Service Company’s Outsourcing Assessment


A. Objectives of Outsourcing

The Client’s corporate mission is “to provide a complete spectrum of enterprise applications software and services to meet the business needs of the global insurance industry.” Today The Client is primarily focused on a full range of products for mainframes and mid-range products, as well as services generated from these products. In addition The Client is moving to become a full solution provider in The Client-server arena by satisfying demand for enterprise wide client-server solutions.

The Client recognizes that to compete successfully in these arenas it must strive for “top of mind” status as the technology leader in the insurance industry. To do this it is continually focused on improving the quality of its products and services. The Client believes that the key differentiator between it and its competitors is their ability to combine technology knowledge with insurance expertise in its solutions, i.e. – its products and services.

One of The Client’s primary objectives within this business strategy is to become more cost competitive in its own outsourcing marketplace. The Client has lost business in the recent past because it was not cost competitive. By partnering with a company that has a significantly larger scale of operations, The Client may be able to gain benefits from greater leveraged purchasing power and the ability to spread fixed costs and overhead over expanded volumes of work. The larger scale of operations can improve operating efficiencies and provide The Client with a competitive advantage.

While the cost-competitiveness goal is a driving factor in seeking to evaluate outsourcing much of its own technology based processing as a business strategy, it is not the only factor. A common theme expressed by virtually all of the business unit and development executives interviewed by TBI during the course of this study was that cost savings alone should not be the only criteria for moving forward with an outsourcing vendor. Time and again the need for a “strategic alliance” which would enable The Client to provide “world class” levels of technical support to their respective areas and/or customers (both established and prospective) was stressed.

Implicit in these discussions was the need to project and provide enhanced levels of service to the internal organization and outside customers as required, either in a pre-sales situation or to satisfy customer operational problems and/or performance issues. Just as the existing Data Center is perceived to be a showcase for customers to confirm their impressions of The Client’s technical prowess, it is felt that The Client must be able to demonstrate and provide similar state-of the-art capabilities in the establishment, management and control of desk-top based client-server environments..

The Client sees outsourcing as part of a strategy to leverage its own core competencies of insurance knowledge and software product development to build growth and breadth in the marketplace for insurance software products and processing. While leveraging its core competencies, The Client also wants to ally itself with a service provider that can do more than provide MIPS at a cheaper price. It is seeking an alliance with a partner who can bring world class technology access and experience, technology credibility, new methodologies, a bigger pool of skilled personnel resources to draw from and marketplace access as well.

The objective of the work reflected in this document was to prepare Statements of Work (SOW) for The Client to form a business basis for decision making and to precisely describe to the potential outsourcing vendor what The Client’s requirements are now and in the near future. Without the cost savings as a base the other goals cannot be achieved so it is critical for there to be a common base for describing requirements and for evaluating the vendor’s response to those requirements.

B. Methodology Employed

In developing the Statements of Work, TBI began with the scope that had been defined in the November 2011 Boundary Study as follows:

  • In scope – all services provided by the Data center and Micro Services group evaluated on a functional basis so as not to ask the vendor to duplicate The Client’s organization, but to provide appropriate services and service levels
  • data center
  • communications – voice and data
  • desktop and help desk – single point of contact from any and all users, excepting external customers
  • Anticipated areas of joint support
    • capacity planning
    • charge back control
    • customer sites
    • ITO, BPO
    • network design & tactical planning
    • telephony design & planning
    • security
    • disaster recovery
  • Out of Scope
    • internal applications
    • product development
    • architecture and strategic planning
    • internet & intranet content
    • audit

Not everything in scope will necessarily be outsourced. That decision can only be made after the vendor’s response is fully evaluated. The purpose of the assessment is to determine “what” is to be addressed, not the “how”, which the outsourcing vendor will propose. The “how” can be negotiated, as can the “what” once a proposal has been made.

The gathering and analyzing of information for the SOW preparation included:

  • reviewing all current (2012) services, service levels, and costs for all the functions included in the scope through a process of interviewing key personnel, collecting available data and observing relevant workflows
  • factoring in growth factors as defined to TBI by The Client
  • determining value added functionality where there are standard industry directions and/or clearly expressed requirements.

C. Business Drivers

Because the outsourcing vendor must understand the nature of PMSC’s business, TBI interviewed a number of senior level business people responsible for sales, marketing, product development, and customer support. Based on these interviews, the vendor needs to understand the following characteristics of the business environment it will be supporting:

  • Responsiveness to customers (existing as well as prospective) is paramount
  • Product development is market driven
  • Service requirements are customer driven (both internal and external)
  • The client is a product developer moving toward becoming a solutions provider encompassing enterprise wide systems and business process outsourcing
  • Product and services are moving to a distributed environment
  • Currently 80% services and 20% licensing moving to a more standard 90% – 10% relationship
  • The Client must be perceived as a high technology leader
  • The Client will always have a range of technologies to be supported because of its product lines and customer base and the fact that in BPO, The Client will be acquiring businesses with a range of older technologies.

Unlike most organizations considering outsourcing, The Client business units impose demands on its Data Center staff which transcend those normally made of a technical staff. The Client’s operating environment is dictated by broad-based product line servicing mainframe, mid-range and client-server environments. In addition, customer demands in the ITO area often require expertise beyond the internally installed base of supported equipment and operating environments, particularly in the communications area. Due to this desire and willingness to be all things to all people, systems personnel within the data center are called upon to provide services to internal and external customers across a broad spectrum of platforms, operating systems and communications environments.

In the MVS Systems programming group it is estimated that close to half of their time is spent supporting activities of various business functions outside the scope of what would normally be considered data center related activities.

The assertion by data center personnel that they are called upon to provide services outside the scope of internal data center activities was confirmed by several business unit contacts. Furthermore, in the non-mainframe area it was consistently suggested that demands on data center personnel would be even greater if the depth of available expertise were greater and better able to serve more advanced and forward planning issues on behalf of these product development areas and an ever increasingly sophisticated customer community.

D. Report Organization

The SOW’s are organized functionally, rather than organizationally, to reflect the “what” of the requirements. The “how” will be provided by the outsourcing vendor and may bear little resemblance to the current organization. Much of the inventory and hardware/software specification type information is attached as appendices.

The outsourcing vendor needs to provide a technical and financial proposal that covers all of the items documented in the SOW’s, except for those requirements labeled “value added”. In those cases only a statement of capability from the vendor is required.

The SOW’s will be revised as part of the contract negotiating process between The Client and the outsourcing vendor.

Share Button