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 The Truth about the Three R’s of Outsourcing: Repatriate, Re-compete or Renegotiate?
White Paper |
Category: Negotiations / Renegotiations IT Infrastructure & Applications Outsourcing
In June 2011 I was interviewing the COO of a California-based bank as part of an application strategy engagement. At the end of the conversation, he asked if Alsbridge had any data on the number of contracts in which the client repatriated all of the services.
My answer was, "Off hand I don't know, but I will find out."
After asking several fellow consultants, I found little or no useful data that would provide a fact-based answer. So, I started digging.
The facts uncovered several "AH HA's!" about the keys to success in outsourcing and the truth about the three R's of outsourcing.
Effectively Blueprinting Your Vendor Management Office
White Paper |
Category: Transition & Governance IT Infrastructure & Applications Business Processes...
Although organizations have been establishing Vendor Management Offices (VMOs) to facilitate their ITO arrangements for many years, few succeed in effectively running their outsourcing activities as a business.
The problem is that there are no industry standard reference models available to help address the unique challenges associated with managing these complex relationships.
This white paper explores elements found in organizations that have developed mature vendor management practices and highlights the framework and associated processes they apply in order to deliver value to their business constituents.
Outsourcing Strategy: How to Make Your Business Case
White Paper |
Category: Strategy & Business Case IT Infrastructure & Applications Outsourcing
Picture this: Your CFO walks into your office 18 months after signing your first outsourcing contract and asks, "What happened to the savings you promised in your original outsourcing business case?"
Do you:
A. Quickly grab the binder that holds your original outsourcing business case which shows your investment through transition, the material changes in your business case and the resulting impact to savings on a month by month basis, and hand it to the CFO, or
B. ... (You fill in the blank).
One of the toughest jobs in outsourcing is tracking the impact certain changes may have on your outsourcing business case. There are a number of actions and forces that can significantly alter what you planned to achieve. Knowing what these changes are and how to best manage them will make a meaningful difference to your bottom line.
In order to ensure you have the right answer for the CFO, you should anticipate any potential changes in your outsourcing business case by proactively asking the following 12 questions:
1. How have costs changed since the inception of the original outsourcing business case?
2. Has the inflation clause in the contract become effective?
3. Has the foreign exchange rate clause kicked in?
4. Is your business growing?
5 Have any unplanned corporate allocations been assigned to your department
6. Has the size of your retained organization increased?
7. Did you follow your original outsourcing business case plan for reductions in force
8. Were your actual transition costs greater than estimated?
9. Did the provider under bid the work? In a competitive bid process, sometimes a provider will contract for more than they can deliver
10. Has the business overwhelmed you with a floodgate of pent up demand that was waiting until you got through the outsourcing transaction
11. Has a process been set up to inspect and reconcile the provider’s invoices against work volumes and what was contracted for the agreement
12. Has the provider re-badged more of your people than anticipated and/or established an on/off shore mix that is more tilted to onshore than anticipated?
Is BPO Service Management the Key to Innovation?
eNews |
Category: Transition & Governance Business Processes Outsourcing
Analyst research and practical experience indicates the organizations outsource primarily to cut costs, then to improve service.
Cost saving can be relatively easily delivered in today's market by using offshoring as the main lever, and can be clearly tracked. But service improvement through effective through BPO service management is more problematic. Why? Because service improvement is more challenging to deliver, more dependent on inter-relationships with the client, and more difficult to track (who knows what the service was really like before the outsourcing?).
However, if cost saving becomes a given, then the main reason to outsource becomes the need for innovation and the consequent service improvements which can be made available through BPO service management. BPO suppliers are at the heart of an industry which talks of innovation. They generally bring consulting and system integration skills to bear, and are delivering similar services to multiple clients on a global basis, learning lessons and pushing the boundaries of innovation as they go...surely they can deliver innovative solutions which improve service as well as cutting costs?
The answer is that they can, but accessing innovation comes only through vigilant BPO service management, It cannot be taken for granted by clients and is not straightforward to contract for. The reason for this is that BPO suppliers have no "secret sauce". They use the same levers for change as are available to any organization - process improvement and standardization, offshoring, automation, management focus and sheer hard work and attention to detail.
All of these require time and investment to have an impact - this has to be paid for. So when a client's focus is primarily on cost savings, then the appetite for investment can be weak. And clients often confuse savings and improvement when they contract for services. Commitments to "continuous improvement" sound as if they are focusing on the service, and are becoming more common in outsourcing contracts, but if they mean anything they tend in fact to mean "continuous price reduction" rather than "service improvement" because they are defined as year on year price cuts. The assumption (right or wrong) is that this will be delivered by underlying process improvements made by the supplier - even if this is the case, these are not the kind of changes which deliver improved services for the client.
For clients to get the most out of outsourcing relationships, they must exploit the potential of a partnership with a major BPO player, through vigilant BPO service management.
Ultimately clients have to pro-actively manage the experience and capability of outsourcers to get what they want from them. If what they want is innovation and improvement, then they have to invest in that improvement and co-deliver the results.
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