However, spending more at the search stage reduces hidden costs throughout the outsourcing effort and saves considerable expense later. Companies should include certain clauses in the contract, select a trustworthy vendor and be certain about the vendor s role. Another hidden cost is the expense of transitioning activities to the vendor. The nature of the outsourced activities determines much of this cost. The cost to manage the outsourcing effort can be considerable, but companies tend to overlook it.
Experience is the best way to avoid high management costs.
Even spending money to hire consultants with IT-outsourcing experience can be cheaper than enduring the high cost of contract renegotiation and dogging the vendor to get the desired performance. The last hidden cost category is the expense to switch vendors or reintegrate the outsourced activities. Many managers view the end of an outsourcing agreement that involves strategic activities as a failure and are uncomfortable preparing for that cost. Simple precautions such as including a reversibility clause in the contract can help reduce problems. All rights reserved.