By Jeff Richards
Managing Partner
We work with a lot of organizations that outsource many of their business processes to third party providers. If you’re considering outsourcing your manufacturing, data center, call center or other processes, you need to be aware of the different phases of the outsourcing lifecycle. In our last article, we introduced the outsourcing lifecycle and its five phases. In this article we’ll delve more deeply into Phase I of the cycle: assessing and documenting outsourcing opportunities.
There are three stages in Phase I. Let’s look at each of them in turn…
Organize the Effort
The first step is to look across your organization to determine what you are doing well and efficiently versus what you are not doing so well, and what is or is not core to your business. This will help you decide exactly what processes you want to outsource.
As part of the organizing stage you will also want to build the team for your outsourcing project. Who will be involved? Whose buy-in do you need to get? What criteria will you use to assess your options? And so forth.
Assess Outsourcing Opportunities
This is where you develop your overarching outsourcing strategy and process- or geography-specific business cases for outsourcing. You can then use that framework to prioritize your efforts and generate executive awareness. From there you can create detailed requirements that, along with the strategy, will feed into the next phase.
It is not uncommon in this phase to find improvement opportunities, either short or long term, that do not require outsourcing to generate process improvement, efficiency gain and cost reduction. You may even choose to stop here and not proceed to outsourcing. In any case we recommend you have this information available so you know where the “low hanging fruit” are before you open a dialogue with an outsourcing service provider.
Develop Strategy and Requirements
Perhaps the largest source of value leakage in the outsourcing process is the failure to articulate a clear outsourcing strategy. Why? Because most companies don’t state or even understand what their “real” objectives are from outsourcing. Outsourcing usually starts as a way to reduce costs.
However, much has been written that suggests focusing strictly on the financial aspects of outsourcing leads to problems. Our experience corroborates this. Outsourcing also offers many non-financial benefits, such as shedding non-core tasks to focus on what gives you a competitive advantage, e.g. product development. Unfortunately, frequently companies do not understand or articulate their non-financial objectives when working with and evaluating service providers.
Whether or not you elect to formalize your outsourcing strategy as a separate deliverable, articulating a clear outsourcing strategy will help to ensure that the requirements and Request for Proposal (RFP) in Phase II are predicated on a clear strategy, and that these documents will help you achieve the desired outcomes.
By articulating an outsourcing strategy that ties to the overall business and IT strategy you will be able to significantly reduce the uncertainty and have a guiding document for the RFP as well as the subsequent evaluation of responses and the service provider negotiation. Tactically it improves the usefulness of the RFP document both for you and the responding service providers.
Conclusion
In the next article we’ll look at Phase II of the outsourcing lifecycle: Evaluating and Selecting a Service Provider.
About Jeff Richards
As an inspirational leader with the ability to develop the “big picture” strategy then drive it down to executable tactics for implementation, Jeff leads our Professional Services team. Clients benefit from Jeff’s 25+ years of experience developing and implementing transformative business strategies.
Jeff’s experience spans both industry (including Materials, Operations and IT Management) and consulting. He developed a unique global perspective during his tenure in significant P&L management-level positions in both Asia and Europe.
About CIO Professional Services
CIO Professional Services LLC is a top-rated IT (Information Technology) consulting firm, based in the San Francisco Bay Area, specializing in strategic IT consulting and business / IT alignment. Companies come to us seeking assistance with their information technology strategy as well as to source interim CIO / CTO employees or fractional CIO / CTOs.