Master Outsourcing
(Or Else!)
By Beth Perdue
Argosy, Inc.•293 K Street•Boston, MA 02127Tel. 617-269-1677•[email protected]
www.argosy-inc.com
2
Topics
1. Trends and facts
2. Top 10 risks
3. Outsourcing contracts
4. Relationships
5. In closing…
3
Trends and Facts
• 80% of U.S. Companies discuss • 40% complete pilot program or more• Offshore dominant – grows 20%+ annually
Source: Computerworld, Gartner Group
Topic 1
4
Hidden Costs
• Supplier searching
• Contracting
• Contract management
• Post-outsourcing reintegration
• Who tracks them?
5
Thinking of Outsourcing?
• Not necessarily cheaper
• At least, not right away
6
Downside
• Big- name companies bringing it back – Dell, Lehman Brothers, Conseco
• Still have offshore operations
7
Have You Ever Seen a Grown Man Cry?
Top 10 Risks
Topic 2
9
1. Cost-reduction Expectations
Top 10 Risks
10
Top 10 Risks
2. Data Security/ Protection
11
How Patient Files Got to Pakistan
12
Personal Info Outsourced Abroad
Medical records
Bank records Debt records
Credit histories Brokerage records
Social Security numbers
Tax documents
Insurance records
Credit card numbers
13
Where It Goes
14
Meet Ankit
15
Why More Risk Overseas?
• Security not priority
• Using small/mid-sized firms• Software piracy means few patches • Lack tough laws and legal tools
16
Take Nothing For Granted
• Penetration testing
• Background checks
• Device restrictions
• Visit, manage, audit
17
3. Process Discipline
Top 10 Risks
18
You can learn a lot from fast food
19
Start With Out-tasking
• Keep command, control, coordination
• Assign well-defined tasks
20
4. Intellectual Property Drain
Top 10 Risks
21
5. Supplier Failure to Deliver
Top 10 Risks
22
6. Scope Creep
Top 10 Risks
23
Top 10 Risks
7. Government Oversight/ Regulation
24
Top 10 Risks
8. Border Concerns
25
Top 10 Risks
9. Turnover of Key Personnel
26
Top 10 Risks
10. Knowledge Transfer
Outsourcing Contracts
Topic 3
28
When the only tool you own is a hammer, every
problem begins to resemble a nail.
29
Incomplete by Nature
• Assets
• Uncertainty & measurement
• Frequency
• Time & costs
Outsourcing Contracts
30
Prices and Adjustments
• Contract length
• Cost-savings program or index
Outsourcing Contracts
31
Prices and Adjustments
• Benchmarking
• Baselining
• Multiple suppliers
Outsourcing Contracts
32
This here's Miss Bonnie Parker. I'm Clyde Barrow...We rob banks.
33
Intellectual Property Rights
• Transferred licenses– Software developed by supplier– Processes developed by supplier
• Transfer to another supplier
Outsourcing Contracts
34
Licenses Don’t Travel Well
35
Is It Your Software or the Outsourcer’s?
• Either way can work
• Flexible licenses
Outsourcing Contracts
36
Get Better Licenses
• Asset management
• Know your opponent
• Timing
Outsourcing Contracts
37
Contract Structure
1. Framework contract
2. SLAs– By geography and business unit, then service
– By service
– Degree of completion
Outsourcing Contracts
38
Contract Structure
1. Degree of exclusivitySole supplier
Preferred supplier
2. Liability
3. TerminationBankruptcy,force majeure, default
Change in ownership
Business needs
Outsourcing Contracts
39
Metrics
• Keep an eye on offshore practices
• Service (customer)
• Process (supplier)
Outsourcing Contracts
40
Minimize Risk
• Objectives
• Meeting structures – Keep minutes
• Disputes
Outsourcing Contracts
Relationships
Topic 4
42
Let’s Call the Whole Thing Off
43
Bringing It Back
• Provider – – Had financial difficulties– Failed to deliver on commitments
• Buyer consolidated vendors
Relationships
44
Change Suppliers
• Knowledge
• Documentation
• Transfer process
Relationships
45
Business Continuation
• Preserve price & service
• Unilateral right
Relationships
46
Transition Cooperation
• Efforts
• Disclosure
• Licenses & agreements
Relationships
In Closing…
Topic 5
48
Selective Outsourcing
• Big risks– Requirements– Specifications– Business smarts
• Make outsourcing a core competency
In Closing…
49
Satisfaction Isn’t Guaranteed
• Inflated expectations– Cost savings– Productivity
• You don’t get what you expect, you get what you inspect
In Closing…
50
“I haven’t failed. I’ve found ten thousand ways that don’t work.”