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What / if anything to outsource

17/7/2016

Libor Bešenyi (CTO)

Read more, what is sensible to outsource and what questions should we ask ourselves before making this decision. These notes follow up on a series of articles by Pavel Farka published on iTMforum (see links below):

 

Outsourcing is recommended for 3+ year contracts.

Outsourcing is mainly about a strategic partnership (we get the highest added value, but we have to accept high risk).

Contracts serve more to resolve conflicts, not to define co-operation.

Replacing outsourcing supplier is more painful for the customer than the supplier.

If the cooperation becomes unattractive for one of the parties, the efficiency of cooperation is reduced (the money saved may be actually more expensive).

Before starting

Me with regard to myself

How much is the service I want to outsource critical to my business?

Beware of the risks, for critical services it is worth to multiply the suppliers. Irreplaceable supplier is a huge risk.

What do I want to achieve by outsourcing and how can we measure it? I outsource because of:

    • Insufficient in-house quality?
    • The cost savings?
    • The need for innovation?
    • The need for flexibility?

If I want to save money, by outsourcing it has to be 2x (my savings plus earnings for outsourcing) - how does this affect the quality?

Why can I not do the outsourced services in-house? (How and why do they do it cheaper? Do I understand it?)

I can effectively outsource only what I know very well (to be able to measure it)!

What will be the impact of outsourcing on my customer (what is the relation of my customer and the service supplier)?

Why and what to outsource?

To outsource I need an outsourcing strategy.

Me with regard to the service

Do we have a common vision?

Is there a technical / technological consistency?

In what relationship am I with regard to the supplier (am I a strategic partner or just one from a "million")?

Do I have a possibility to influence the composition of the people who work for me?

Service with regard to me

MoSCoW principle:

  • Must have: Does the services fulfil all what I need?
  • Should have: Does it provide something like ...?
  • Can have: Is there anything with added value?
  • Want have: What is absent?

What is the stability and reliability of the supplier?

What are the acquisition and "exit" costs?

What are the dependencies on the individual (employees / partners)?

What is the maturity of their processes?

What are the references?

What is my feeling from the personal interview?

What will happen if the service goes bankrupt?

Can I evaluate the financial indicators (what is the effect of the service on my business)?

How to start?

  • Definition of my goals (in order to avoid misunderstandings)
  • KPIs definitions (if have not measured the service yet I will not be able to meet this point, thus showing the importance of the point that I can only outsource what I understand)
  • SLAs definitions
  • Definition of frequency and forms of communication (operation + strategy)
  • Definition bonuses and maluses
  • The definition of rules and responsibilities during the "exit" (copyright, knowledge base, documentation, ...)

How to continue

  • Let's measure & evaluate
  • Define and open problems
  • Review contract on an annual basis (reflection on new situations)
  • What are the new trends and what is their potential for further cooperation (extend the contract - we grow together)
  • Discuss middle/long term objectives
  • How to improve the current process?

Sources

 

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