Outsourcing Roadmap Index

Service Buyers: formulating the outsourcing strategy

The first step to successful offshore operation is to formulate a solid and feasible outsourcing strategy. In order to achieve this, the organisation must address a number of key questions. The process is not easy as often different interest, at management level, collide. Outsourcing also means internal reorganisation, rationalisation of processes and resources in order to achieve a number of goals. But the process will almost certainly touch employees, their employment status or benefits. Clear and honest communication is of paramount importance.

Know yourself

What do you do well? What are your key competences? What is your core business?

What are your, strengths and weaknesses?

What does your customers want?

What don’t customers need?

What are your competitors doing?

How can you sustain your competitive advantage?

Where will the next disruption to business-as-usual come from?

What are the key trends in your business?

Outsourcing means, breaking up your existing value chain!

WHAT DOES IT MEAN to your organisation and HOW TO DO IT, what are the RISKS involved?

Why do you consider outsourcing? What are your motivations?

What is the desired state where you want to achieve? Is offshore outsourcing the right vehicle to get there?

Do you know your resources and capabilities at hand now?

Is outsourcing seen as a short term solution to today’s problems or a long term strategy to reach certain objectives? What are your long term targets?

Do you know enough about outsourcing? Do you know the advantages, disadvantages and risks involved in outsourcing?

Do you know the risks associated with outsourcing? How do you intend to mitigate these risks?

Do you know the factors which will increase the costs as a result of outsourcing?

Do you have the support from the top management?

Do you see strategic advantages in IT? Do well established business strategies drive your IT investments?

Do you manage costs in your organisation?

Do you manage risks in your organisation?

Do you have a clear overview of the key processes within your organisation?

Do you have complete process documentation? Is it reviewed and updated regularly? Are the key processes well segmented?

Do you know the costs related to each of the processes within your organisation?

Which processes are the candidates for outsourcing? Why?

Do you want to outsource in one larger step or do you intend to follow an incremental approach?

Do you have solid knowledge and experience in project management, transition management and multi-cultural issues?

Do you know the mistakes other organisations have already made in their outsourcing efforts?

Did you look at similar outsourcing operations you are planning?

Do you plan to diversify your operations? How (multi-sourcing v.s. single sourcing, geographically, etc.)? Do you consider a mix of onshore - nearshore -offshorealternatives?

Do you have resources (organisation) in place to support the outsourcing process and relationship?

Is there a right size of the process to be outsourced? (10 or 100 employees...)

Beside answering the above questions and defining the outset of the outsourcing strategy a clear COMMUNICATION PLAN should also be formulated to communicate effectively the outsourcing intent, consequences and approach within the organisation vertically and horizontally.

The final output of the strategy formulation process is the broader RATIONAL for your organisation to move certain processes offshore (and how does it fit into the overal corporate strategy), the list of functions/processes to be outsourced,  and candidate countries where you could locate your offshore operation - also called COUNTRY RISK ASSESSMENT. The selected functions must be of manageable size and scope, be spareable from the enterprise and match the ability of the future outsourcing partners to execute the transition. A TRANSITION PLAN has to be developed in order to ensure service level and business continuity, minimize risks and efficiently manage the transition process.

After an initial evaluation the pre-selected functions/processes should be prioritized based on their individual features and properties, the potential benefits of moving offshore, versus the risks involved.

How can one recognise a process which might be outsourced offshore? Properties of strong offshore process candidates are often;

Require minimal client or end-user interaction

Have limited reliance on IP

Have mature features and stable well defined requirements

The process is standardized, repetitive, well segmented and documented

Do not involve secure or sensitive data

Large enough to produce substantial benefits

Low added value or labor intensive

The application/process is stable with a reasonable expected life time

Low operational complexity

Low to medium business criticality