Technology & Business Integrators, Inc. (TBI) has been delivering Alternative Sourcing Assessments and consulting support to Fortune 500 companies for 48 years, and has established a reputation as the premier provider of these services in the United States and Europe. During this period, we have amassed a considerable wealth of lessons learned and expertise regarding when it makes sense, and when it doesn’t, for a company to alternatively source an IT or business process. This extensive knowledge base and experience has allowed us to develop a very robust methodology for conducting these assessments, which we now call TBI’s Alternative Sourcing Assessment Process (ASAP).
ASAP offers a rapid but detailed evaluation of those factors found to be most critical when a company is considering alternatively sourcing any if its IT or business processes. In addition to a detailed findings report at the conclusion of this process, TBI also provides a graphical representation of the information that has proven to be a very effective tool for the senior decision-makers at a company to optimize their sourcing strategies.
Factors to be considered when evaluating outsourcing for an IT or business process might include the following:
- Is it a “Core Competency” of your company?
- Is it a key competitive strength/advantage of your company?
- Would your company’s external customers perceive it as a key “value-added service” performed by your company?
- Would the market analysts most influential in covering your industry sector perceive it as a key “value-added service” performed by your company?
- If customers knew it was being alternatively sourced rather than performed in-house by your company, would they likely reduce or curtail their relationship with your company (NOTE: this could depend on who your company alternatively sourced to)?
- What would the impact be on your company’s overall revenues/profits (i.e., business risk) if there was a performance problem with an alternative sourcing solution for this IT or business process, and is this business risk easily mitigated?
- What is the potential of relinquishing a strong competitive advantage in your company’s marketplace, either real or perceived, if this IT or business process is alternatively sourced?
- What is the potential of losing key personnel with strategically important “corporate knowledge” if this is alternatively sourced?
- From a strategic IT perspective, would alternatively sourcing this IT or business process preclude or reduce some form of intended future benefit or advantage that is expected once the IT strategy is fully implemented?
- What would be the impact on other IT or business processes within your company if this one were alternatively sourced? Could it indirectly cause other potential business risks?
The above factors are simply examples of what might be considered in deriving a value for your company’s particular IT or business processes. It is important to note that the only financial consideration is the potential business risk (if something goes wrong with an alternative sourcing option) to your company’s revenues/profits. Each factor would be assigned a numerical value, based upon the results of TBI’s assessment methodology and derived by some pre-established criteria that would be determined in concert with your company’s senior management. TBI would facilitate the development of these criteria.
The specific approach to weighting each factor in comparison of importance to the others would also be facilitated by TBI and determined by your company. This would be important in considering sourcing options for multiple IT or business processes, where economies of scale and reduced overall costs for “bundling” services could come into play.
Another factor is the Performance Index, or “PI”. The PI is used to describe the overall performance of that IT or business process. Factors to be considered when evaluating the PI value for an IT or business process might include the following:
- Do your company’s internal customers perceive it to be meeting the business needs of your company?
- Is it actually meeting the business needs of your company?
- Is it operating efficiently, in comparison to “best practices” in that specific industry (e.g., is the Helpdesk performing as good as or better than other similarly-scoped Helpdesk operations)?
- Does your company have the necessary staff, with the required skill sets, experience, and background, to perform the services today?
- Does your company have the personnel resources needed to implement their longer-term IT strategy as it relates to this particular IT or business process?
- Is your company able to effectively recruit and retain the personnel needed to perform within this IT or business process?
The above factors are simply examples of what might be considered in deriving a PI value for one of your company’s IT or business processes. It is important to note that there are NO financial considerations addressed in the PI evaluations. Each factor would be assigned a numerical value, based upon the template assessments and derived by some pre-established criteria that would be determined by your company’s senior management. TBI would facilitate the development of these criteria. Again, TBI would also facilitate the specific approach (it would still be your company’s final decision) to weighting each factor in comparison of importance to the others, which could prove useful when considering sourcing options for multiple IT or business processes.
The third factor is the Potential Savings Index, or “PSI”. The PSI is used to gauge the range of potential savings that your company might reap if that IT or business process were alternatively sourced. Factors that might affect the PSI range for an IT or business process might include the following:
- Which alternative sourcing option would be used (e.g., internal consolidation into shared resource centers, as part of a full IT/business process outsourcing initiative, as part of a partial outsourcing effort with retained select services, as an insourcing scenario, as a value model with a venture partner, or in concert with an Application Service Provider in lieu of a traditional outsourcing vendor)?
- Would this IT or business process be alternatively sourced in a stand-alone fashion, or as part of a “bundle” of services being considered for alternative sourcing?
- If alternatively sourced externally, would it be done in a sole source or competitive fashion?
- Would your company conduct the alternative sourcing itself in lieu of seeking external support from a firm specializing in alternative sourcing (e.g., TBI)?
- Are there any recent solicited or unsolicited quotations from external vendors?
- Are there any other forms of cost-benefits analysis or studies already conducted by your company or others to gauge the potential savings of various sourcing options?
- Would it be prudent to implement a risk mitigation scenario as part of the alternative sourcing for this IT or business process (if so, the expected costs for that risk mitigation would also be incorporated into the PSI range)?
- Would the potential cost of alternatively sourcing the IT or business process be likely to cost your company more than it does now (in which case, the PSI range would be in the negative portion of the graph)?
The above factors are also examples of what might be considered in deriving a PSI range for one of your company’s IT or business processes. The actual ranges used would depend on both the results of TBI’s assessment methodology, as well as empirical data derived from other recent and on-point TBI sourcing engagements and our benchmarking databases.
Once a company has decided to alternatively source an IT or business process, TBI can provide the help needed to make that happen in the most expedient and cost-effective manner.