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Balancing the Risk and Reward of Outsourcing
The best outsourcing agreement for your organization is not necessarily the one with the lowest price. Your primary goal when negotiating and structuring an outsourcing contract is to develop an agreement that achieves your business objectives not just on day one but throughout the entire term.
This white paper will help you understand the overall construct of a good outsourcing contract so that you can make certain you balance the overall risks and rewards in order to receive the services you need, at the levels you require, and within your price constraints.
Are You Ready for Outsourcing?
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.
The A to Z of Outsourcing
Outsourcing has attracted a lot of attention over the past few years. At times, the logistics of outsourcing can seem complex but, the basic idea of outsourcing is of course very simple – reap the benefits of having a specialist do a specific job for less money than it would cost for you to do it yourself. However, when it comes time to setting up the right outsourcing agreement, you may be overwhelmed with the complex and bewildering array of outsourcing terms and jargon.
As a result, we at Alsbridge wrote this outsourcing guide to help anyone involved in outsourcing understand the main terminology. The "A to Z of Outsourcing" isn't intended to be an exhaustive manual, but rather it is a guide to help you understand common outsourcing terms and concepts. If you don't know your ARC's from your Earnback, this outsourcing overview is definitely for you.
We've tried to make this outsourcing guide comprehensive without creating an encyclopedia. However if there's anything you would like to know which isn't included, or which isn't clear, feel free to contact ALsbridge, we'd be delighted to hear from you. Our goal is to make understanding outsourcing as easy and simple as possible so you can gain the most benefit from your deals.
Squeezing IT Infrastructure for Cost Savings: Is There More to Extract?
For the past 20 years or so, corporate management has looked to information technology (IT) services as a means to reduce overall annual costs. When all the internal cost reduction strategies had been squeezed dry, IT leaders turned to outsourcing to realize additional IT cost savings through leveraged service offerings, labor reductions via better tools and processes, and competition between the outsourcing service providers.
Once those IT cost savings were maximized, IT leaders went "offshore" to find even more IT cost reduction through labor arbitrage. Both offshore service providers and US-based service providers with offshore operations were able to offer IT cost savings over the onshore solutions due to lower labor costs of IT professionals located in parts of the world like India and Malaysia.
While there are some enterprise companies that have not fully leveraged outsourcing and/or offshoring to its full potential, most Fortune 500 companies have. These IT management teams have already been through several internal cycles of cost reduction strategies through layoffs, hardware/capital reductions, application rationalizations, consolidations, and more. And yet these companies are still seeking more opportunities to save IT costs in today's unsettled economic environment.
Due to the availability of better IT cost savings tools and the standardization of IT environments, IT leaders are beginning to examine the possibility of taking some services traditionally outsourced to a service provider out of their contracts and back in-house. This changing trend has clients asking outsourcing providers to further break down their pricing by the IT service towers to enable them to pick and choose what they want to have in-house and outsourced. This white paper will explain where you might be able to squeeze your infrastructure for more IT cost savings.
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