What is Contracts Management?
Outsourcing is a company transferring a part of its business processes and functions to a third-party organization located elsewhere, all of which is consummated by a contract.
What are the advantages of outsourcing?
Outsourcing enables budget flexibility. It allows organizations to pay only for only the services they need and when they need them.
It also reduces the need to hire and train specialized staff, brings in engineering expertise from the outside, and reduces capital expense, yielding better control of operating costs. The outsourcing arrangement can change as your maintenance needs change.
What is an SLA? Best practices for service-level agreements
A service level agreement (SLA) is a critical part of any outsourcing contract. SLA defines the boundaries of outsourcing project in terms of the functions and services that the service provider will deliver and identifies the service standards that the service provider must meet. A well-drafted SLA accurately sets expectations for both parties and provides guidance for measuring performance to the defined targets.
If the outsourced function is business critical, it is important to identify additional consequences for failing to achieve the service standards, such as designating the critical functions as key service levels and identifying the termination triggers.
Potential risks of outsourcing
Outsourcing maintenance services have risks, that have to be considered to be mitigated:
- Unrealized savings or hidden costs
- Decreased flexibility
- Poor contract or poor selection of partner
- Lost know-how or Loss of knowledge/skills
- Loss of control/core competence
- Supplier problems (poor performance or bad relations, opportunistic behavior, not giving access to best talent or technology)
- Losing customers, opportunities, or reputation
- Duplication of data entry for maintenance management
- Lack of information for maintenance management in the EAMS/CMMS.
To avoid this reality, it is important to have an effective Contract Management process in place.
