Outsourcing has grown in complexity, giving rise to the need for clients to investigate what services, applications and business processes are viable candidates for outsourcing rather than simply going forward with a comprehensive, single-sourced solution.
Outsourcing has traditionally been viewed as a way to reduce the expense of commodity-level processes and infrastructure, but as organizations and outsourcing have grown, the services that can be outsourced and the various types of outsourcing tend to require a greater level of due diligence, strategy and management.
The methods used to manage an outsourcing assessment depend upon the complexity and breadth of what is being outsourced and the number of potential vendors that are engaged. A complex outsourcing program consists of individual workstreams as well as a number of cross-program activities. Typical program management, communication, reporting and controls must be adapted to meet the requirements of this increasingly complex environment.
Program Office
Aligning the various services, such as IT services, application development and maintenance or business processes involved in complex outsourcing is a challenging process. It requires evaluating and managing the impact of projects and relating these to the changing needs of the business. Specifically, there are four critical success factors that are fundamental to managing complex outsourcing programs:
A clear direction to lead the work. Outsourcing programs exist to deliver business benefits in a rapidly changing environment. A clear direction is the foundation for a successful program and this requires the following elements:
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A relentless focus on specific business objectives
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A clear roadmap with realistic intermediate targets
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A ruthless prioritization of resources on what is important.
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The commitment of key stakeholders. Outsourcing programs involve and affect a diverse set of stakeholders. These programs also create change, which most people find difficult, particularly where structure, jobs and working practices are affected. The feelings of uncertainty, anxiety or even anger cause people to react unpredictably, and the potential for misunderstanding, mistrust, obstruction and misinformation is significant. Gaining the commitment of key stakeholders or at least ensuring that they don’t stand in the way, requires a deliberate campaign by program leaders. This involves:
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Identifying stakeholder expectations and concerns
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Overcoming the barriers to change
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Keeping up the engagement and managing expectations
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Consistent communication designed for specific stakeholder groups. |
The program must be organized to balance conflicting influences. Sourcing programs tend to be very complex. They affect stakeholders across the business and have potentially global impacts. They require an effective delivery organization, which means:
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A delivery organization that is aligned with the business. The program must operate within the business environment, and the design should be consistent with the business’ prevailing culture and authority structure
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A balance between central control and local flexibility. Sourcing programs need central control and direction combined with autonomy for delivery. The credibility of the central team to set clear standards, allocate resources where most needed and coordinate and channel best practices across the program are all key success factors. Another factor is effective empowerment to create local ownership for the delivery of program elements. Above all, the central team must promote proper communication between the center and the program teams so that everyone involved has a sense of belonging to a single community
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Effective program governance arrangements. Good governance requires appropriate delegation of authority and clear definition of accountabilities for all involved, particularly at the boundaries between the sourcing program and the business. The decision-making process must balance the sourcing program’s needs for rapid day-to-day decisions with the board’s need to manage the risk by vetting key decisions.
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The program must be driven to realize the benefits. Considerable effort is needed to convert output into benefits. Effective benefits management must pervade each phase of the program, rather than being added at the end. The program plan must clearly articulate how the benefits are to be measured — what can’t be measured or won’t be delivered. A robust benefits model must underpin the plan. The plan must specify the actions — both within the program and within the business itself — required to convert the outputs into the required benefits, and to set clear accountabilities and milestones for their realization.
Individual Workstreams
In a complex outsourcing program there may be several sourcing assessments taking place simultaneously, each being led by a different workstream leader. In order for these workstreams to progress efficiently and coherently, the following critical success factors must be maintained:
Workstream leads must collaborate and communicate effectively. Each individual workstream will have its own unique scope of services and corresponding group of potential service providers. It is essential, however, for workstream leaders to collaborate effectively so that the program maintains a common direction. This will ensure that all internal and external communications are consistent and sequenced correctly, human-resource conflicts are avoided and information resources can be shared.
Program templates must be used consistently by each workstream. A central document repository is necessary to equip workstream leaders with templates that ensure consistency across the program and eliminate duplication of effort. Standard text (e.g., company background, description of the bid process, etc.) should be provided by the program office and used in all relevant documents. This is particularly important for documents that are provided to service providers (e.g., requests for information, responses to questions, etc.) as a single service provider may be in communication with multiple workstreams.
Workstream leads must understand overlaps and dependencies. There may be questions about which services and/or assets belong to which workstream. For example, application-support services could be considered part of the service center or part of the application-maintenance workstream. Similarly, firewall software could be considered to be application software or operating-system software. It is essential that workstream leaders are clear on what is in and out of scope so that services and/or assets do not get overlooked or duplicated. Dependencies must also be clearly understood so that interfaces between services (e.g., between the service center and production services) are not compromised in the future mode of operations.
Market analysis must be a key component of each workstream. In a traditional outsourcing program, the number of potential service providers is quite small as there are not many vendor organizations that can provide a comprehensive, single-sourced solution. In a complex outsourcing program the number of potential service providers is increased dramatically due to the number of workstreams and service packages within workstreams. A new group of smaller, specialist vendor organizations are now viable service providers for the reduced scope of services on offer. Ensuring that these organizations are not overlooked in the initial vendor assessments requires an in-depth understanding of the marketplace and market-analysis techniques. Techniques like Porter’s Five Forces, should be adopted by each workstream.
