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The secret to keeping your outsourcing initiative on track is having a governance model in place that not only specifies but also, constantly monitors and measures how effectively your provider is delivering your outsourced services - without it you simply cannot assure or improve the quality of service.
But how can you track the delivery of outsourced services when a portion of your services are in the Cloud?
Continue reading, “How Can You Measure Success in the Cloud?”
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For complex IT problems, uncovering and validating the root cause can be challenging. This is especially the case when coordination between multiple IT departments is required (e.g., it’s unclear whether the root cause lies in the infrastructure or application support space). It can become even more challenging when some of those support services are provided in-house and some of them are provided by different outsourcing service providers. The outsourcing buyer has brought in the expertise provided by the outsourcers, but their experts have differing opinions…
As an outsourcing buyer, has your company’s IT operations ever run into this situation?
Provider 1 is missing its SLAs and identifies the root cause as Provider 2’s performance. Of course, Provider 2 has the opposite view. When working with two or more outsourcing service providers that propose completely different hypotheses of a Root Cause of a problem, the answer is: “They both can’t be right.” Continue reading "Solving the Root Cause Finger-Pointing Conundrum"
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Assuming that costs savings is the most important factor to consider when evaluating a potential outsourcing arrangement, what do you think is next in importance? Service Levels? Innovation? Greater access to technology? While I would agree that these are important components of an outsourcing agreement, I would argue that these pale in comparison to building a flexible agreement that holds up over time.
What do I mean by flexibility? I’m really talking about the mechanisms that allow the outsourcing contract to withstand the inevitable pressures that will come as a result of business and market changes. These pressures can include:
1) Changing business priorities
Things that are highly important now from a client perspective may not be nearly as important in the out years. For example, the original deal may have been constructed to minimize delivery risk and maximize availability. However, from a business perspective, perhaps the client is now better positioned to accept some risk in return for freeing up dollars/resources/capacity to work on IT activities that add additional business value. Continue Reading "The Second Most Important Factor in an Outsourcing Agreement"
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Well over a year ago, I had the pleasure of advising a client that was willing to “take a risk” by doing something non-traditional with their external IT services provider. This client followed Alsbridge advice and used innovative price methods for application maintenance services outsourced to a Tier 1 Provider. The savings they achieved were expected, but the relationship improvement with business end-users was a surprise.
During a re-negotiation of the IT outsourcing contract in which the provider was to receive significant increases in work volumes, the client insisted on new price methods for Application Maintenance Services (AMS.) As many people have experienced, outsourced AMS is difficult to price in ways that keeps both parties happy. Many IT outsourcing contracts settle on pricing staff levels of effort or simply establish annual budgets for the services.
Continue reading "Taking a Risk Reveals Hidden Value"
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I’m always interested in hearing about the trends and best practices for maximizing the business value from outsourcing relationships. With the news of several outsourcing service providers being acquired (e.g., ACS/Xerox, EDS/HP and Perot/Dell) a common “trend” being touted is that the acquired companies should be able to leverage the innovation that comes from the Xerox’s, HP’s and Dell’s and apply it to their sourcing model thereby offering their clients something more than simply a lower-cost way of doing what they already had been doing via labor arbitrage.
Having dealt with many large scale systems integration projects, innovation is not just about applying new technology from the parent company. Innovation is about changes in IT operations, reinventing a business process entirely, developing new or improved products and services, or changing the business model or how the company competes. Yes, technology plays its part as seen in the Xerox/ACS partnership where Xerox can use its vast R&D capabilities to address the business problems of ACS’ customers. Add them together in a collaborative environment, and the hope is that they will be able to solve problems in new ways and provide new services to their clients.
So I’m wondering why developing this type of innovation is so hard for the outsourcers? Well, according to a recent Harvard article, collaboration is good but if you keep asking questions to over-analyze a decision an original innovative idea will never move forward because the process of getting the innovation to market takes too long. Hopefully, the new alliances will build collaborative environments that enable innovative ideas to be auctioned and go beyond the traditional outsourcing services. That’s a trend I’m sure we would all would like to see.
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I was recently working with a CIO that wanted to know what “operational alignment” truly meant, and how it could affect a sourcing decision. This client was weighing the pros and cons of outsourcing versus a shared services solution. The CIO felt that with either solution, the new retained organization had already been defined, and that meant the company had already had achieved operational alignment. While having the retained organization defined and ready to implement is an important step in the sourcing journey, it is not a component of having operational alignment.
As we walked down the hall to the CEO’s office, I quickly explained the three critical elements to achieving operational alignment: Continue reading, "Operational Alignment: 3 Easy Steps"
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Over the years I’ve worked with dozens of tier one and tier two outsourcing providers. I recently asked some of them to provide their perspective as to “why their clients and potential clients should hire a sourcing advisor.” One would initially think that a provider would be opposed to having a sourcing advisor involved as it might slow down the process and lessen the advantages that a provider could have over the client without the benefit of independent advice. I found quite the contrary.
Listed below are a dozen “uncut” reasons why providers believe clients should hire a sourcing advisor:
A Dozen Good Reasons
1. Ensures objectivity – brings in impartiality to the provider selection process
2. Acts as a catalyst – a good sourcing advisor spurs the sourcing discussion within the client environment
3. Provides a financially sound approach and rigor – develops a sound data-centric business case for sourcing options leveraging a data-driven approach
Continue reading Provider’s Point of View: 12 Reasons to Hire a Sourcing Advisor
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Outsourcing is comparable to the synergies created by an acquisition in which the algebraic properties are no longer applicable to the rules of mathematics.
1+1 does not equal 2
2-1 does not equal 1
The value of acquisitions create the concept of revenue growth multiples through product and service line leverage; additional geographic penetration; and sharing innovation through research, development and best practices. At the same time, redundant processes, expenses and staffing are eliminated, and the benefit result of lower costs increase the bottom line. Benefits also flow through to the final customer, higher sales and lower costs are achieved by one entity (as opposed to the two, separately) and shareholder value is increased exponentially. Combining the two entities achieve results of: 1+1 equals 11
Placing processes with an outside provider brings lower costs, leveraged industry experience, improved processes and innovation that was not readily available while working in an isolated environment away from others. Companies not using outside providers define its best practices as what employees know as existing, and the only reference point is oneself. Outsourcing algebra equation is: 2-1 equals something <1
Value Creation > 2
Here are some of the pieces of value creation and how it works: • Labor arbitrage • Elimination of tools • Training costs reduction • Leveraged environment • Capital preservation • Buying by the drink • Cost control and avoidance • Soft savings in telephony, benefits, environmentals and human resources Savings opportunities exist with the elimination of a layer of management staffing that is no longer required to oversee the staff and replaced with a leaner vendor management organization to manage the provider. Available department time allows for greater focus for supporting company strategies and business growth. Share your comments with others about how outsourcing achieves: 2 – 1 equals something < 1; Value Creation > 2
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on Saturday, 31 July 2010 08:52
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