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"Large scale change
may be organizational, such as outsourcing, downsizing, or mergers or on a smaller scale
such as conflicts between individuals, teams, departments or other groups. Our change
management consultants focus on clarifying the rational for the change, communicating the
change processes and the desired outcomes. "
Source: Estrella Partners Group LLC
Outsourcing Challenges: Avoid the Pitfalls
is also known as :
Business IT Outsourcing
Business Process Outsourcing
Business Processes Outsourcing
Business Process Outsource,
IT Outsourcing Challenges,
IT Outsourcing Companies,
IT Outsourcing Company,
IT Outsourcing Management,
IT Outsourcing Providers,
IT Outsourcing Solution,
IT Outsourcing Solutions,
IT Outsourcing Trends,
IT Services Outsourcing,
Outsourcing – Part of most Business Operations
Outsourcing has provided management with a powerful tool in its arsenal to control cost and enhance product and service delivery. Most analyses are quite thorough in outlining the benefits yet too many outsourcing initiatives have fallen short of expectations.
It is interesting to muse about why we call something Outsourcing verses Outside Contracting. In common usage Outsourcing seems to refer to the 3rd party handling of functions that were traditionally internal to the corporation while we hire Outside Contractors to perform activities to do functions whose skill set were not generally available within the company.
While we might Outsource Check Processing, IT or Accounting Processes we Outside Contract for architecture, engineering and general contracting to build a new corporate facility. While this delineation may seem somewhat perfunctory it holds a clue as to why many Outsourcing initiatives ultimately fail.
Current Mode of Operations
When we contract with an engineer, architect or general contractor there is a tacit acknowledgement that these firms possess skills not inherent internally. We go through a judicious selection process to make sure we have validated the capabilities of these firms and that they possess the personnel and skills required to do a job. We also assess the compatibility we have in ideas and the ability to work together. Once a selection is made we then trust these Outside Contractors to make significant decisions on our behalf.
In the realm of Outsourcing the exact opposite is often the case especially among the internal personnel whose functions will be displaced by the Outsourcer and who will be relied upon to manage the transition. We outsource functions we think we know very well.
The Outsourcing contract process has become very well established. There are specialties legal and consulting firms that have developed significant practices doing this work and they do a thorough and commendable job. The metrics, clauses and processes are well defined with strict penalties for failure to perform.
In the IT space competition is particularly intense among IBM, EDS, CSC, Perot and others to garner contracts valued in the hundreds of millions and some times billions of dollars. Organizations go through an intense RFP process with six or more bidders often down selected to 3 or 4 for another round of negotiations and more often than not final contract content negotiations proceed with 2 entities.
This process results in very fine tuned bids and strict contract terms. While it may seem that this process should result in a firm relationship often the opposite is true.
Because of the lucrative size and long tenure, as many as 10 yrs, competing outsourcers often overextend themselves feeling that even if they lose money early on in the contract they will make it up over the long term. In addition, no matter how knowledgeable the outsourcer is the employees currently doing the function understand the nuances of providing effective service in a much more in depth manner than the potential acquirers.
Upfront under funding combined with high expectations from a very knowledgeable customer breeds discontent.
Avoiding the Pitfalls
It behooves firms contracting for outsourcing support not to be focused solely on getting the best price and the strictest contract terms. An assessment needs to occur on compatibility of personnel, ability to perform, a demonstrated understanding of all the difficulties they will encounter and complete sharing of information.
This posture runs counter to many negotiation scenarios where we view it as a competition and feel that if the party across the table doesn’t know something it is their loss. Unless a firm looking to outsource has come to terms with treating an outsourcer as a multi capable, multi headed employee rather than an outsider the sufficient sharing of information will not take place so as to result in satisfactory long term service.
Outsourcing initiatives are often dictated top down. The personnel running the operations take the decision to outsource as an affront to their own abilities. This is a most tenuous situation for a CEO because while he or she has charted this change in direction they must rely on the people affronted to negotiate the outsourcing and manage its transition. More often than not there is a part of the team that wishes the Outsourcer to fail.
Getting the Right Solutions
Getting an objective assessment and impact of the business functions slated to be outsourced requires specialized skills and experience. It involves broadening the ROI evaluation to include impact to parts of the enterprise that regularly interact with the units being outsourced and business partners up and down the supply chain. Additionally, there are organizational change management issues that can scuttle best intentions.
EPG has an experienced staff with deep background in outsourcing and organizational change management. Our staff has a track record of assessing the affinity between the outsourcer and the outsourcing entity to provide an objective and more complete “bottom line” for Executive Management.
EPG staff has successfully transitioned business process to outsourcers and helped the staff to identify their interests in the outsourcing success. This provides benefits realization for the entire enterprise.
About Estrella Partners Group
Estrella Partners Group LLC is a consortium of proven, senior-level executives who possess the ability to understand their clients’ complex business problems, develop creative solutions to these problems, and effectively help them implement these solutions. Each member of the Estrella team contributes a unique combination of skills and style to Estrella Partners. Each was selected not only because of his or her abilities and openness to collaboration, but above all, because of their inherent commitment to client service and dedication to client success.
Estrella Partners is focused on assisting clients identify revenue opportunities and increase operational efficiency through the use of Organization Change Management, Program Management, Risk Management, and Green Advisory Services.
We are an organization that treats its clients with the utmost respect, honesty, and professionalism - all with better than competitive rates. Our resources have the hands-on experience necessary to lead client teams or manage projects that are beyond our client’s internal team’s comfort level.
We are supported by a dynamic group of professionals that encompass both deep industry and functional subject matter expertise with a proven track record of providing exceptional value as trusted advisors.
About the Author
John Scopaz holds a Chemical Engineering Degree from Manhattan College and an MBA from New York University. He has broad experience managing large technology, back office operations and construction initiatives.
John has strong coaching and educating skills and works well with company owners and senior executives in developing strategy, management practices and organizing project management and governance oversight. He possesses a keen awareness of the essential components of effective outsourcing from both the client and provider perspective and he personally has structured and negotiated numerous outsourcing engagements.
John has lectured at the University of Yunnan, China on Offshore Outsourcing and co-presented a Lawline.com video on Legal Issues in Outsourcing. As an executive John conceptualized the consolidation of global technology operations of a financial services entity and oversaw the implementation of global software and centralized computer operations significantly increasing the reliability of corporate data and reducing cost.
He acted as CIO for Republic National Bank for 18 years. John currently acts as a Senior Advisor to the owners of a computer manufacturing / parts supplier and an offshore knowledge processing outsourcing company.
For further information, Contact;
Al Uretsky, Managing Partner
Estrella Partners Group, LLC
Tel.: (623) 594-9283
Web site: www.estrellapartners.com
Table of Contents
- OUTSOURCING – PART OF MOST BUSINESS OPERATIONS
- CURRENT MODE OF OPERATIONS
- UNFORESEEN PITFALLS
- AVOIDING THE PITFALLS
- GETTING THE RIGHT SOLUTIONS
- ABOUT ESTRELLA PARTNERS GROUP
- ABOUT THE AUTHOR
- FOR FURTHER INFORMATION, CONTACT