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Outsource like a pro #3: Calculating the actual costs

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Outsource like a pro #3: Calculating the actual costs

2016 / 01/02

You make a big mistake if you only take into consideration the contract price payable to the given partner when calculating the costs of an outsourcing project. If you start working with an external contractor, new types of costs will be incurred.

First of all, direct costs of the partner selection process need to be mentioned, which are in fact incurred within your company, but it would be a mistake to disregard them. The total time your employees need to spend on finding the right partner depends on the complexity of the functions to be outsourced and the difficulty of the selection process.

 

Calculate with extra charges if the language of the contract is not your mother tongue

The hardships you will have to overcome in preparing the relevant contracts also depend on the complexity of the functions to be outsourced. Technical preparation of the contract (for example, preparation of specifications) mostly requires the use of internal resources, and you will have to pay a retainer for the lawyer drawing up the contract and assisting you in the contract conclusion process. It is advisable to calculate with extra charges if the language of the contract is not your mother tongue, and/or some of the legal requirements differ from the current legislation of your country.

 

Dedicate time and resources to check the process

Last but not least, we must mention in this section that even the smoothest of partnerships have to be managed. The appropriate level of control over a partner depends on the complexity of the activities outsourced and the relationship established with the selected partner. You will have to dedicate time and resources to check the progress and quality of the work performed by the partner, to manage change requests, to conduct personal negotiations etc., which will cost you money… The costs incurred during liaising with your partner will be further increased by travel expenses arising when travelling to personal meetings with the partner, which may be significant in the case of partners operating in remote countries.

 

  • When calculating the costs of preparation of the outsourcing project, take into account any costs associated with the use of internal resources

  • Do not forget about the legal costs related to drawing up and concluding the contract and preparing the cooperation

  • Relationship with the outsourcing partner will have to be managed, which may entail significant costs. Take them into account too!