Realizing the Benefits More Quickly by Focusing on the Key Issues
“Based on your experience in this business, can you tell me how quickly I can outsource IT and begin to see savings and/or improvement as a result? Can it be done in three months (by year end, by the end of the quarter, etc.)?”
This is the kind of question that TBI hears from many executives today. The answer “it all depends” may not sound satisfactory. Unfortunately, it is the truth. What does the speed of an outsourcing process depend upon? Most importantly, it depends upon organizational readiness for outsourcing, upon the extent to which the services to be outsourced are routine, upon the level of organizational consensus on outsourcing strategy and goals, and the extent to which the current service delivery environment and process is understood and documented.
The need to quickly achieve results is a pressure that TBI has faced with our clients over the past four decades, time and time again. And, time and time again, our consultants have found ways to ‘fast track” the process in order to meet critical business deadlines. TBI’s Fast Track IT Outsourcing methodology has been built and evolved over time, based upon our real life experience working in this industry, particularly in the past two decades of outsourcing.
Industry changes that facilitate a speedier process
Three changes in the outsourcing industry have made a “fast track” ITO process more viable than ever before:
- IT Outsourcing is now a relatively mature process – many of the mysteries of the process have been revealed;
- The leading IT vendors have fined tuned their offerings – many of them are now providing routine services and processes in a standardized fashion, instead of customizing each client solution;
- Many aspects of Information Technology have become highly reliable.
As a result of these changes, much (but certainly not all) of the due diligence efforts performed on outsourcing deals can now be shifted to customer unique issues, reducing the overall time and effort needed to complete a deal. This allows the customer to realize outsourcing benefits sooner, or to focus on transformation activities where top line revenue might be positively impacted as well as costs. This is the foundation for TBI’s Fast Track IT Outsourcing approach.
Reviewing TBI’s outsourcing projects over the last two decades makes it clear where the process is likely to bog down and where the difficult timeframe issues are usually found.
The following is a list of seven places where time is most often lost during the initial outsourcing process:
- Obtaining needed data to build a clear picture of the baseline scope and costs the foundation for outsourcing decision making;
- Developing the service level agreement where there is little documented performance history;
- Managing the participation of and evaluation of a large number of vendors in the RFP process;
- Vendor due diligence and client evaluation of vendor proposals on multiple, diverse aspects of technology and services – some of which are commodity services, others which are more specialized and customized to the organization’s needs;
- Gaining agreement on optimal and vendor-acceptable contract terms and conditions;
- Client management decision-making processes (e.g., scope for outsourcing consideration, vendor approval, people issues, investment constraints and ROI requirements);
- Getting business unit buy-in to the process and the results.
Each of these time constraints have been successfully overcome with our clients using aspects of TBI’s Fast Track Outsourcing methodology. We will be discussing these issues from both the client and vendor viewpoints in more detail in a future white paper, providing specific insights into our “fast tracking” methodology related to each one.
The remainder of this paper provides a high level introduction to the fundamental approach.
TBI’s Fast Track IT Outsourcing
How does TBI speed up the outsourcing process? One key is the recognition of each client’s need for and varying vendor ability to provide “commodity IT services” versus “unique or value added services”.
Commodity IT services include break/fix, problem management, and installation, move, add and change (IMAC) activity for all infrastructure components (e.g., desktop systems, LAN/WAN, servers), level 1 and 2 help desk services, and computer operations. This is the workload that can be broken down into relatively small, discrete units (e.g., a service request, a desktop installation, a server move, etc), generally without much variation from client to client within an organization in terms of cost and scope per unit of delivered results. The service may require an experienced individual to set up and check for unusual requirements (or handle unusual problems), but less experienced individuals can complete the typical work following instructions that can be highly proceduralized and standardized.
Non-commodity services are related to the unique or value added service requirements of the organization. Custom application maintenance and development falls in this category. Unusual business requirements for service levels often do as well (e.g., a requirement for infrastructure availability during peak season for a retailer’s on-line order entry system, or desktop break/fix in a time critical, high value securities trading process). In addition, any transformational change is by definition a non-commodity service.
Once this distinction is made, the path to outsourcing can often be shortened by carefully shifting more focus to the value-added services, with less focus on the commodity IT services. While baseline data stills needs to be collected, the effort to outsource the traditional IT tasks devolves more to a pricing competition, for which there is less and less differentiation amongst the leading vendors. The framework for the outsourcing investigation and the focus for choosing the best vendor now becomes one of identifying the vendor that is most capable of addressing the client’s unique requirements in a cost effective manner.
The TBI Fast Track approach to the outsourcing life cycle follows this sequence as shown in Figure 1:
- Determine the unique characteristics of the client’s environment and future business directions;
- Determine the transformation objectives that the client desires to achieve;
- Conduct an RFP process on the unique and transformational issues with leading vendors with whom it is a given that they can provide excellent service on the standard outsourcing tasks;
- Down select to two finalists;
- Incorporate the scope of the standard outsourcing requirements;
- Conduct a two vendor price competition to select the winner.
With this approach, the elapsed time for the entire process can be reduced, typically by at least 20%. The client is not spending time with multiple vendors on evaluation of standard task capabilities that they can all perform relatively the same and well. The data gathering for the standard outsourcing tasks can be done in parallel with the RFP response and evaluation period for the unique and high value transformational services, rather than tackled sequentially as a prerequisite to the RFP. The due diligence effort is therefore focused on the unique and high value functions as it should be and the client can reach a contractual agreement faster and achieve the expected benefits that much sooner.