A Guide to Avoiding Unexpected Outsourcing Costs

One of the most compelling reasons to turn to outsourcing in your hiring strategy is to keep costs down as you scale your business.

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That’s why it’s important that you don’t get blindsided by hidden or unexpected costs during the outsourcing process, as they can turn a favorable work arrangement into one that provides a far less appealing ROI.

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In this guide, we’ll walk you through some of the most overlooked - and unexpected - costs of outsourcing and what you can do to avoid them. In addition, discover how employee time tracking tools can help!

Expect Hidden Expenses

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One of the biggest mistakes many companies make when attempting to outsource core business functions is failing to crunch the numbers on going in-house.

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It’s easy to assume that outsourcing would be the most cost-effective option - yet this isn’t always true. 

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If it were a simple case or paying a fixed project fee that would be lower than you’d have to pay to do it internally, then you could make a sound argument for outsourcing that project. However, there are often hidden costs you incur when you outsource which you need to take into account to get the full financial picture.

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For example, there’s a chance you might have to invest in a premium software subscription plan to integrate your outsourced team with your in-house team. Or, you could strike up a working arrangement with your MSP (managed service provider) only to find that the scope of the project changes a few months in, and you need to re-negotiate your pricing.

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Everything from consultation fees to changing circumstances can affect the price you pay for outsourcing, so it’s wise to overestimate in the beginning to make sure you stay within budget. That way, when you approach an MSP, you’ll have a clear idea of what price makes sense for your business.

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To stay on top of project scope creep, you can use stealth employee monitoring software to track outsourced tasks so you can anticipate changes.

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What is employee monitoring software?

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Software that gives you the tools to accurately measure productivity performance measures through robust productivity analysis reports and automatic time tracking. 

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As one of the best apps to keep track of work hours, Insightful solves the riddle of how to monitor employees at work, while also abiding by workplace monitoring laws so you can securely track outsourced team time without infringing on individual privacy.

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A brief employee monitoring software comparison and exploration of workplace monitoring articles will reveal that the features on offer can help you better manage employee time which can support operational efficiency and mitigate unexpected costs.

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Clarify Relevant Details

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The only way you’re going to settle on an outsourcing arrangement that works for you and anticipates unexpected costs is by clarifying all relevant details.

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The first matter to resolve will be identifying exactly what it is you want to outsource. Of course, broadly speaking you’ll have an area you’d like to delegate such as:

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• Marketing
• Accounting
• Customer support
• Human resources

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Yet the decision-making process shouldn’t end there. A common mistake business owners make is choosing to outsource a core business function without clarifying what specific services they expect to receive from an MSP.

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If you want to build a clear roadmap for working together with an MSP, you need to lay out exactly what their roles and responsibilities will be.

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Without thinking about the specifics, you leave it in the hands of the vendor to set a price based on what they think you need - which may or may not align with what you actually need.

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So how do you communicate your specific outsourcing needs to the vendor to avoid unexpected costs?

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There are various ways you can go about it, such as the following:

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• Develop a responsibility spreadsheet - with a responsibility spreadsheet or matrix, you can clearly lay out what you expect from the MSP in an easy-to-digest format.
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• Itemize each role - if you prefer, you can open up a document and list out all the tasks and deliverables that correspond to the roles you expect the MSP to assume.
  
  
• Onboard the MSP in your project management solution - if you already have a project management platform, you can onboard the MSP so it’s a simple case of scanning the appropriate folder or board to see the tasks they must complete.

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Read the Fine Print

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It’s an all-too-common practice in business to overlook the finer details of a contract or working arrangement, and this certainly extends to outsourcing.

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Even if you’ve found a perfect deal that is well under budget and could save you thousands of dollars in the long run - you could still run into unexpected costs that sour your view of the deal.

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If you don’t want to get caught out, it’s worth spending a little extra time going over the statement of work (SOW) with your MSP to make sure everything appears satisfactory. The SOW is a legally-binding document that locks you into a contract with your MSP, and as such, it’s critical that you read and are satisfied with it.

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Usually, an SOW will include:

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• Deliverables
• Processes
• Timelines

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When reading the SOW, check that everything you’ve discussed with the MSP is clearly written into the document. If, for example, you agreed on communicating through Slack for the duration of the project you should check for this otherwise you have no recourse if the team decides not to use it once you start working together.

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Evaluate Change Management

A change management process dictates how you and your MSP will deal with unexpected changes as you work on projects.

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It could include how you respond when there’s a technology outage or what to do when a deadline has passed and there’s still work left to complete due to factors outside your control. 

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The first step to establishing an effective change management process is to clearly define what these changes could be, so you both have an idea of what you might have to deal with during your working relationship.

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Once you’ve identified possible changes, you can discuss the financial implications of certain changes, such as how much extra the MSP can charge for working overtime or using a new process to complete a deliverable.

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A thorough change management process will cover you when you inevitably run into unexpected issues as you’ll know exactly what to expect and what the cost will be. That makes it much easier to set up an effective budget for the outsourcing process, as you can account for the unexpected as well as what you already know.

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It’s easy to overlook or downplay the importance of the change management process, especially since it can represent tedious, ongoing discussions to make sure both parties are satisfied. However, once you have a solid change management process in place, you won’t regret it.

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