There are many reasons why nearly 50 percent of all midsized companies outsource non-strategic, high-risk functions such as payroll, HR, benefits administration and workforce management (aka time and attendance).? Employers outsource to take advantage of a provider?s expertise, offload liabilities associated with noncompliance, transfer fixed costs to variable ones and leverage economies of scale of a provider. So why are so many outsourcing clients frustrated with their solutions?? Here are some of the common issues we hear about:
Service ? The cornerstone of an outsourcing relationship is the provider?s service commitment to their clients.? After all, these providers are the front facing liaison to your employees, so if the service is sub-par, it sends a bad message to your most valuable asset, your employees.? Nearly every provider talks about great service, but very few actually deliver.???
Cost to Value ? One of the most frequently stated reasons for outsourcing is that it provides a good return on investment.? If the return on investment were poor, no one would make a change.? Unfortunately, when companies look back at their total costs years after the initial engagement, the financial equation often looks very different than what was originally proposed.? Initial costs never seem to include ?other? things like additional tax jurisdictions, interfaces, new features, per item charges, etc.? These other items regularly drive price past the point of a good return and rarely offer sufficient value to compensate for this increase.? Add to the mix upgrades and other unexpected costs and the business case crumbles.?
Liability ? Part of the value of outsourcing is transferring the risk of noncompliance to the provider.? Often, though, the protection provided is limited.? Service level agreements are sometimes in place to ensure great service, but more often than not, only a fraction of fees at risk are covered. If the provider makes a mistake that costs your company money, why shouldn?t they assume all of the liability for these mistakes?? Unfortunately, the ?transferred? liability pales in comparison to the actual liability, leaving companies on the hook for the provider?s mistakes.? Since liability is one of the factors in the decision to outsource, this simply doesn?t make sense.
Integration ? Integration is the most often used, and abused, term in the application market today.? True integration is one database feeding multiple systems.? Interfacing systems means transferring data between databases.? Plain and simple, integration offers real time information and eliminates errors and duplicate entry.? Interfacing offers risk from these errors.? As an example, if an employee?s benefit deduction is not immediately sent to benefits from payroll, reporting is off.? An erroneous report to a senior executive never bodes well, does it?? Having a common front end to represent integration doesn?t absolve the back end data integrity, it merely hides it.
Loss of control ? Loss of control associated with in-house processing of payroll, HR, and benefits administration is the #1 issue with outsourcing.? Often businesses prioritize the cost of losing control over the financial gains of outsourcing?s cost advantages from scale.? Why is this? It?s because most employers observe a time gap between when data is sent and when it is actually transferred to the providers. In consequence, employers struggle with blackout periods or data latency that causes errors. This gap usually also results in additional time spent checking and double checking for errors, often causing more time to be spent checking the provider than just processing payroll yourself.
Are these challenges your business faces with its current outsourcing relationship? Do you have other challenges we didn?t mention?
Source: http://yourwatchgroup.com/2012/03/10/outsourcing-many-businesses-do-it-but-few-are-satisfied/
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