Successful outsourcing“We’re in it to win it”- negotiating successful outsourcing transactions Introduction
Section snippets
A. Step one: establish the Requirement
In today’s economic environment, this is usually straightforward, i.e. to achieve tangible cost savings. What is necessary in this regard is to have a clear picture of the real cost of providing the relevant services “in house” (factoring in the guarantee of particular service levels, which is unlikely to be on offer from an in-house function) so as to be able to compare and contrast it with the figures put forward by the potential outsource suppliers. It is essential that like is compared with
B. Step two: identify the project sponsor
One of the most common causes of failure for outsourcing projects (both in terms of aborted procurement processes and problems arising during service provision) is the lack of an appropriate project sponsor, ie someone suitably senior within the client organisation who assumes “ownership” of the project and who has the ability to make things happen, e.g. by freeing up resources, resolving internal disputes, or liaising with other affected parts of the business. The larger the proposed
C. Step three — set up the teams
Running an outsource procurement process is a project in itself, and needs to be staffed and planned accordingly. From the client side, key constituents of the team will be representatives of the affected business areas, in-house procurement/sourcing specialists, HR and of course legal (invariably both in-house and from external outsourcing specialists such as Barlow Lyde & Gilbert). Increasingly, the support of external sourcing consultants is also engaged, not simply for their experience with
D. Step four: develop the ITT
All too often, the ITT (invitation to tender) is addressed in a haphazard or half-hearted way, to the ultimate detriment of both the client and the outsource supplier. The ITT should ideally not be a broadly-worded “wish list”, but instead a clear and easily auditable statement of requirements, capable of being referred to in the ultimate contract as a document against which the performance of the supplier can be judged. Outsource suppliers will usually also see the benefit of a clearly drafted
E. Step five: run the procurement process
Once the ITT has been issued and a flood (hopefully!) of responses has been received, the process of assessment begins. Whilst much concentration will inevitably and correctly be applied to considerations of cost and perceived quality, it is essential to remember that, at the end of the day, it is the contract which represents the deal which has been struck, and accordingly the Supplier’s response to the proposed contract terms should be given equal prominence in the evaluation process. To this
F. Step six: award the contract
Contract signature is invariably accompanied by the popping of champagne works and a period of mutual self-congratulation amongst the negotiations teams of the client and the successful bidder. However, in reality the procurement process is not yet finished. There will invariably be post-signature issues to be resolved (e.g. in respect of the transfer of staff or the valuation of assets to be passed across to the supplier), albeit that post-signature due diligence should always be minimised to
G. Conclusion
Outsourcing projects are amongst the most complex commercial contracts around, and cannot be approached on anything other than a dedicated basis, using the input of people who are expert in the area. Whilst the larger outsource providers quite literally do this for a living and so have well developed toolkits to guide them through the process, the same can rarely be said on the client side. Careful planning and team selection can accordingly help ensure that both parties come out of the
References (0)
Cited by (2)
Managing it outsourcing: Second edition
2010, Managing IT Outsourcing: Second EditionManaging IT Outsourcing: Governance in Global Partnerships
2006, Managing IT Outsourcing: Governance in Global Partnerships