The Impact of Outsourcing on Quality: A Quality Framework to Ensure Success Agility

Dr. Mohammadali Farjoo – intellcert Australia / New Zealand

Outsourcing has become a familiar strategy in today’s business environment, allowing organisations to focus on core competencies while leveraging external expertise. Commonly outsourced functions include IT, HR, legal, and even marketing. Today, some organisations, including universities, are taking outsourcing a step further by contracting out even critical functions like technology transfer offices and executive trainings.

While outsourcing offers significant benefits, there are concerns about how it can impact the quality of services or processes. A well-structured quality framework for outsourcing can address these concerns by ensuring that outsourced services meet organisational standards and expectations. Here’s a look at how this framework works, as well as its advantages and disadvantages.

Understanding the Quality Framework for Outsourcing

Metri and Yadav (2010)  proposed a quality framework based on Input-Process-Output (IPO) model, which can be broken down as follows:

1. Input Quality (Quality Planning): This phase involves setting clear outsourcing goals, supported by top management and cultural awareness. Defining “what, why, who, where, when, and how much” to outsource helps set expectations from the outset. The involvement of top management in the planning process is crucial to ensure alignment with organisational objectives.
2. Process Quality (Contracting Process Quality): This phase covers the actual contracting stages, including pre-contract negotiation, contract formulation, and post-contract management. A clear contract, backed by service level agreements (SLAs), lays out the responsibilities and expectations of both the client and contractor. This phase ensures that all parties understand the quality standards expected throughout the contract’s lifecycle.
3. Output Quality (Outsourcing Success): The success of outsourcing is measured by how well the service meets the predefined quality standards and goals. Effective post-contract management ensures the contractor’s performance aligns with the organisation’s standards, minimising risks, and optimising benefits.

Pros of the Quality Framework

1. Enhanced Clarity and Alignment: By setting detailed goals, roles, and responsibilities, this framework minimises ambiguity in the outsourcing relationship. Contractors and clients have a clear understanding of expectations, reducing the chances of misunderstandings and conflicts down the line.
2. Risk Mitigation: The framework addresses potential risks by incorporating pre-emptive planning and contract management measures. It includes dispute resolution mechanisms and performance metrics, which help in identifying and addressing issues early, thus reducing the likelihood of major conflicts.
3. Flexibility and Scalability: Through strategic planning and long-term contracts, the framework can be adapted to various outsourcing needs, from short-term projects to longer, more strategic partnerships. This adaptability makes it suitable for a range of industries and functions, from IT and HR to more specialised areas like tech transfer.
4. Cultural Considerations: Recognising cultural differences between client and contractor teams enhances collaboration, especially in global outsourcing. Cultural training and sensitivity can lead to a stronger working relationship, improving the quality of the output.

Cons of the Quality Framework

1. Time-Consuming Setup: Establishing clear quality goals, conducting thorough contractor evaluations, and setting up SLAs require time and resources, which can be challenging for organisations seeking rapid outsourcing solutions.
2. Cost of Implementation: While this framework aims to reduce risks, it also increases initial costs. Investments in quality planning, legal and contractual expertise, and post-contract monitoring can be substantial, especially for smaller businesses.
3. Dependency Risks: Long-term contracts, though beneficial for continuity, can create dependency on the contractor. Should the contractor fail to meet expectations or adapt to changes, the organisation may face challenges in managing the transition to another provider.
4. Complexity in Managing Multiple Contractors: For organisations that outsource multiple functions, managing various contractors and ensuring alignment across contracts can be complex. This framework requires dedicated resources to monitor each contractors’ performance, which might be resource-intensive.

Striking a Balance

The quality framework for outsourcing offers a structured approach to manage quality effectively, emphasising careful planning, clear communication, and risk mitigation. It is especially valuable for organisations outsourcing critical functions, where quality assurance is paramount. However, implementing this framework requires commitment, resources, and a focus on long-term goals.

As outsourcing continues to evolve and be more digitalised and automated, quality frameworks like this helps organisations preserve the value of their outsourced functions. When done right, outsourcing can enable businesses to remain competitive, flexible, and innovative while ensuring that quality standards remain uncompromised.

 

Reference:
Metri, B. A., & Yadav, V. (2010). Outsourcing Contract Success: A Quality Management Perspective. International Journal of Innovation in the Digital Economy, 1(4), 41–53. https://doi.org/10.4018/jide.2010100104