Post on 06-Apr-2017
transcript
Change management and business performance improvement
Extract: Module 2 Section 11
Ged Melia
Section 10: Shared service centresSection 11: Sourcing decisions
Section 12: Minimising IT project riskSection 13: Downsizing and restructuringSection 14: Growth – making M&A work Section 15: Growth – good practices in Sales
Module 2 - Business performance improvement
Section 8: Improving processes
Section 9: The management control cycle
Section 7: Continuous improvement
Section 11: Sourcing decisions
Outsource Insource
Sourcing decisions
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“Vision without execution is hallucination.” Thomas Edison (attrib)
“Execution without vision should get outsourced”
Anon
Sourcing decisions
Source: Harvard Research Group, 2005 study
Drivers behind sourcing decisions
Factors driving the timing of sourcing decisions
• Specific IT program or project benchmarks.
• Part of annual or long- range business plan review.
Planned, Orderly Budget Reviews
• Change in IT architecture or platform.• Major change in IT strategy.
Major IT Architectural challenges
• Change in business strategy (key expansion or contraction).
• Inter-divisional organization changes in management or function.
Division-Level Disruptions
• Potential merger and acquisition activity.
• External industry or national events.• Potential spin-offs.
Company-Wide disruptions
Sourcing decisions are typically driven by circumstances or an event rather than by a calendar. While prospective outsourcing partners will promote the
‘as soon as possible’ perspective, the prudent course of action is to undertake some extensive internal analysis and benchmarking beforehand.
Form a strategic alliance Retain
Eliminate OutsourceStra
tegi
c im
porta
nce
Contribution to operational performance
Low
High
High
Low
The insource/outsource decision
All decisions are likely to be specific to a set of circumstances but a good starting point is to identify the task or activities strategic and operational
importance and work out where it should fit in the matrix.
What can be outsourced?
•Office equipment.•Capital equipment.•Bounded, single IT applications.
Discrete activities and commodities
•Hardware, software, network infrastructure.•Business infrastructure (printing/copying/data input.
IT services and infrastructure
•Business applications within overall business function (payroll, market research).•Web-based or hosted business processes.
Business processes and
applications
•All or most processes within a function (HR, accounting, procurement).
Entire functions and businesses
Repetitive tasks Expert tasks Specialised tasks
Benefits of outsourcing
Reduces operational cost
Facilitates focus on core activitiesOutsource partners usually specialistsBetter able to manage peaks and troughsLower IT/technology capital expenditurePotential 24 hour time zone cover
May speed up processing
Access to cutting edge technology
Risks associated with outsourcing
Financially unstable partner
Quality control
Poorly structured SLAs
Loss of the ‘wrong’ staff during transitionPost transition roles poorly definedLack of organisational alignment Failure to effectively communicate E2E processes that are not seamless
Ineffective contract change control
Unrealistic pricing
Poor forecasting and planning
Poor record keeping
Culture and language stresses
Confidentiality and data protection issues
Currency variation
Time zones
Risks associated with outsourcing
Outsourcing steps
1 2 3 4
5 6 7
Create the ‘burning platform’.Establish business case /understand costs
RFP.Shortlist/BAFO
Contract and SLA Planning
The process broadly follows the same tender approach taken with other vendors but there are some clear
differences. It is usually a significant change programme involving people leaving the business, process changes,
technology integration challenges and a detailed focus on how the new operating model will work post handover (performance, quality, communication, reporting etc.)
Cost & service.buy-in.Clearly define the parameters and specs
Usually cost but can be expertise or technology
Project plan:New processes.Comms.RedundanciesEtc.
Search and initial partner discussions/’beauty parade’.
Detailed negotiations, andselection.
Detailed operational parameters and contract
Transition to BAU
Pilot testing, O/S recruitment, leaver processing, SLAs, KPIs etc.
Outsourcing guidelines
Don’t outsource a problem
Make sure it fits with long term strategyConsult stakeholders and get buy-in
Treat as a major project
Get the cost/service quality balance rightChoose the right outsource partner
Scope the contract properly
Make sure it works operationally (E2E)
Outsourcing guidelinesApply governance and change control
Hire-in during the transition period
Communicate service levels and roles
Incorporate partner planning into the MCC
Measure and manage performance
Monitor and manage risk including DR
Ensure that there is an exit strategy
Dilbert….