourcing than just cost-cutting

Outsourcing continues to help a lot of companies reduce costs, but it doesn't always provide much other business value. Customers can get more out of the arrangement, including innovation, new technologies and access to new business insights, reports Stephanie Overby at CIO magazine.

Improving the efficiency of business processes along the margins is good, but it is not the most important thing for companies these days, according to Phil Fersht, founder of HfS Research. Company leaders are looking for new ways to achieve value, says Fersht, who suggests four ways to garner greater business value from outsourcers.

First, Fersht says, forget about viewing outsourcing solely as a way to cut costs. Chasing the lowest-wage labor is not sustainable, so it shouldn't be part of the strategy. If an outsourcing deal doesn't provide more value, it isn't worth it.

Second, focus on the ways in which an outsourcer can contribute to the company's objectives when you pen a deal. Other variables, such as the number of employees or the number of transactions involved, don't indicate the value of the arrangement.

Third, don't be afraid to make technology changes in mid-stream. If a process or a technology isn't proving its value, scrap it. If the outsourcer has invested in new, best-in-class systems, leverage them. 

Finally, change the way you measure the outsourcer's performance. In additional to service level agreements, agree upon some metrics based on business outcomes.