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Strategic Outsourcing Assessment
(SOA)-Part 2
Outsourcing initiatives have evolved
from short-term tactical projects focused on cost savings
to executive-level business strategies that enable companies
to gain and sustain revenues and profits in the competitive
global marketplace. In this second newsletter of a four-part
series, ZSL, an IT outsourcing solution provider, details
the initial steps of the SOA process.
The process owners or function heads
would be asked the following questions.
- What are the organization’s core competencies?
- What are our critical functions that are not core?
- Which services or other support functions are not
integral to or close to the core competencies?
- What is the cross-functional impact and interfaces
for the functions considered for outsourcing?
- Can we/should we fix the problems internally before
considering outsourcing?
- What is your capacity utilization?
- What an outside provider can better accomplish?
- What are our outsourcing objectives?
The feasibility of outsourcing is
determined by a series of thought and brainstorm processes
that every outsourcing idea should pass before further,
detailed evaluation. The first is the core and non-core
competency analysis. If the function or functions to
be outsourced contribute in central ways to the organization's
competitive success (core competencies) then those core
functions probably are not strong candidates for outsourcing.
But do not confuse a critical function with a core competence,
as the former probably should be outsourced to a best-in-class
provider.
The next step is to analyze the support
functions that are not tightly integrated with the core
competencies. Those support functions are possible candidates
for outsourcing without many dependencies.
The outsourcing can be divided into
two general categories: total and selective. Total outsourcing
involves contracting out 80% or more of the function.
Selective outsourcing involves outsourcing a few functions
that total less than 80% of the whole. Methods for identifying
functions that might be selectively outsourced include
opportunistic, problem-focused approaches and more methodical
planning approaches.
The cross-functional impact needs
to be considered and evaluated to qualify for the outsourcing
with the identification of potential technical and functional
interfacing issues. Remember, Outsourcing is not an
excuse to wash management's hands of a poorly managed,
misunderstood function. Understand the costs, problems
and potential of a function before deciding to just
get rid of it.
Assess the operational and financial
risk for each function and assign the mass value based
on risk level. The internal IT team’s capacity
utilization would give a clear picture about the possibility
and feasibility of fixing or addressing your current
IT needs which are aligned to your business (function)
goals.
Defining the explicit goals of outsourcing
is very important. If you do not know what you are trying
to accomplish, any alternative can look good or bad.
Businesses that rush into outsourcing without fully
understanding what they hope to gain soon find themselves
mired in a contractual battle or not receiving improved
services. Sensible reasons to consider outsourcing are
both strategic and tactical.
About SOA
ZSL offers a complementary Strategic
Outsourcing Assessment (SOA), resulting in a highly
detailed step-by-step document, or “roadmap”,
which includes:
- High-level overview of core and non-core business
applications/processes
- Evaluation of outsourcing readiness
- Itemized gap analysis of systems/process infrastructure,
complete with roadmap and recommendations
- Summary of optional engagement models with projected
impact analysis
- Summary of short term and long term recommendations
- Detailed solution providers evaluation checklist
- Recommended jump-start pilot outsourcing initiative
to build buy-in and momentum.
- The SOA would also help you in
- getting a baseline for a overall project plan,
- providing momentum to stalled discussions/planning
of outsourcing initiatives,
- validation for functional heads who have yet to
secure sign-off for an outsourcing initiative,
- providing a competitive baseline by which current
preferred outsourcing vendors can be re- evaluated.
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