20 Steps to Successful Outsourcing Objectives The following 20-Step Program will provide you with a guide that would help you achieve the following: p...
20 Steps to Successful Outsourcing
Objectives
The following 20-Step Program will provide you with a guide that would help you achieve the following:
20-Step Program
1. Organize a top management Steering Committee assigned in planning, monitoring, overseeing and searching for your transition to outsourcing. These includes members from your internal information systems division, key user groups, and executive management including marketing and/or strategic management. It is essential to factor the changing needs, markets, distribution channels from the beginning resulting to minimal surprises in the succeeding phases. Management also needs to be informed and be part of the process to make sure that there is due diligence being performed and to provide appropriate stewardship up over these key corporate information assets. This is to minimize the loss of important information resources, losing effectiveness, or leaving the company vulnerable to competition due to a screw up in an outsourcing deal which could lead to legal suits in the future.
2. Identify and engage an expert team to be able to guide you and the organization during the decision, selection, and contracting processes for your outsourcing needs. The team should include a small group of independent experts with specialization in outsourcing such as an information technology consulting professionalwho understands both you and your outsourcer in your needs and who is by far capable in helping you administer the contract over time, assuring a smooth transition to the systems, and resolve problems when the contract is signed. Then, an attorney with specific contracting, business, and outsourcing expertise to help develop and negotiate and outsourcing that would be beneficial to both parties and make the relationship work. Lastly, an organization development/merger and acquisition professional to make sure that the transition of staff and relationships works well.
This team is also warranted and needed to make tough decisions because perceived or actual weaknesses in your current IS team may have caused the failure of IS within your company in the first place. Also, engaging with independent experts to assist your IS managers will be wise because they themselves would probably be most directly affected by moving to outsourcing and the resulting contracts that goes with it.
3. Identify critical internal resources, such as a particularly competent data processing director or chief information officer, who will stay on your company's staff internally assigned in managing and administering the relationship between the outsourcer and your company. Determine which staff, and software and hardware licenses and resources should/must go to the outsourcer for the relationship to be mutually successful.
4. Identify what is good and bad about your current installation in terms of:
Then assess each strength and weaknesses such as budget constraints, changing needs of internal users, top management commitment, resistance to change, lack of tools and human resources, staff development and ability to attract and retain quality staff, lack of methodology, hardware technology limitations, platform limitations, etc. Quantify and identify which are essential items and service levels and which components should be added, improved and attained in the outsourcing arrangement. Go for the “good enough” systems and targets that are attainable, affordable and of necessary quality.
5. Update the company's strategic business plan. The typical outsourcing agreement would cover a period of 7-10 years. You should make it a point that you know where your company is going locally and globally in terms of products, markets, manufacturing, sources of supply, distribution arrangements, labor sources, etc., before you develop the systems plan to be able to support such direction and needs.
6. Develop a 7 to 10-year strategic systems plan to identify the long-term needs of the company that translate into the strategic business plan. Also, ascertain the new applications that will be required such as electronic data interchange, integrated manufacturing and production control using robots and automated “smart” buildings, international telecommunication networks, “intranets”, etc., which applications will be updated, which and when it will be discontinued, and which will be developed from the modified new applications software.
7. Identify the alternative hardware and operating systems alternatives and find out the recommended new architecture(s) needed to develop and support the new systems plan. This includes satellite communications, wide area networks, wireless communications, mainframe and client-server usage and inter-connect, specific operating systems, open-architecture decisions, database and programming language decisions, special development and maintenance tools, etc.
8. Understand your cost structure and determine/estimate future costs to build the projects outlined in the strategic systems and architecture plans developed mentioned in steps 6 and 7 above, including estimates of manpower and supporting hardware and software and equipment to aid you in building, upgrading, maintaining, operating, and controlling such systems. You should also recognize that over the next 5-10 years there is a need to estimate all relevant capital as well as operating costs; costs of supervising the outsourcer, likely increases in costs for salaries, benefits, service contracts, etc.; "cost of money"; interest costs; residual value of equipment and facilities; cost of transition, including personnel; cost of changes in direction and level of resources; cost of contract modification, etc. it is important to note that this is the most difficult task so you should be able to utilize your expert team for guidance and confirmation.
9. Identify your current and anticipated usage: normal operations, expanded operations over time, peak periods, off-site processing, storage, archive, integrations requirements, back up and disaster recovery requirements, etc.
10. Review the strengths and weaknesses of the outsourcing alternative. Establish how the outsourcing alternative will aid your company meet its long term goals and why it is a better alternative than staying in-house or partial outsourcing or working with multiple outsourcers. Determine which applications and resources should be outsourced and which to pursue using a different approach. Update this information and re-evaluate the decision throughout the entire decision-making process as new or better information is gained.
