Outsourcing Roadmap Index

Service Buyers: What to outsource?

During the process of determining WHAT to move offshore or outsource, one should consider all and any parts of the value chain if it can be done better, faster, more efficiently, cheaper, etc. by an external partner.

As a result of answering the following questions we shall have a clear view on the process candidates to move offshore:

STEP 1. SIPLIFY, STREAMLINE and CONSOLIDATE your processes within your organisation before considering outsourcing - MAKE SURE IT WORKS!

STEP 2: REVIEW your processes and make the first selection of candidates. Look at the regular characteristics of processes which are often candidates for offshore ITO.

STEP 3: What are the processes which, under any circumstances, you DO NOT WANT to outsource?

Do you have a strong case not to move a specific process offshore? What not to move offshore? Usually:

Core competences and/or processes which give a competitive advantage

Functions which can not be performed by a third party with equivalent performance

Not sizeable enough to deliver clearly measurable benefits

STEP 4: Decide what can not be outsourced. Look for processes which:

have solid mandates

are subject to internal corporate politics and emotions preventing to move them offshore

are heavily dependent on physical infrastructure, which can not be moved

ensure compliance

require frequent on-site, face-to-face customer interaction

STEP 5. Which are the processes not suitable to be outsourced on the short term? Look for:

Work in progress or on going projects

Unclear roadmap (lifecycle)

High risk (revenue impact, sensitive data, IP)

Requires highly specialized technical or business domain knowledge

Contractual obligations

STEP 6. BENCHMARK the present service levels and PRIORITIZE the processes/functions which are outsourcing candidates

Why Benchmarking present service levels? The benchmarking result is going to be the baseline to measure and manage the outsourcing operation, contracts, SLAs and outsourcing vendors and relationships.

The prioritization is based on the individual features and properties of the processes and it takes into consideration the potential benefits of moving offshore, versus the risks involved. In your prioritization model, you could consider elements, such as:

Technology complexity

Supplier vertical market domain knowledge requirements

Criticality to business operation, strategy, competitiveness or continuity

Risks involved

Benefits to move offshore

Penalties not to move offshore

The selected functions must be of manageable size and scope, be separable from the enterprise and match the ability of the future outsourcing partners to execute the migration.

The prioritization and the systematic approach to select what to move offshore will help you determine:

The right mix of internal and external supply of services or business functions

The required capabilities of offshore vendors

The key directions in negotiating the outsourcing deal, contracts, SLAs

STEP 7. Create a METRICS set

If you have a well developed metrics set in place, linked to your baseline, you will be able to measure and manage the outsourcing process and relationship. You can compare it to the established baselines (STEP 6.) and you will have a guide to develop and manage the contracts, SLAs and the entire outsourcing relationship. Proper metrics will provide an early warning tool to address problems and negotiate changes. However, general guidelines to develop an effective metrics program apply;

The goal of metrics is better management not measurement. Keep it simple and focus on a small set of important metrics

Each metric must be directly related to a management issue to be addressed

If the information isn’t current, it is at best, worthless.

Monitor trends, not just values

Never take action based on a single metric

Measurement should not be disruptive