Have you ever heard the expression "Any road will take you there if you don't know where you're going."?
It can sure cause long term problems if you don't invest in strategy development, goal setting and planning. Today I'd like to talk about a couple of "best practices" and "worst practices" in outsourcing strategy.
Thankfully, "worst" practices in outsourcing strategy are becoming less common. One that is still surfacing is that lots of really well-run companies find themselves stepping back to take a closer look, only to find a dizzying array of outsourcing relationships on their plate. It could look a bit like a messy plate of spaghetti. An elegant name for this is "multi-sourcing", but don't be lulled into complacency by a nice name for a challenging situation.
Let's face the facts - all business processes eventually overlap at some point, both within and across business lines. In practical terms, in the absence of a company-level plan, the business units and departments will outsource their processes to the "best" provider. Understandably, there is often little or no consideration for the consequences at the all-company level of this "best-of-breed" strategy. Or of the impact on established outsourcing relationships. Business leaders are there to maximize their business or unit's profitability and efficiency. They are likely unaware that a substantial part of the cost benefit and efficiencies are wiped out at the company level. The total cost of managing quality, service delivery, technology, and processes across a large pool of providers is something that can only be seen when measured at the macro-level.
I searched for stories of companies facing the challenge of rationalizing a long list of outsourcing service providers, but apparently this isn't the type of story that gets aired in public. Let me instead share a personal experience: an HR executive showed me a long list of service providers and asked where to head next. The list included just about every provider you could think of, so a lot of analysis was needed before we could talk about rationalization strategies. The first thing I did was to assess switch costs, which can end the conversation right there. Eventually, the discussion turned to implementing the switch process. Entering an outsourcing arrangement is a long, costly and sometimes risky process. But changing providers raised another legitimate concern - they no longer had an intimate operational knowledge, which didn't feel too comfortable.
A "best" practice is to invest time in creating an integrated destination strategy, with a phased implementation plan. This allows you to create a long term road map while managing pace. I'll describe an IT application development outsourcing strategy in my next blog, followed by a simple readiness assessment process, and later by a description of a sound Program Management Office.
Meanwhile, you may want to read a good article in Global Services magazine in their March 2007 edition entitled "Success Strategies for Global Sourcing" . This introduces the topic of Program Management Offices, which is definitely a "best practice". http://www.globalservicesmedia.com/content/general200705301776.asp.
Deborah Kops, subject matter expert and Chief Marketing Officer for a prestigious Indian BPO company, says, "Most companies run their outsourcing Program Management Office like a Project Management Office. Projects are discrete events that focus on the need at hand. They are rarely scaleable or all-encompassing. Well designed Program Management Offices manage outsourcing as a portfolio of business changes".
Please send me your comments and questions. Until next time...........Linda