Outsourcing
A CompsimTM
Process
Objective: The objective
of this paper is to define a process for evaluating outsourcing issues that
might be addressed by an organization.
When considering a series of
options where outsourcing is one of the options, one should consider a
multi-phased effort.
Phase 1: {Problem Identification}
First you need to identify
the problem that you are interested in solving.
In most, if not all cases, the problem you are trying to solve is not
outsourcing. The problem may be focused
on reducing expenses, obtaining access to technology, reducing headcount,
increasing operating efficiency or some other business reason. Outsourcing all or part of a function may be
one of the options.
Phase 1A: {Management Clarification}
If there are guidelines or
management directives that may impact some of the options they should be
documented. These management directives
might limit: adding new resources, capital spending, or additional expenses. These directives will likely impact
consideration for some of the options.
Phase 1/1A Deliverables:
Using the Compsim’s business management tools, the result of Phase 1
and 1A leads to the development of the top level issue (title and description
details) that defines the problem to be solved.
Phase 2: {Alternative Solutions}
Identify (brainstorm)
alternative solutions. Each of these
alternatives should be explained (Title and Description). This will give a
reviewer that is not knowledgeable about the subject, sufficient detail to
understand the alternatives being considered.
The list should be inclusive.
Outsourcing a complete
function, part of a function, or several functions may each be considered
alternative solutions.
Phase 3: (Optional) {Prioritized Alternative Solutions}
It may be possible to rank
and weight the different optional solutions as to their value to the
organization. This phase is only done if
the options carry some obvious preferences.
If there are no preferences for specific solutions, then no
prioritization of the positions is necessary.
In most cases we will use the arguments to validate the options in order
to make the most appropriate selection.
Phase 4: {Supporting and Objecting Arguments}
Identify the supporting and
objecting arguments for each of the optional solutions. Remember to refer to the Management
Guidelines from Phase 1A.
The CompsimTM
Issue “What should be considered in a general topic called
"outsourcing"?” has a position identified as ”Compatibility
with Objectives”, with a child issue titled:
“What objectives might be satisfied with "outsourcing"?” The child positions of this issue may be of
value in defining some of the reasons the potential solution would be
appropriate.
Another area of the CompsimTM Issue “What should be considered in a
general topic called "outsourcing"?” focuses on Cost. The positions responding to “What costs might
be associated with outsourcing?” can be used to key in on some of the objecting
arguments. The same is true for the
issue “What risks might be associated with outsourcing?”.
Utilize these hints and
other opinions and observations to justify each of the identified
solutions. Refine the data with input
from individuals or teams, listing additional details that explain why each of
the arguments is important.
Phase 5: {Prioritize the supporting and objecting
arguments}
Utilize the
‘drag-and-drop-plus’ capabilities of Compsim’s tools to
prioritize and weight the supporting and objecting arguments as they impact
your business decision.
Phase 6: {Initial Option Selection Report}
Prepare appropriate reports
of the raw data as desired.
Utilize the decision-making
report from Compsim’s tools to determine the
preferred option. Review the report in
detail along with the raw data to insure that you are comfortable with the
decision. If you are not, then review
the raw data items and their respective impact priorities for items that might
be adjusted.
Phase 7: {Outsourcing}
Assuming that Outsourcing
was one of the preferred solutions, it is important to perform a more in-depth
analysis of the impacts, costs, and risks.
In the initial phases 4 and 5, there may have been an expectation of
associated costs or cost savings.
The CompsimTM
top level analysis utilized above: “What
should be considered in a general topic called "outsourcing"? includes several other segmentation topics that should be
reviewed. They focus specifically on
topics that need to be understood when developing an outsourcing relationship
with an outsourcing supplier.
Now it is important that
this information be refined and reviewed.
To do this you will need to
work with your outsourcing supplier and your own administration group. You may have been initially estimating some
of the cost items. At this point you
need to more fully develop the pricing details to insure that your estimates in
phases 4 and 5 are correct.
You also need to evaluate
the risk items. In some cases you may have
identified risks that may have reduced the impact of some of the options. When dealing with the outsourcing supplier,
you may be able to reduce or limit the risk of some of the items as part of the
negotiations. These could take the form
of performance guarantees or an increased understanding of the working
relationship.
Phase 8: {Service Level Agreement}
The final phase of the
outsourcing plan will be to develop the Service Level Agreement with the
Outsourcing Supplier. This is your
chance to limit the risks you have identified with the plan. The CompsimTM
Issue: “What should be considered in a general topic called
"outsourcing"?” has a section that covers a number of items that
could be considered part of the
Phase 9: {Post Mortem}
Assuming that you have
decided to move forward with the outsourcing agreement and have successfully
negotiated an agreeable
If you found that
unidentified costs were encountered or that unexpected savings were obtained,
then you will want to highlight the impacts in a copy of the analysis. If you feel that you will likely be
performing additional outsourcing investigations in the future, you should
create templates of the options for rapid deployment.
It may be appropriate to
prepare a “Best Practices” report.
Compsim LLC
Copyright 2002 Compsim LLC; All Rights Reserved