How to succeed with outsourcing

What benefits are associated with outsourcing your service functions? How do you make outsourcing a success? In March this year IFS outsourced workplace service for its sales and consultancy offices throughout Sweden to Coor.

“The new solution has resulted in reduced costs for workplace service and has saved time equivalent to a half-time job in the finance department. Moreover, the management now has more time to devote to the company’s core activities,” says Per Wange, IFS’ Purchasing Manager, who goes on to describe his own experiences.

Per Wange spearheaded the company’s outsourcing of workplace service and is now responsible for the service agreement with Coor.

More time for core activities

Per Wange describes how the decision to outsource workplace service was a natural one. IFS works with cost control and wanted to devote more time to its core activities. The management also realised that there were other companies better suited to dealing with service activities.

The first step towards outsourcing was an internal review of support functions, which showed that these had been delegated to a number of different units. This review resulted in responsibility for all support functions being assigned to a single company.

The internal support company had been up and running for a year when IFS decided it was time to outsource the business. Experience gathered from running its own service business meant that IFS was able to specify in detail the content and costs associated with the various support functions. The specification was presented to potential suppliers, who were asked to submit suggestions as to how they would manage service activities with regard to, for example, organisation, processes, projects and costs.

“Coor produced the most detailed and interesting description. As part of their tender, they put on workshops in order to obtain further information about our business. They had very good people and excellent procedures in place.”

One additional element in the support company was the finance department. However, IFS decided not to outsource this function, but to keep it as an internal department

“The finance function is integral to our core activity. We have subsidiaries in 24 countries and so the finance function is important in order to be able to handle management and follow-ups. We also have very good internal competence in the finance field, unlike the service activity field.”

The decision to outsource service did have a positive effect though, even on the finance department, as there were fewer invoices to deal with and authorise. Nowadays, IFS receives a collective invoice from Coor for all service, which has led to time-savings equivalent to a half-time job.

Internal support is important

An important part of the outsourcing work is to ensure internal support for the decision. Once the decision had been taken to outsource the service activity, trade union negotiations were initiated, during which the company described what outsourcing would mean and the desired cost savings and operational streamlining opportunities.

“Once we had chosen a supplier and reached an agreement with the trade union, we informed the employees concerned. This was done simultaneously in all regions during a joint information meeting with Coor, where we explained the process and gave the reasons for our decision. Coor then gave a presentation on their company.”

When Per Wange looks back at how the outsourcing process went, he emphasises that the majority of work involved defining what sort of services needed to be purchased – and what they should include.

“In the beginning, it was difficult trying to remember everything. I would say we got about 80 per cent of it right. During the first six months of the agreement, we have reviewed the service descriptions with the service provider and remedied any issues that have come to light. Some things were added, others were removed or amended.”

If Per Wange were to give advice to other companies who are considering outsourcing their service activities, it would be to determine carefully what needs to be outsourced and what it will cost – including any hidden costs, such as the management’s time and dealing with suppliers.

“Make sure you get everything in order. It makes life easier for all the parties involved, including the company doing the outsourcing and the service provider. It encourages greater confidence and helps you to avoid nasty surprises. It is also important that your company has a complete organisation in place that can manage the service agreement and make any necessary adjustments in conjunction with the service company. Finally, I would recommend that you get support for the decision and outsourcing process from the employees involved and their trade unions.”

Facts about IFS

IFS, Industrial and Financial Systems, is one of the world’s leading providers of component-based business systems. The company’s turnover in 2005 amounted to SEK 2,149 million, and it has approximately 2,600 employees.

About the service partnership

Coor is responsible for workplace service at IFS’ offices in Linköping, Göteborg, Stockholm, Jönköping, Värnamo, Malmö, Luleå and Karlstad. The agreement, which is worth MSEK 12 per year, runs for four years. The main services included in the service delivery are reception, meetings and conference service, office equipment, office cleaning, office materials, drinks machines, mail and goods and order service.