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Are You Ready for Outsourcing?
By David Perara, Managing Consultant, ProBenchmark

Is your organization ready for outsourcing? It's an important question, and one that too many executives fail to consider.

Oftentimes, an organization makes a decision to outsource and leaps straight into the RFP process without looking back. A variety of independent research studies have put the percentage of outsourcing deals that fail somewhere between 50 to 75%. A well thought through process should focus on a comprehensive evaluation of the full range of sourcing options available, rather than simply churning out standard RFPs focused solely on reducing vendor pricing against cost points that may or may not have relevance to the success of the business or the vendor service delivery.

Conducting a thorough and deliberative feasibility and strategy phase before developing the RFP will help you avoid becoming one of the aforementioned statistics by (A) determining whether you should be outsourcing the function; (B) if so, how much of it; and (C) where the work should be done. This tenet holds true in all situations, but is especially important for complex, global organizations attempting to restructure multiple functions and processes.

Make no mistake about it: outsourcing is a risky proposition. Hopefully, the sourcing advisor you select will do their best to anticipate, define, monitor, and mitigate the risks involved - but you should accept that there are risks. Therefore, before knowingly taking the risk, it is important to understand whether it has a chance of paying off.

Most organizations perceive that much of the work required to create a sourcing strategy has been conducted under other initiatives, and that gathering the results of these "one-off" efforts can serve as a significant process accelerator. It is our experience that most such work has been done without a common understanding of the structure, content, or tools necessary for developing a total sourcing strategy.

This article discusses why a thorough assessment of an organization's current state (functions, processes, baseline costs, etc.), is essential to revealing the sourcing options available and the strategies to be considered for your organization.

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