11. Using your expert team, identify several outsourcing alternatives. Get hold of the appropriate literature of relevant information from the team's pre-selected short list of outsourcers. This should cover all of the technical and administrative things you will need to know about your outsourcer, you will also need to know in depth: corporate history and stability; current, new and lost customers; employee numbers, turnover, and experience levels; financial stability through a review of audited financials and footnotes; technological status including methodologies, tools, platforms, expected life of existing hardware; age of current applications; their own business and systems plan; downtime statistics; results of operational and security audits; customer surveys and systems demonstrations (both are critical and must be well planned); conversion commitment success/history (a must if you want your business to prosper); such intangibles as responsiveness, control, competition for resources, flexibility, etc.
12. Determine which areas of your company you would like to outsource. Identify a phased-in approach for outsourcing services if that is the desired method.
Services can be selected for virtually any part of your Information System areas including:
13. Develop a rigorous request for proposal (RFP) with a uniform format for you to be able to compare such responses from other outsourcers. Their answers to pricing should be simplified so that you can readily understand which are essential or basic services and which are add-ons. Pricing can take on many forms and that the different services may be priced differently or in alternative combinations to your advantage such as flat monthly fees; transaction volume-based fees; fees based upon a customer unit of volume (i.e., number of customers, accounts, credit cards); fees based upon CPU usage required to execute your jobs; fees based upon the number of input or output transactions or both; fees based upon the amount of disk storage or other storage requirements; programming fees. Those may be different from enhancements, new developments, special reports, or rush jobs; data communication line charges; disaster recovery rates; training and seminar fees; consulting fees; documentation charges; conversion fees; etc.
Identify some key clauses that you would like to be integrated in the contract so that you may be able to win some concessions on these during the bidding phase and so that you can determine the sticking points early.
Identify Acceptance Criteria for outsourcer bids and for systems and service acceptance throughout the validity of the contract: the accuracy, frequency, and timing of reports and information; response time for on-line transactions; uptime of the systems or the various components; emergency procedures in the event of downtime or other disruption of services; responsiveness of outsourcer personnel in the event of problems or errors; data archiving; access security; ease of use; unit, string, systems, and acceptance testing methodologies to be used; systems development methodologies and user participation and signoff points; usage of data query, parameter-driven, fourth and fifth generation languages in programs; user of upper- and lower-CASE tools, client-server architecture, and object oriented approaches; etc.
14. Invite bidders to a bidders’ conference at your site and individually take the bidders into a tour of your site. Let your top management and the Steering Committee meet with the outsourcing representatives for at least an hour during the tour. This should set the tone and demonstrate the importance and visibility of the study and resulting relationship. This can be very important if your top management would need to meet the outsourcer's top management in the future.
15. Evaluate proposals against your pre-established, and fully documented, criteria. Identify different approaches recommended by the outsourcer and compare it from your own research and preliminary conclusions. Be receptive to suggestions but be careful in analyzing the differences. Have a debriefing with the outsourcers for you to be able to discuss alternatives and to clarify proposals.
16. Rank proposals so that you have a backup vendor. This is essential in case negotiations break down with your preferred vendor. This can also give you the confidence to negotiate with the vendors in a tough but fair manner. Identify absolutely necessary criteria early. If the outsourcer does not meet the minimum criteria they should be asked to clarify their proposal or drop them from the list.
17. Checking references is a critical part of the evaluation and comparison of outsourcers. This is very important. You should visit their other customers as well. Review their status reports on key projects and contracts if possible. Don’t underestimate the experiences of the other customers and assume that you will gain a different result.
18. Negotiate the contract using your expert team and using pre-determined target clauses, criteria, and escalating alternative dispute resolution (ADR) options to keep the outsourcing agreement and relationship in line with your mutual objectives and be beneficial to both parties.
Consider and develop a strategy for at least each of the following contract areas:
19. Monitor, manage, modify, and steer the outsourcer and the contract as required over time. Give three-month report cards to the management of the outsourcer. Update and change the contract over time to continue to assure that your needs and, hopefully, the mutual needs of the outsourcer continuously being met.
20. Be Lucky: Ben Rosen, a legendary high-tech venture capitalist who invested almost first in Apple and in Compaq and made it big, said in a speech a few years back that you must "be lucky" in these kinds of long term relationships in uncertain times.
OUtsourcing 103
Outsourcers' criteria for evaluation
Outsourcing 101
There are about nine “Billion Dollar Babies” companies that were expected to sign billion-dollar outsourcing deals in 1994. Companies such as the Xerox Corp., with a $4 billion plus outsourcing deal, McDonnell Douglas and General Dynamics all joined the hype.
Web User
A decade ago, when it came to seeking information, the catch phrase was, “let your fingers do the walking” through the yellow pages. Today, you could safely say that it has been replaced with, “let your mouse do the clicking”. Fortunate or unfortunate, good or bad and like it or not, the fact is that more and more people every day turn to the Internet to seek the information they desire.
