3 Steps to Outsourcing Success

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By Peter Tarhanidis

When leaders use outsourcing it is often in an effort to enhance the organization’s value proposition to its stakeholders.

Outsourcing allows leaders to focus on and invest in the firm’s core services while using cost effective alternative sources of expertise for support services.

When services are outsourced, management and employees need to prepare for a transformation in organizational operations—and project managers must establish a strategy to guide that change.

 

Creating an Outsourcing Strategy

Project managers can help to create an effective outsourcing strategy based on a three-part structure:

1. Assess the current state

This assessment should define the firm’s:

  • Labor expertise and associated labor costs
  • Value versus non-value support services
  • Baseline of operational measures and service levels

 

2. Consider the “to-be” state

The to-be state should be designed based on a comprehensive evaluation and request for proposal, including a good list of best alternatives to negotiated agreement items.

The to-be state must consider:

  • Access to low cost, high expertise labor and the marketplace arbitrage. This may evaluate onshore, right-shore, offshore and hybrid labor models.
  • Whether the firm should invest to “fix and ship” its processes or to “ship and fix” and adopt the providers processes.
  • Productivity gains that may be measured via the labor arbitrage, process capability improvements, speed to software application and deployment, automation of processes and IT management services, robotics, etc.

 

3. Consider the governance required to sustain the future state

A new internal operating model needs to be formed. This includes establishing teams to manage the contract, such as senior sponsorship, an operational management team or a vendor management team.

Then the outsourcer and the outsourcing organization should focus on continuous improvements that can be made to the process.

 

Avoiding Outsourcing Pitfalls

Project managers can avoid a few common pitfalls in their outsourcing projects:

  1. Add procurement and legal outsourcing experts on the project team to construct the agreement.
  2. Engage senior leaders to steer the initiative and align it to the business mission.
  3. Garner senior leadership support with change management actions to help guide the organization across this journey.

Overall, if done with a defined end in mind, leaders can capitalize on outsourcing by reducing operational costs, reinvesting those savings in core services, and providing access to expertise and IT systems that would normally not have been funded via capital appropriation.

Have you been a part of any outsourcing efforts? What advice would you offer to project managers involved in similar projects?

Posted by Peter Tarhanidis on: August 26, 2016 11:40 AM | Permalink

Comments (7)

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thanks, very informative.
I on work on construction field and the approach is to outsource some well defined activities. managing at the same time different projects and different project teams, which different companies in outsourcing, a very challenging element I found is represented by the unification of the process, tools and communication "set".

Fosco thank you! I agree with your view regarding variability in process management. One needs to establish clear process and standards. Standards can then be measured and acted on to improve and communicate performance to key stakeholders.

I offer big firms that "you have to train your outsource companies, if you don't, you fail"

Great Article Peter. My advice would be "Watch Your back" ......It's beautifully summarized by your last paragraph which is to be supported by management and legal teams.
That's the easy bit....actually doing the outsourcing work.

The complexity arrives where you have to exercise Emotional intelligence if you come face to face with departments or stakeholders in a organization whose functions or jobs are about to be outsourced.

" Up in the Air" a George Clooney movie , is very insightful in regards to the "Human Element" of Outsourcing.

Excellent ..

Thanks for sharing

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