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Establish an Effective Sourcing Governance Process Early
There are many reasons for value leakage in a sourcing agreement such as excessive capital spend, budget expansion, scope creep on projects, delivery misunderstandings, etc..., that are mistakenly identified as the root cause of a failed outsourcing relationship but, they are all symptoms of the lack of an effective outsourcing governance process.
Alsbridge research shows, when outsourcing fails to achieve expected results as initially intended, the most prevalent root cause is often the governance process and structure.
Many companies have governance organizations in place prior to outsourcing but, all too often they set up to operate efficiently or effectively. Without an effective governance organization in place, the likelihood is that the same results will be achieved post services transition and sourcing with a new provider as were experienced prior to the relationship.
There are at least three options on timing the development of an effective governance organization:
- Prior to the sourcing process to effectively monitor the current environment
- During the sourcing process designed to accommodate both the retained and outsourced domains
- Post sourcing process after challenges are discovered and value leakage has taken hold
Timing the development of a successful governance organization has an important direct impact on the success of a sourcing arrangement, though businesses will benefit from the right governance organization in place, even without an outsourcing arrangement.
How to Control Cloud Sourcing in Your Organization
Many organizations currently investigating the opportunities and risks associated with adopting cloud sourcing solutions are doing so without fully understanding how to manage the future of those technologies. Getting answers to several key questions can help IT and sourcing executives better understand and manage the future of cloud sourcing within their organizations.
Each year Information Technology (IT) users are exposed to an increasingly wide range of innovative technologies supporting both business and personal applications. The proliferation of end-user based technologies and the relative ease with which they are deployed, has contributed to a significant increase in the level of understanding of technology by growing numbers of individuals.
Why is it Important to Manage Cloud Technology?
As the level of sophistication in an end-users 'use' of technology grows, traditional barriers to adoption are lowered. New cloud sourcing applications and services are relatively easy (even for the less savvy users) to purchase and set up. Therefore, it is increasingly incumbent on an organization's IT and sourcing executives to lead the enterprise in its understanding of these new technologies, experiment with cloud technology in the business, and manage the process for adopting and deploying cloud-based solutions across the enterprise.
Managing the Future of Cloud Technology
Getting answers to several key questions can help IT and sourcing executives better manage the future of cloud sourcing within their organizations. First, it is important to know whether or not IT and non-IT executives within the enterprise believe cloud computing can drive value to the business. Second, it is important to know how their companies might realize value from the adoption of cloud technology.
Developing a Cloud Decision Framework
Organizations can better manage the future of cloud computing by developing a decision framework that positions cloud-based services within the context of their existing technology plans and sourcing strategies.
In Summary
Many organizations are investigating the opportunities and risks associated with adopting cloud-based solutions in their business, without fully understanding how best to manage the future of those technologies within the context of existing technology plans and sourcing strategies. IT and sourcing executives must work collaboratively to develop a cloud decision framework within the organization while maintaining control over the introduction and deployment of cloud sourcing technologies across the enterprise.
Offshore Considerations for Business Process Outsourcing Strategy
Business Process Outsourcing (BPO) strategy is gaining momentum in the marketplace with anticipated growth of over 20% annually. More and more companies are turning to BPO strategy to reduce their costs and improve productivity and processing quality.
Simply put, the reason behind this push is that a successful BPO strategy can provide significant benefits in these areas and more.
As your company contemplates making this leap, you should consider several key decisions related to the BPO strategy endeavor. The first two will be discussed in this article, and be sure to look for the remaining three in upcoming issues of the E-newsletter from www.outsourcingleadership.com
- Supplier Selection
- Due Diligence
- Service Delivery Approach
- Knowledge Transfer
- Governance
This is, of course, a crucial step whether you have determined to go to a sole source approach or to a broader, more conventional bid process to ensure a competitive solution at a competitive price.
The first step is to survey the suppliers in the marketplace who have the capability to effectively provide the services you are considering moving offshore - a difficult task given the explosion of suppliers in the marketplace today. Prospective buyers should be aware that many are simply virtual storefronts looking for your business.
Next, ensure you have developed comprehensive, precise criteria for your decision that will meet the needs of all the key stakeholders. You may have people in your organization who have a preference for (or against) certain offshore locations.
Due Diligence - Prove the work can be done.
Due diligence is critical as you move from your initial list into your shortlist of suppliers. Just as it is important to have specific assessment criteria in determination of the supplier, it is equally important to have a thorough understanding of your financial, operational and quality expectations.
Operational and quality expectations should include - at a minimum - the key service levels that you are expecting in the performance of the work. If those expectations are greater than what is being delivered today, you should plan accordingly as you look at resource requirements to deliver the work offshore.
Finally, it is strongly recommended that your core team representatives see firsthand the facilities in which the service will be delivered.
The following steps are no less important to the success of an offshore BPO strategy endeavor.
- Service Delivery Approach - How and where the work will be done.
This addresses the point of how your organization wants to accomplish the savings. Do you want to start small with a pilot? Are you looking for a single throat to choke? Outsourcing, shared services, or maybe a joint venture...
- Knowledge Transfer - How to make it work.
There are two key points here. To paraphrase the real estate mantra "relationship, relationship, relationship" and planning with defined milestones... - Governance - How to keep it working.
Three key issues: service levels, reporting structures and change control...
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.
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